393 | Why Aren't There More Vertically Integrated Real Estate Companies?

We frequently reference the fact that investors should look for a "vertically integrated" company, but many in your audience - especially newer viewers of the show - may not know what we mean by that phrase. 

This was something that our community member, Mike Foster, brought to our attention.

That's why we're going to clear it up on the next episode of the Not Your Average Investor Show!

Gregg Cohen, co-founder of JWB, and show host, Pablo Gonzalez, will come together to help you understand:

- what we mean by "vertical integration", and why such few real estate companies are able to do it
- which activities are completely integrated (aka. handled in house) by JWB when you become a client, and why some activities aren't
- how vertical integration actually leads to higher, more reliable, returns than what other companies are able to promise
- and more!

We know that when a member of our community suggests a topic, it's likely on the minds of many so we fully expect a big turnout for this one!

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https://jwbrealestatecapital.com/turnkey/ 

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Transcript

Pablo Gonzalez: 0:00

Today, we have a topic that we know you're going to love. You know why we know you're going to love it, GC?

Gregg Cohen: 0:05

Why's that?

Pablo Gonzalez: 0:05

Because Mike Foster sent it in. We know that when one person in the community is asking something, many people in the community is asking something, and therefore we make that piece of content for you, because we love it. And today's question du jour, that's question of the day.

Gregg Cohen: 0:21

Thank you.

Pablo Gonzalez: 0:22

Is, what is the difference between Turnkey for and vertical integration. We've got another one for you, too. It's fake turnkey. Oh, we're gonna we're gonna talk about because some people like to talk the talk, but they don't walk the walk of the turnkey walk. If you know what I'm talking about. And so if you have, you know, newer to the community, and you haven't kind of figured out why we throw around this term so much, or you've been here for a while, and you want a little bit of refresher, it's evolved, right? It's evolved, because as as times change, What you need to do in order to fully control and experience and provide the best possible service for your clientele evolves naturally. So we're going to go into that, and it's going to be pretty illuminating for our community today, GC. Welcome everybody to the Tuesday edition. Actually, not the Tuesday edition, to the weekly edition. It is the edition. The live edition. Weekly edition of the Not Your Average Investor Show. I'm your host, Pablo Gonzalez, with me as always. The man that I affectionately like to call GC because of his genius concepts, because he knows how to generate gas flow, because he's a great co host. And because his name is Greg Cohen, say hello, Greg.

Gregg Cohen: 2:42

Hello, everybody. Great to be with you.

Pablo Gonzalez: 2:44

It is great to be here, buddy. I love, I love our Tuesdays in studio. I feel like there's been so many interruptions of it in the last couple days. And I love this energy. I love being here. Community's already showing up. And, we got a little tradition that we do when they show up. Yes, we do. It's called We got Christopher Lee kicking us off today with Fernandina Beach, Christopher Lee. Alright, Christopher. I'm headed that way after this show. There we are. You got a little speaking gig, don't you? A little speaking over there.

Gregg Cohen: 3:10

Tell the folks what you're doing. Is it during

Pablo Gonzalez: 3:11

the

Gregg Cohen: 3:11

roll call? Yeah, sure.

Pablo Gonzalez: 3:12

Yeah, I've got, uh, the biggest keynote of my career. Absolutely. I got, uh, yeah, I got invited, uh, by NARPM, the Broker Owner Conference, which happens to be here in Amelia Island. And, I get to share the story of this show and this community as a way to drive word of mouth for property managers. So this has been, my platform as much as it's been anybody else's, and it's a really, really big joy to get to share that story.

Gregg Cohen: 3:36

We're really proud of you, buddy. Good job. So we get

Pablo Gonzalez: 3:37

more people. You know, creating community in order to create good the way that JWB does.

Gregg Cohen: 3:42

Your vision lives on.

Pablo Gonzalez: 3:43

It lives on, it lives on. All right, Christopher Lee, I'm coming to your neighborhood. We got our lead off hitter batting second today.

Gregg Cohen: 3:48

John Henning. We got the early bird in the house. Mr. Bean Curry.

Pablo Gonzalez: 3:51

We got the mystery man.

Gregg Cohen: 3:53

Denny Davies.

Pablo Gonzalez: 3:55

He's back to his pig suey. Two battings mystery man. Now he's claiming Calipari. we got the MVP, I think you may have heard of him.

Gregg Cohen: 4:01

I think I know Mr. Leadbishop. Mr.

Pablo Gonzalez: 4:03

Leadbishop, we got the mama bear in the house.

Gregg Cohen: 4:05

Ms. Cody Adams.

Pablo Gonzalez: 4:06

Adams in the studio, we got the maven from the mountains of Denver. Ms.

Gregg Cohen: 4:09

Leslie Wilson.

Pablo Gonzalez: 4:10

Ms. Leslie Wilson. We got Laura Colby from Washington State. Welcome back, Laura. Hi, Laura. Charity Sackey Graham is back with a Hello, Gentlemen. Alright, Charity. Good to have you. Welcome, welcome. We got our amigo. Bill Shields. Buenas tardes desde Dubuque. We got a man in Belgrade saying good morning from the lugubriously peppy mountains of Colorado. Thanks for bringing down the amount of consonants in a row there, Billy. You're taking it easy on you, man. Taking it real easy on me. We got the Shah man in the house.

Gregg Cohen: 4:39

Nadim Shah. Nadim, just so you know, your replacement bracelet is on its way. Bella made another one for you, so don't you worry.

Pablo Gonzalez: 4:47

Beautiful. We got our favorite name to pronounce Aaron O'Neill into the lights. Good to have you here, Aaron. We've got my buddy, Bob Wiesner from Marietta, Georgia. All right, Bob. Nice to see you, buddy, Bob. We got our, Oh, the five S our favorite fiduciary flat fee financial advisor, friend. Yeah,

Gregg Cohen: 5:05

Kelly Barenboim.

Pablo Gonzalez: 5:06

Kelly Barenboim. I was still, I was on my sixth one. Your job is not to count, your job is to say the name. Kelly, it's great to see you. All right, here we go. What else do we have out here? All right, good roll call today. All right, let's kick it off. Richard Hall is here in the house checking in with his AI assistant. Look at us. All right. Checking in from the future, Richard. Good to have you, buddy. And of course we have the patriarch and matriarch of the first family of the Not Your Average Investor Show, Ken and Carolyn Moline with Duchess Karen. We

Gregg Cohen: 5:34

salute

Pablo Gonzalez: 5:34

you. Good to have you. Cheryl Odom from Nashville, Tennessee. Love it. And the ringmaster. Drew Barnhill. the house. Pamela Myers is in the house. Good to have you, Pamela. We

Gregg Cohen: 5:46

got the gang.

Pablo Gonzalez: 5:47

We got the gang is here. Let's get us started. GC. GC, do you remember when we first started talking about like, we should, we should really differentiate this idea of like turnkey and what JWB does and what is really needed to succeed in real estate. How do you tell that story of the birth? A vertical integration.

Gregg Cohen: 6:05

Well, you know, it's funny. There have been multiple kind of inflection points in this industry. When I started in 2006, the term turnkey was the way to differentiate from the real, the traditional way that real estate was done. And I remember, Going and speaking and talking and helping folks understand that there is a different way to invest in single family rental properties. And it was this new thing called Turnkey and nobody had ever heard of it before. And so, Turnkey was the differentiator and, it continued to be the differentiator, but for many reasons where a whole lot of folks started to learn about single family rental property investing. And Some things pointed in the direction of that asset class being the darling asset class for so many years that there were a whole lot of service providers that popped up. And guess what they called their services? Turnkey. Turnkey. Turnkey. And as with most great things, as you start to get more players in the game, the need came about to differentiate again, and really helping our clients and helping those not your average investors understand. And now what is a crowded space called turnkey? What is the JWB definition? What is a definition that maybe you think you're getting a certain thing, but you might not be? And so that's where you and I kind of put our heads together along with our team. And we said, you know what, what do we do? That's different. What's important here to differentiate here. And that's where vertical integration was kind of coined that

Pablo Gonzalez: 7:43

a few years ago. Now, three years ago, about three years ago, about a year into our runs. I remember, I remember being on one of our Monday morning runs and just being like, man, I don't think turnkey really represents, like, I think you guys have Evolved beyond that model. Like I, I, you know, when I think of turnkey providers at that time, I was just thinking about like people that can bring you a deal and it doesn't really matter if they're in one market or many markets or what they're doing. And I'm just like, I think what really matters is this idea that you guys, you know, are not just bringing people deals, but you have people in house that are managing things, you know, specifically the way that you want it managed. And more than that, I, I just kept thinking about this idea of how, because JWB is in Jacksonville and you are, you know, an inch wide and a mile deep, you don't just affect the deal within the property management lines, right? Like within the property lines. And I was just like, man, I think we should just throw a gauntlet out there of, You know, who else out there can do all these things for you, manage it all in house, and on top of that, go beyond that to like, really be playing at like a local economy level, a neighborhood level, a community quality of life level which is what was very clear was the priority for you guys since day one.

Gregg Cohen: 9:06

It was. That was the appeal of going and focusing on one market and making our mark and our impact in one market. It's because we, at one point, we envisioned having the opportunity and the platform to affect positive change for our investor clients, for our renters who rent our homes with us, for our community at large. I mean, that's the appeal of focusing on one market versus going to 10, 15 different markets across the country. And you're right. It's a different approach than others may take. When it comes to real estate, it's really hard to set up. It takes a whole lot of time to, to refine and build and get to this level now. But now we get to play at a level where we can, we can create these flywheels. And we can have this major influence on some of the macro effects of our community here in Jacksonville. And you just don't get that opportunity. And what that means for clients, you just don't get that opportunity if you kind of space it out. But what that means for clients is a whole lot when you can start to affect bigger things, being an influencer and bigger macro trends and start to have bigger impacts. It means. risk mitigation for investor clients, and it means higher upside. And it means being a part of an investment where everybody can win. And I especially hear that third point, I hear that from clients. They want to know that renters are being taken care of, and that they're winning as well. They want to know the community at large is winning as well, not just the investor base. So I think we And all of us here at JWB sit in this really nice seat now where we can start to see those things happen after 18 years of this vertically integrated approach.

Pablo Gonzalez: 10:49

Cool. Let's start to share it, man. So we're going to talk about number one, it's what's in it for the investor when it comes to these different departments that become vertically integrated, right? So we're going to cover acquisitions, we're going to cover property management, we're going to cover client service. And just the strategic element, right? Like the, like the upside part, we're going to cover, thanks to Mike Foster's suggestion, what is in house at JWB versus being done by partners, right? It's not everything that you guys are doing, although you're working with.

Gregg Cohen: 11:18

Yeah. There's a whole lot that is. Yeah.

Pablo Gonzalez: 11:21

And then we're really going to talk about this, like this piece of like, outside of the property line, right? Like we talk about The order of operations when you acquire properties, people do it wrong, right? Like they like to think of what property am I going to buy? And then once you find a property, you're like, well, I'm in this market. And like, who's on Craigslist offering property management services? Instead it's, you know, the order of operations should be, where do you have the best teammates, right? Where do you have the person that can Give you the best chance to win long term because it's a long term investment and then you want to look around and think hey What are the conditions in that market and do they serve me? So this like final piece and then you you know, then the property is the thing that comes into play But you know the final piece of talking about economic development and how this goes beyond the property line is that number two notch to have and like having a partner working at that level for you is pretty rare, right? And, and, you know, like we're going to talk about the challenges of all this stuff and why it just doesn't pop up all over the U. S.

Gregg Cohen: 12:19

So 100 percent ready to get into it. You see, I'm ready, buddy.

Pablo Gonzalez: 12:22

All right. Acquisitions, right? Acquiring properties. Um, when we talk about it a, from a standpoint of what you think is fake turnkey versus real turnkey versus what integration becomes. How would you say that?

Gregg Cohen: 12:42

So let's start with what we call fake turnkey. There are a lot of operators out there that might claim to be turnkey who may sell you a single family rental property, but here's what I think fake turnkey is. There's a whole lot of operators who don't actually own the assets that they are selling. They may talk to you as a potential client. You may say, hey, I want to buy properties with these, this criteria. And they may say, okay, great. Now let me go on to the multiple listing service and go and try and find that property to suit you. And then let me put that property under contract and try to basically kind of like be a middleman without actually owning the asset. Can you see how that might create a situation that doesn't go smoothly for the end client here?

Pablo Gonzalez: 13:34

Yeah, sounds like, sounds like somebody that you're like dating and, uh, they're telling they can do something for you for the next 30 years.

Gregg Cohen: 13:41

Yeah, I wasn't going to go to the dating reference, but, uh, I think there's a lot of things that could go wrong there, right? You got, you know, if you don't actually own the asset, You got to think, why didn't you own the asset? Yeah. You might not have had the money to be able to buy the asset. You might not have had the confidence to take that risk to actually own the asset. But either way you shake it, if you, if you're buying properties from somebody who doesn't actually own the asset, you don't know that that asset is actually going to be sold to you because They are not the decision maker. The seller's not the decision maker, right? Or the turnkey company's not the decision maker. And even if that property does want to be sold, can you imagine, I don't know if you're very familiar with this, I don't know how much we've talked about this on the show, but there are so many things that happen from the point that a property goes under contract. to acquire it, right? Like JWB to buy a property, which eventually will become a client property. From the time we go under contract to the time that we close on the house, there are liens to negotiate. There are challenges with title. uh, you might have to get people to sign things that didn't know they needed to sign on the title. You might have to go and scour the country to find them. I mean, The amount of closings on the buy side, when JWB buys properties that sometimes don't happen because the seller, doesn't follow through on actually wanting to sell or it just gets delayed a ton of time is, is really rampant. So you don't want to put yourself in the seat of trying to buy a turnkey asset that you want to be passive. If you're not actually talking to the person who owns it. If it's just a middleman, that's what we would call fake turnkey.

Pablo Gonzalez: 15:24

Fake turnkey. And Charity's asking, that's different from wholesaling, right? Charity, if I'm listening correctly, wholesaling is a part of every equation, right? Like the wholesaler is the person that's looking out there, looking for properties, and then getting them to investors. Here it's You know, are you, is the wholesaler representing them themselves as a turnkey, as a turnkey provider versus, you know, is there a wholesaler that's out there selling to somebody like JWB that has been buying it before, already owns it, and then is then going to buy for you, right?

Gregg Cohen: 15:54

Yes. Inherently. There's nothing wrong with wholesaling. JWB buys properties from our partners in the real estate community here in Jacksonville. And some of them are what we would call wholesalers. They find properties undervalued and then they sell it to JWB. JWB then renovates or builds that home. And then, you know, of course, turnkey experience and the vertically integrated experience that we have for our clients. So there's nothing wrong with wholesaling. There are different ways to wholesale. You can buy the asset and then turn around and sell it to a partner like JWB. Or as a wholesaler, you can just simply put it under contract and then flip the contract to JWB. We're okay with all that because We are an investment firm and we're okay if the delays happen or if something happens. But what you want if you're investing in passive income single family rental properties, you don't want to deal with any of that. You just want to make a decision to buy the asset. And you want it to be purchased. Yeah, you don't want any surprises. You don't want any surprises. We are here to deal with surprises and we have to deal with surprises when we buy from wholesalers. But that's not what you want. So, there's just a little bit of differentiation there.

Pablo Gonzalez: 17:08

So, that's fake turnkey. The fake turnkey doesn't actually own the asset. They're basically saying like, yeah, I got your dog. And then, hopefully they're going to show up with it at time of closing and the property manager and whatnot. And then there is The run of the run of the mill turnkey GC. So the way that I would, I guess, understand that it would be people that have actually bought that asset. It may or may not be rented and you know, but they are basically buying something and they're going to bring it to you them owning it, but they're not necessarily the property manager. They might just be bringing in a partner. That's a property manager. I guess we're just talking an acquisition side right now. Right? So like, What is it? How different is it in acquisition side?

Gregg Cohen: 17:48

So the differentiator between fake turnkey and real turnkey would be, do they own the asset? So fake turnkey, they don't own the asset. They're just a middleman and that's very, very rampant. So ask that question before you start to work with a what you believe is a turnkey company. Now, what is turnkey as far as? The acquisition part of this, well, that would be somebody who owns the asset, but they're largely just thinking month to month with acquisitions. The way that this results for you is you might come to that. Turnkey operation. And you might want to buy that property from that turnkey operation, but you might have to wait a period of months. And this is very common. People have to put down binder deposits or some sort of financial commitment and you basically lock yourself into working with that provider and you're waiting for that provider to actually pay you. supply the inventory, then the supplier goes out, put something under contract, closes on the property so that they can actually deliver on the, on the promise to you and actually sell it to you. But it takes time. And so a lot of times you have to wait and your money's not working for you. And what's almost always the case, if you're buying what I would call just turnkey is you have to wait until your home is rented. So many times you're going to close on that property that you bought from that turnkey operator. that home may not be renovated at that time and almost always is not rented to a resident. And if it's not rented, it's not collecting revenue for you. And so this is very common in what we would call the turnkey space, right? It's turnkey meaning they can sell you the asset pretty quickly and pretty easily. But as far as the return on investment, it's not big. It's not as great for you because you might have to wait two months, three months, six months, maybe to actually receive income from your investment.

Pablo Gonzalez: 19:40

Got it. Okay. So then what is vertical integration?

Gregg Cohen: 19:42

Vertical integration is what you get when you work with a company that has all aspects under one roof when it comes to actually acquiring assets. And they are thinking not just month to month, they are thinking years in advance to make sure that there is a runway for acquiring assets. of inventory available for you and all of their clients. And they may be acquiring land years and years in advance, like JWB has done since 2011. Like for example, JWB owns 3, 000 lots that we're in the process of developing. And every year when we sit down in business planning, we say, okay, how many of this inventory of lots that we're sitting on are we going to build this year to meet the demand for our clients? So we already own it. What this does is allows for you to always have inventory, a runway of inventory for you. Because if you're a JWB client, you're on a buying plan and you're on an investment plan that, you know, many clients are adding one, two, three, five properties a year. Well, you want to know that those assets are there for you. So it allows for you to do that. And then one of the best things that can happen for you, especially if you're a new investor, when you're buying your first turnkey properties, is that they're already rented. And so, almost without exception, JWB properties are rented at the time of sale. It gives you a lot of peace of mind and cashflow positive from day one. Yeah. And that's just normal course of business with JWB because of the vertically integrated approach. And you just don't see that in other other places.

Pablo Gonzalez: 21:11

So what I'm hearing essentially is this idea, I guess the umbrella theme that I'm thinking of when it comes to acquisition is the strategy behind it, right? Like if you're working with a turnkey, like a regular turnkey, they're just kind of like buying inventory to sell inventory. And that means that if you have a strategy to build a certain portfolio, and we get into like an economic time where, you know, inventory is really low, like we are right now and we were in, you know, kind of like during COVID and stuff like that, you may be delayed and your strategy might get disrupted. But with a vertical integrated company, because they are, you know, creating this like assembly line of like lots and things that are construction and whatnot, they're able to keep you to your strategy to a certain extent. Right. And on top of that, I would also layer on strategy wise. I would assume that a company that is buying just in time inventory to sell doesn't have the luxury to really be like, you know what, I'm going to just dominate these four neighborhoods because, you know, if, if we, if like to really look for the pockets of neighborhoods inside of a, inside of a city or in whatever markets and really, you know, be the, be the person that has the best inventory there. because they are, you know, more beholden to like moving the inventory as opposed to like sitting on it and being able to supply it and creating that line. Is that accurate?

Gregg Cohen: 22:36

Yeah, I think so. I mean, you can be a whole lot more strategic when you are not in a need for inventory. Right? You can keep, you can keep your acquisitions costs low, which help to increase home price affordability for our investors, as well as our residents, those who are renting from us, because from the, the ability that you have to buy years and years in advance, the cost basis of those lots is a lot lower than what it is today. Today, and we're able to pass along those savings to our clients. And ultimately that affects rents and home prices for the Jacksonville community at large. So you can just, let's just wrap all that up when, when you're vertically integrated, when you have the connections, the ability to acquire. You have the lending lined up so that you, you can put million, tens of millions of dollars into inventory years in advance. You're in the driver's seat and you can create a wonderful experience for a first time investor, especially coming into this asset class where you can serve it up on a silver platter. It's ready for you when you're ready to make your decision. It's ready for you when you're ready to grow. Your portfolio and it's rented at the time of purchase.

Pablo Gonzalez: 23:49

Got it. Cool. So, fake turnkey means the person selling it to you does not own the asset. Regular turnkey means they own the asset, but they're just buying on demand at the time of purchase and then getting it to you. Vertical integration means you're working with a provider that owns the asset, sits on years of runway and is like more strategic. In how you can build your plan and also how they can deliver these assets to you in an efficient economic way and set you up to succeed. There you go. Let's go. All right. So, the next department when it comes to the rental property owning experience would be construction, right? No matter what happens, you're gonna, you're gonna need some construction involved either to get the house ready and to keep it going, right? So, let's see. What's, what's a fake turnkey when it comes to construction?

Gregg Cohen: 24:33

Selling properties to you in a non renovated state? That happens a lot. There's a lot of outfits out there that say that they're turnkey. You go and you actually get down into it and they ask you to basically fund the repairs for them. So you have to contribute a whole lot more capital. You have to, go along for the ride of construction overages with them. So this is a very scary situation for especially first time rental property investors. But people claim it as turnkey. I call that fake turnkey. It's a, it's an unrenovated property or a property that is not built and it is surely not rented at the time of purchase. And, that's not good for your returns or your peace of mind.

Pablo Gonzalez: 25:20

Yeah, that, when you say that, it makes me think of Jag's show where she was, you know, she had a 1031. And she identified three properties and she self described it as like a nightmare scam, a regular kind of not great experience. And then the JWB experience, which was top of the line. And she talked about this idea of, you know, in 10 31, you have a certain amount of time to identify the property and then you got to lock it in, you know, within a certain time as well. And she was working with what sounded like a fake turnkey provider because they, I promised them this property. It wasn't renovated at the time that they needed. She was just kind of like counting on them to, to make that happen. The time ran out, she hadn't identified another property, right? So not vertically integrated in land acquisition either. And then the property took way longer than she expected. So, you know, she was kind of like out that money. And that income throughout that time. So those are the dangers of a, of a fake turnkey property. So what is a regular turnkey property do you see?

Gregg Cohen: 26:18

Uh, that they sell the property to you after it's renovated or built. And that it would be cashflow positive day one. That's kind of your standard for what a turnkey property should be.

Pablo Gonzalez: 26:28

Got it. So it's renovated already and it has a tenant in it or a resident in it, right? Okay. So then what's vertical integration?

Gregg Cohen: 26:37

So when you're vertically integrated or working with a vertically integrated company, you're operating not just for the purchase, right? I think so many lanes are kind of moving towards like what Turnkey is. It's focused on the transaction day of when you buy it. But vertically integrated, is thinking about the relationship long term and your long term success. So Vertically Integrated, when it comes to construction, is working with an organization that provides economy of scale, because they do a significant level of construction work and they're able to bring on and work and develop relationships with their contractor base so that they can be, there can be cost savings for you. Because, you know, soon after you acquire this asset, your biggest pain point will be maintenance costs. and vacancy costs. Yeah. But by working with a vertically integrated provider who does, let's say, who builds 400 houses a year and who renovates 1500 homes a year what you're able to do is get that line item pricing, those costs down, not just on the big items, but on all of the everyday small items. And that really, really adds up. so it's, about that long term. How does that provider, that vertically integrated provider, not just going to sell you that asset, but are they going to be able to sell you that asset, tell you what your expected maintenance costs are, and then deliver on that and have a methodology for getting those costs lower and lower and lower as their volume? grows and that economies of scale works in your favor. And you know, that's one thing we of course focus on at JWB

Pablo Gonzalez: 28:22

sounds like at a minimum. If you're going to call yourself vertically integrated, you need to have a construction department in house. Like you might not be the home builder, but you have people that project manage, you have folks that can like look through estimates and like really see that, that have experience in that trade and can manage that thing for you. Be it with an outside contractor or your own in house kind of like handyman and drywallers and stuff like that.

Gregg Cohen: 28:46

Yeah. I think you just need to be able to develop. You need to drive significant. 5, 000, 000 of construction. So like JWB starts over 5, 000, 000 of construction every single month. So that's where this thing really matters from a construction perspective. Because if you're driving 5, 000, 000 a month of construction, if you're writing those checks every single month, You know, inherently, you're going to get cost savings that you can pass along to your clients. And then inherently, you're going to have management in house of that construction if you're doing 5 million a month like we're talking about. So you're just not, you're just not going to drive enough volume if it's just you just one person in your organization who's working with a bunch of handymen. You're just not going to drive enough volume.

Pablo Gonzalez: 29:31

You know, coming from the construction world myself before my, before my career as a marketer, and I used to, you know, one of our biggest clients was the biggest like hospital chain down in Miami and they were like the number one spender in construction in Miami, and we were one of their like key general contractors. I can tell you what it, what, what it sounds like you're saying. It's like you judge it by the amount of. influence you have over your contractors. Because he or she who spends the most in construction will have the most influence and will, you know, you can also probably delineate it across the line of like how much you spend and how well you treat them and like how loyal they are to you. Because at the end of the day, it starts with cost savings. But the real value of being that 10, 000 pound gorilla in the construction trades is the preference will treat them

Gregg Cohen: 30:18

100 percent is

Pablo Gonzalez: 30:19

the idea of that. Hey, when things get busy, you know, they're moving other people off the schedule to keep your schedule on. And specifically in Florida, when hurricanes come and like these things happen and everybody's freaking out ahead of the hurricane, you have everybody making sure that you're prepared. And even more important is God forbid we get hit by a hurricane. You know, now they're, you know, they're able to go charge top dollar to somebody that they don't know. But they're going to stay with the person that they know is going to be there forever. And they're going to give you preferential treatment and show up and fix and fix your residence. 100%.

Gregg Cohen: 30:51

I mean, every part of the country has their form of a natural disaster. We happen to have hurricanes here, but I think what's more pressing and more kind of relatable is just the storms that happen every single day. You know, like it's the quality of the service that we have to take care of your renters who, who, you know, are going to be hopefully making a decision to renew that lease, right? To stay to, to, to continue to be a great resident for us. They're not going to do that if there's more value somewhere else, right? And that comes down to a lot of customer service. And a lot of that comes to, How do we perform when there are maintenance issues? And a lot of that comes down to the contractors that we have. And so that influence that you're talking about really matters. The standards that we have for our contractor base go far beyond just the cost savings. It's how do we work together? How do you serve our residents? and that really matters. And then, you know, when we do have, you know, one of those big storms or a hurricane may happen, And any of those clients that are listening in right now, I'm sure you can relate to this. You know that JWB clients are the number one priority when it comes to those trades that are most needed after a big storm like a hurricane. Roofers. It is impossible to get in touch with a roofer after you have a major storm. Roofers and tree guys. And tree guys. Well, we, and we report on this. We report all of our maintenance work orders. Everybody, of course, after a big storm, you all ask those numbers. You know, the days of response that we have, you can measure in hours. Yeah. And that is again because of the influence that we have because of the volume of work that we do.

Pablo Gonzalez: 32:26

Got it. Patron Santorius brings up a point here. Michael Santorio says, Greg, as someone who's completed several 1031 exchanges, attempting one without a vertically integrated company who doesn't have inventory, you may have challenges getting your exchange in time. I agree, Michael, but we brought it up inside the construction side of it, right? Because it is one part inventory of just like, Do you have a 1031 and do you have options on properties in case one falls through, but you're going to have to go to that second option if the construction and the property is not ready and it's not already filled in with a tenant, right?

Gregg Cohen: 32:56

Yeah, absolutely. And I think Michael's spot on here specifically talking about that 1031. I mean, let's just put this in real dollar, you know, amounts here, right? If you think that you're going to go and do a 1031 exchange and just work. with a turnkey company and you happen to find a fake turnkey company or just a regular turnkey company, you know, those rules for 1031 are really solid, right? You have 180 days to close, but you have 45 days to identify your property. There's not many turnkey or fake turnkey companies that can meet that 45 day threshold. Vertically integrated companies like JWB, easy, no problem there. So I would absolutely, I think working with the VI company, like we're talking about, obviously is something that I'm biased and I think it's the best because I've just seen it work so successfully, but I 1031, do not even consider going anywhere else other than a vertically integrated company.

Pablo Gonzalez: 33:52

Yeah. And, you know, look no further than two episodes ago, Jag Chata's episode, right? Like that is the perfect example of how things can go wrong if you are doing a 1031 and you're not working with a vertically integrated company. And she has the three experiences, right? She's got big Turkey, regular Turkey, and vertically integrated. And she talks At links about that. So

Gregg Cohen: 34:11

I forgot to put the numbers to it, but it can easily cost you 20, 000, 30, 000, 50, 000 of taxes that you wouldn't have otherwise had to spend. If you run across those deadlines and you don't work with a vertically integrated company.

Pablo Gonzalez: 34:24

Got it. So the next piece is property management. Let me guess, fake Turnkey people don't have property management in house, GC. They're a, maybe a realtor that's like, no, no, I got this house for you. And I got my cousin over here who's a property manager. He's going to do it for you.

Gregg Cohen: 34:37

That might be one. I think if I see a whole lot of companies that are marketing agencies that, and so I, I even see that more than just realtors, you know, acting in the turnkey space, but I see a whole lot of marketers out there that are pretty good at driving a list and getting people, you know, excited about this asset class, but don't own the assets, don't control the construction, and they don't have in house property management. And in house property management is such a differentiator. I think it's so critical. So, fake turnkey would be no property management in house. And it is. Very, very common in this space. So watch out for that.

Pablo Gonzalez: 35:16

Yeah. So what's, what's regular turnkey?

Gregg Cohen: 35:18

A regular turnkey would be having property management in house. So the same company that is selling you the asset is also responsible for collecting the rent and managing that relationship with the resident, but they are more short sighted. They are only signing one year leases. That is a very. normal thing in the, call it turnkey space, they haven't evolved. They haven't, they aren't thinking long term. They're not thinking about managing your money for the next full market cycle. They're not thinking about this as an avenue for a better retirement strategy for you. So they're only focused on one year leases. And you know, I'm not sure how much you want me to go in depth there, but ultimately one year leases are a recipe for more turnovers, which means more times your resident is going to be leaving your home, which is costly. Every time a resident leaves, it can cost you between 6, 000 to 7, 000 when you talk about the lost rent while they're moving until you find a new great resident. It can cost you in terms of maintenance costs to put the house into great rental shape again, and it will cost you in terms of fees from your property management company. And so it blows my mind that property management companies still the status quo is one year leases when there's such a correlation between long term leases. And better return on investment for the end investor. But, but that's your, that's your typical turnkey company. That's what they're doing.

Pablo Gonzalez: 37:29

Yeah. you know, I got this turnkey not this turnkey, this property management conference coming up tomorrow. I'm going to be talking about how you lay out a point of view across an industry. And I'm, I'm excited. I'm kind of nervous to share ours.

Gregg Cohen: 37:41

I don't know. You might run into a boss. I

Pablo Gonzalez: 37:43

might run into a boss because I'm going to I'm going to use it as an example, but I'm essentially going to be like, Hey guys, you know, if you want to create word of mouth, you need to align your priorities with your clients. This is how we do it in J2BB. And then I'm going to. Completely just rain on the parade of one year

Gregg Cohen: 38:00

leases. You know, you were talking about how you like doing business with those who like to challenge the status quo. I think you're going to go down that path, challenging the status quo.

Pablo Gonzalez: 38:08

I'm not really interested in working in the ones that don't. Cause let's talk about what vertically integrated is, right? To me, I, what I'm, what I'm, I'm assuming what you're going to say is vertically integrated companies truly put this like long term relationship. at the forefront of this thing and sign two, three year leases and incentivize renewals instead of instead of turnovers and educate their residents about how much less it's going to cost them to increase their rent by 50 bucks and to move out. And they educate their investors about how it's in their best interest to get a 50 increase in rent than have somebody move out and get somebody else paying an extra a hundred bucks and like these kinds of things and, and, and really measure long term stays for rental property investors as the metric for success, as opposed to your things rented.

Gregg Cohen: 38:56

Right. The differentiator is what does that company view themselves as? Are they a regular status quo property management company? If they are, they're probably signing one year leases and they think their job is to keep your house rented. A vertically integrated company who is focused on a better retirement strategy for you through single family rental property investments they think of themselves as an asset manager. They are here to deliver a return on investment for you. So all of those examples that you just rattled off there, those are questions and answers that that company should be able to guide you on. Because there are a whole lot of ways that A property management company can be really good at keeping your house rented, but drop the ball when it comes to delivering a better return on investment. But you got to think differently. So, you know, I think one of the most eye opening moments for me in my evolution in this space has been when we started to buy property management companies. Because I have always seen our books on the property management side, but I noticed a lot of differences when I started to look at the books of other property management companies that we were buying. And we looked at the We've bought five property management companies now, and we've seen a lot of others that we said no to. And one thing that is really consistent is you see a really high percentage of the revenue in those property management companies coming from tenant placement fees, 20 to 50 percent is what I typically see of all the revenue that's generated for a standalone, typical property management company is generated in those tenant placement fees. 20 to

Pablo Gonzalez: 40:37

50%. of revenue is tenant placement fees for the average companies you're looking to buy.

Gregg Cohen: 40:41

25 to 50 percent.

Pablo Gonzalez: 40:43

And those are the good companies that have made it to the point where they want to like be

Gregg Cohen: 40:45

bought. Yeah, they have an asset that I want to buy, right? There's a whole lot that's a lot worse, right? But 25 to 50 percent, and they do this by signing one year leases because one year leases lead to higher fees collected for the property management company. Typically, your property management fees will be, call it, one month's rent. And so when they rent that home out for you, they're earning one month's rent right off the bat. With the only sign of one year lease, and that lease comes up in a year, that resident moves out. Well, that property management company is going to earn another month of your rent to go towards that property management fee, which is, you know, a big revenue driver for them. But you got to work with a company that thinks differently. A vertically integrated company who makes their money, not from the majority coming from property management fees, but on home sales, property sales will think about it differently. And they'll say, I understand, that the longer that I keep my resident happy in my home, the greater my return on investment is going to be for me as an investor, because I don't have that six to 7, 000 of costs coming my way. I don't have the tenant placement fees coming. I don't have the maintenance costs coming. I don't have the lost rent. And if I can defer that hit coming to me, and so it doesn't happen every year. But it might happen every four or five years. They understand that's how you as an investor is going to win. And they design their business and their property management services around that. And so, the first thing that you'll notice is that they sign longer term leases. They sign two and three year leases are what we sign at JWB. Then they focus on renewing leases. I don't even think I've told you this stat, by the way. Our property management team is Yeah. Tell me the stack because I need to put it in my keynote. Yeah. Achieving things that I didn't even think were possible in terms of renewing residence. They were

Pablo Gonzalez: 42:49

at 70%. They were

Gregg Cohen: 42:50

at 70%. You go back, I don't know, three, four, five years ago, and if you listen to the show at that time, I was talking about 65 percent is best in class for lease renewals. So this is when your resident signs a two or three year lease right off the bat. And then three years later, let's say. They come and they have the opportunity to renew. I was saying 65 percent was best in class because that's what we historically were doing. Then it rose to 70%. I've been talking about 70%. Well, we just crossed across the 80 percent threshold in quarter one of this year. So don't, I'm not saying that is repeatable. I don't, you know, I didn't think that was possible. We'll call 70 percent or 75 percent best in class here. Yeah. But they focus their activities on longer term leases. They focus this on a service organization for your residents so that they want to make the decision to renew. And you know, by doing that, the average duration of residence day lengthens. And so our average duration of residence day is four and a half years. And why do they do this? It's because they don't make the majority of their money from tenant placement fees.

Pablo Gonzalez: 43:54

Are tenant placement fees lower than, I'm sorry, are renewal fees lower than tenant placement fees? They

Gregg Cohen: 43:59

are. That's a really good point. So a tenant placement fee is equal to one month's rent, which might be 1, 400 on average or so for your property. A lease renewal fee is just 200 for each year that is renewed, right? But as a company, if all I was thinking about is a normal status quo property management company, I would look at that and I would say, that's a big amount of revenue that I'm giving up if I try to sign longer term leases. And this is what's going on in the minds of normal property managers, you know, to get them to sign two or three year leases. First of all, it's a ton of work. So you're asking a normal property management company to do 5x the amount of work to be able to sign two or three year leases. And then what you're asking them to do is to cut their revenue by 25 percent or more. And there's not a whole lot of property managers that are going to be willing to do that. And they probably couldn't even survive. So the difference for a vertically integrated company is they don't make the majority of their income off of fees, like tenant placement fees. They make the majority of their income off of home sales. We understand at JWB, if we get really good at treating our residents really well, and then make the decision to renew and their maintenance costs and their vacancy costs are lower and your tenant placement fees are lower. We're going to beat your return on investment expectations. You're going to be excited and you're going to fulfill that buying plan. And 3, 5, 10,

Pablo Gonzalez: 45:26

20 show up to shows, a couple of events that we host

Gregg Cohen: 45:30

and we, I tell you, it wasn't easy to convince us to do that, you know, 15, 18 years ago, but it's proven to be a win all across the board. And that's why we love it.

Pablo Gonzalez: 45:41

So Tara Paget is asking, why don't most PMs try to obtain long term leases up front? What are the pros and cons versus a two, you know, one year versus two year or longer. It sounds like you just kind of answered that, right? This idea of number one, there is no con. For the, for the, for the investor, right? For the investor, what you are doing is guaranteeing occupancy, lowering your vacancy rate, lowering your vacancy costs maintenance costs that happen whenever you have to do it. And that loss of revenue that happens. And when you're doing these two, three releases, you get to bake in the PR the price increase. So you don't have that awkward conversation every single year of what is happening. But for the property manager, The pro to a one year lease is that it's easier for them to fulfill on. Oh yeah. The con is that it's much harder to fulfill on. So it's really for the, it's up to the owner to say, no, no, no, you figure that out. It's not on me to figure that out. I, this is what I want because I want to maximize occupancy in order to fulfill my return expectation. And I expect you to get really good at renewing.

Gregg Cohen: 46:44

Absolutely. A lot of JWB clients try to bring that to their other property management companies. From what I hear, they haven't been so successful in convincing those other ones. And ultimately it just comes down to an economic reason that Most property management companies just simply can't do it.

Pablo Gonzalez: 46:58

So basically the con is operationally, it's super difficult. You've got to be a really good operator in order to be able to do it. All right, GC, that's PM. I'm going to summarize PM as fake turnkey is no PM in house. Regular turnkey is PM and house, but they are not aligning the goals of the property management company with the goal of the investor. They're just running a property management company. Vertically integrated means that everything is aligned in order to preserve the longterm experience of holding that house, which means that you are Maximizing for tenant stay which means that you are signing long term leases, and you are really devoting significant efforts into Maximizing measuring and reporting your renewal rates Cool. Okay. Last but not least is client services, GC. So, right. Like I assumed that a fake turnkey, what, what we here call what I call my portfolio manager a fake turnkey, I don't assume has a portfolio manager in house. They don't have like a financial advisor in house that is telling you like how this thing is performing and what you can do with it and, and solving those problems for you, asking those questions for you.

Gregg Cohen: 48:05

Yeah, absolutely. You can, you can really start to get a sense of this is a fake turnkey company by asking them the amount of staff that they have in their entire organization. And if they are, do they have a physical location or are they all remote? That's another question. sign of it potentially being fake turnkey. Not saying everything that's all remote is a fake turnkey company, but these are, these are signs. This, what you are trying to buy into is a passive investment where you can sleep well at night. You don't have to be an expert in real estate. You don't have to be an expert in that market. And in order to accomplish that with something that is inherently complicated, like single family rental properties, where you're renting homes to families for years and years and years. there has to be a physical presence. There has to be boots on the ground, or else they many times are just a middleman. And so what is fake turnkey? You know, I see a lot of operations that might have 10 people on staff for their entire organization. And you ask them about their customer service and they might say they have one or two folks that are customer service folks. But really what those folks are doing is they are acting sort of as a liaison to a company like you know, to a property management company, you know, and so they don't really have any say when it comes to fixing issues. Because at the end of the day, it's the property management company that is responsible for delivering for the residents and delivering for the owners. So you know, just ask questions. If it's like 10 folks, if there's one or two customer service folks if they're all remote those are signs that it's probably not something where when push comes to shove, they're going to be able to solve problems for you versus just being a liaison or a middleman.

Pablo Gonzalez: 49:48

Got it. What is regular turnkey when it comes to that?

Gregg Cohen: 49:51

That they have an organization that is sizable, right? Depending on how, how, how big they are and how much volume they do, right? JWB is one of the largest companies in the country here for turnkey. We have 130 people on staff. We are very lean when it comes to hiring. We don't hire 130 folks just because we like to hire folks, right? All of those folks are incredibly important, but this is what it takes to operate at a scale of, you know, selling 400 homes a year. So, you know, not every company is as large, but start to scale that back. They gotta have, you know, 30,

Pablo Gonzalez: 50:29

50 folks there. In my head, I was thinking minimum of 50 people in order to like really have all that stuff in house.

Gregg Cohen: 50:35

I'm trying to like give the benefit of the doubt, but you know, they, and they have to have done this for a long time. And in order to do this for a long time, you need staff. who understands it. So, you know, length of time that they've been in business, size of staff, are they physical in that market? Those are big things. So a real turnkey company would have those things.

Pablo Gonzalez: 50:56

So 10 plus years experience. 30 to 50 employees and just like this track record with somebody that's actually like your client management, your portfolio management, that's really like treating it as an asset. You'll

Gregg Cohen: 51:10

know real quick when you get on the phone with them if they, if they get return on investment. That gets return

Pablo Gonzalez: 51:16

on investment. Yeah. So you're talking to someone that gets return on

Gregg Cohen: 51:19

investment. And most property management companies do. Do not, you know, so, um, Yeah, or keeping your house rented. I keep going back to that's not the end result, right? Um, but that's not what you're going for. So a real turnkey company would get, would get that return on investment. All

Pablo Gonzalez: 51:33

right. So then what's vertical integration beyond that?

Gregg Cohen: 51:35

So vertical integration beyond that is the size and scope of the management, the experience of the management. I think what vertical integration allows for you to do is to have Such. Wonderful business insights. Um, you know, JWB manages 6, 000 rental properties. So when I get to get on the show with you all and you ask me really great questions, the answers I get to give you are based on that data, that data flywheel that we have here from managing 6, 000 homes and from selling over 3, 000 turnkey properties since 2011. And we house all that data. We look at all that data. We report on all of that data for all of our clients. Every quarter you get your client ROI report, which breaks down exactly how your investment is faring. And so when you have that data driven approach and the size and the scale and the scope of what you've been doing for so long is there. You're able to make better decisions on behalf of your clients, you're able to run your own business better, you're able to mitigate risk, you're able to understand opportunities better, and ultimately you're able to deliver on the return on investment. One of the most, I'll just give you one example before we kind of synthesize this a little bit, but one of the most common questions that we get from newer investors is how do you know what my maintenance costs are going to be? It's one of the easiest ones for us. Yep. We just We look at the data. We know exactly, is this a new construction home? Is this a renovated home? Those have different data sets for how much maintenance should be expected. And that's how we inform clients that are buying homes from us on the pro forma, you know, when they make the buying decision. But companies just simply don't do that. They just use numbers or industry standards. And guess what? They err on the side of lower costs because it inflates their returns at the time of purchase. And it. You know, ultimately, many times they struggle to hit those.

Pablo Gonzalez: 53:36

Yeah, I guess what I'm hearing is you're drawing a line in the sand and proprietary data to a large extent, right? So like fake turnkey is you don't have a portfolio manager, a person that's helping you make investments. Real turnkey is they have somebody in there and they speak ROI, not maintenance, not occupancy, right? Like they're talking about actual returns. And then, but they're still using values from a book. They're using standard values that they're getting from an outside report or an industry standard or whatever, whereas truly vertically integrated providers are establishing they've been there long enough. They have enough strategy. They're, establishing their own data sources, and then they are getting to the point where they can make decisions based on real data points that happen based on their own proprietary experience. Okay. That makes sense. Billy Green says, does the vertical integration process and good reputation of JWB result in any benefits per your relationship with insurers in Florida? Billy, I'm glad you asked that because, you know, right now we're talking about all the vertically integrated things that happen within the property line, right? Like these are all things that you control that stay within the property, within the deal that you're creating. And we're about to move into this idea of true vertical integration being something that extends beyond that. But before that, we want to satisfy. What Mike Foster asked us to begin with, which is, hey, you know, you can build all these services in house under one umbrella, one management, you know, one company that reports to one CEO. But there is a handful of things that are still outside there. They are, you know, in your case, strategic partners that you build long term relationships with, but you don't manage them directly, GC. What are those? What are those things?

Gregg Cohen: 55:16

Yes, absolutely. And I wouldn't even say. We want to take these things in house. There is the, it is a strategic move to not take some of these things in house, but the things that are not under this roof, not directly in house would be lending. It's nice to have a third party and an arm's length there when it comes to Lending component. So Lending, lending is an approved networks network of lenders that have been approved, vetted by JWB and we know exactly how they're going to deliver, not just the, the interest rates and the terms of the loan, but the customer service component. Okay. So that's not in-house. Our contractor base, we have management of the con, the construction services. in our organization here, but my team is not actually, we do not have employees that are out there swinging the hammers. These are subcontractors. And the same thing with builders. Right. So those who actually swing the hammers and build the houses, they're not employees of JWB. And that's a good thing. That's a good thing. And then, insurance, just like mountain man's question here. You know, insurance is any crucial part of this. And we have, you know, insurance providers that we love. Richie insurance group is our Kind of our flagship insurance provider. And she and her team are so ingrained with everything that goes on.

Pablo Gonzalez: 56:32

Inside our WhatsApp group, answering questions live. Yeah, there we go. Yeah, yeah, yeah. Right,

Gregg Cohen: 56:36

been on the show multiple times. Been on the show,

Pablo Gonzalez: 56:38

sponsored our event. I was going

Gregg Cohen: 56:39

to say sponsor for the golf tournament. Plus they're

Pablo Gonzalez: 56:40

hanging the whole time. There we go. The reason you and I met.

Gregg Cohen: 56:44

Absolutely. Yeah. It's funny. Yeah.

Pablo Gonzalez: 56:47

Pretty integrated.

Gregg Cohen: 56:47

But to Billy's question, I mean, that results in a ton of cost savings and hassle savings for you. So it's great that they are a third party organization. But they see every asset before we sell it, before we make it available for sale, they're going to see that asset. They're going to tell us exactly what the insurance premium is. And, Through the closing process, they're going to save costs and time all throughout. So, yeah, so those are the three main things that are not in house.

Pablo Gonzalez: 57:12

Yeah. And he's saying, what does, you know, what are the benefits of the relationship with insurers? I think that you kind of hit on that. It's a, that you, you know, by having a deep relationship, you get the pricing into the deal before, you know, so you know exactly what the pricing is. Other benefits are the fact that, you know, having somebody like Whitney inside the WhatsApp chat, asking questions answering questions and doing those kinds of things. Any other, I mean, I don't imagine you have preferential pricing, but you do get better information, I would assume.

Gregg Cohen: 57:40

It's, there's things that we get that you might not think of. So, like, for example, insurance companies look at the rate of loss and they look it over they would look over an entire book of business. And so, I know what Whitney and her team have been able to show the insurance companies is, JWB has an entire book of business, like the 6, 000 homes that we manage. Call that an entire book of business. Look at the, the level of quality of the construction work that's here. Look at the level of quality of the renovations, and what that translates into a lower rate of loss for the insurance companies. And so, what this does is it creates better rates. So, we do get better pricing. Yes, we do get better pricing, but it's also more than that. It's less inspections required. So, every time that, you know, insurance companies now, especially, are requiring lots and lots of inspections, well, over time, we've been able to build such trust and credibility with that insurance company that they may say, you know what, you don't need that four point inspection, whereas somebody just off the streets would be, and that would save you maybe, I don't know, fifty bucks or a hundred bucks, save you some hassle from having to coordinate that. Yep. Whitney and her team and our team would coordinate that for you either way, but you're going to save that time. So there are already a lot of cost savings that happen there.

Pablo Gonzalez: 58:46

And I think that goes down the line of all these outside vendors, right? Like I know when it comes to lending, I believe that one of the, one of your strategic lenders realized that somebody had closed under one rate and the road had changed or something like that and they were able to bring them the new rate proactively and save them and save them that type of money with construction. We already talked about the benefits of that. What I'm really hearing is this idea that whether you are. You know, turnkey vertically integrated, not a big difference in this idea of having. Outside providers when it comes to insurance mortgage and construction, but the big difference between a turnkey and a vertically integrated provider lies in the length and depth of the relationship with those providers and, you know, that correlates with these special treatment that you get as an investor. preferential pricing, better service, more options proactive options, and really less uncertainty. Okay, GC, now let's move on to the, the big aha that we had was this idea that When you are vertically only in being vertically integrated, can you start to affect the deals that happen, you know, like my wealth from outside the property line?

Gregg Cohen: 1:00:01

Yeah.

Pablo Gonzalez: 1:00:01

And it came from this idea that JWB having been here for 17 years, not diversifying for other markets has made a long term bet. into getting involved with the city, becoming pioneers of downtown, doing the research that says, Oh, downtown's when they start to thrive properties all around that urban core appreciate at a rate that's 20 percent higher than the, than the, or more than the average, I'm not a numbers guy than the, than the average home press appreciation around the country. So let's bring in a bunch of stakeholders. To an urban core, get them to buy in this opportunity for them as downtown developers so that the investors around it can do this and we can bend the, the rate of appreciation rate for a city.

Gregg Cohen: 1:00:45

Absolutely. That is the single greatest thing that we could do to increase your return on investment is if we can have an influence on the home price appreciation in Jacksonville. And the way that you do that. is by raising median incomes. You need to be an influencer in raising median incomes if you want to create this. unlimited potential of what home price appreciation can be for you as an investor. And fake turnkey and regular turnkey companies just can't play at this level. And it's taken 18 years. It's taken a whole lot of learnings along the way and relationships and money and strategic partnerships and saying no to other things so that we can start to make real impact and real change. And it's going to benefit, it's already benefiting our owners. Yeah. Our turnkey clients. But the benefits to the community and to our renters are just as exciting. And that's that triple win that we talk a lot about.

Pablo Gonzalez: 1:01:50

Yeah. And it feels like you guys, recently we started talking about is of this like economic flywheel, right? That is this idea of, hey, if you start making homes in a neighborhood better, Then the amenities around the neighborhood will want to come and want to invest in it. Amenities in the neighborhood come and want to invest. It raises the quality of life. Better quality of life attracts employers that have jobs to come settle in this town and employers that have a job coming to settle with this town increases jobs, increases higher paying wages, which increases the amount of homes that get to be built in a neighborhood and renovated in a neighborhood, which then keeps going and going. And it feels like You know, you guys now that you, you got to this level where you're pioneering the downtown development and really evangelizing this thing. You're really starting to drive that economic flywheel, but it really kind of started inside of a, Of a community flywheel where you know, like that, there's one piece of that economic flywheel. That's the community, which is essentially like, man, you make one house after another bit better, but you start looking at it from a neighborhood scale. So you, so you build a playground that adds to the, so that adds to the neighborhood. And we, you know, I got to see this presentation at a TMM of just like these neighborhoods that JWB has been in, what it looked like before, what it looked like after nicer looking houses. Playgrounds and amenities and these kinds of things and that's really like what your wedge in was, was this vertical integration where, you know, you really saw what neighborhoods were going to work long term in Jacksonville and started really investing in them.

Gregg Cohen: 1:03:24

It's been one of the most rewarding parts of what we've built here, and we don't talk about it nearly enough, especially on the show but what you all are a part of when you invest in JWB properties so much more than just. Determining generating a better return on investment for you. You're, you're truly changing lives. And one of the coolest things is we started this business when Google street view came into play. Yeah. Google street view. If you go and you see, you know, you can look up on Google and see what a street looked like 10 years ago or five years ago. Well, I'm so glad that JWB coincided with that technology, because now we have the ability to go back and look at streets that had were overrun with crime or had dilapidated houses or had vacant lots. And now they are thriving streets where families live. Many of them are brand new construction homes. And inside those homes, kids are learning better, right? There's not as much financial challenges in those homes. The quality of life that we all as a part of this have been able to affect is mind blowing. And we started to see this pretty early on, you know, because we're so focused on the right neighborhoods for us to be in, in Jacksonville. And, you know, I mean, pretty early on we saw this. And, what doesn't get talked about enough here is not just the community development redeveloping neighborhoods and streets, which is, I love it. It is wonderful to see, and we get success stories that we hear all the time about how crime rates have gone down and how you know, the taxes that are raised, the property taxes that are raised are going to fund our essential workers and our police and our fire and our teachers. And so those are all, all really, really important. What doesn't get talked about enough. are the individuals in our neighborhoods that are rising up, that are helping themselves through, you know, this impact that we can make to take that leap from renter to home owner, renter to homeowner. Because there's, you know, I don't know if this is the number one most direct correlation to financial wealth or what have you, or a solid financial future, but it's gotta be way up there. Do you own a home? Do you own a home that if that answer is yes, you are in such a better financial spot, not just for yourself, but for your future generations. Actually pulled some stats here from the National Association of Realtors. The average homeowner has 300, 000 of net worth. The average renter has 8, 000 of net worth. It is a large, large difference. And we have this platform now where we can help our renters become and by doing that, we are creating a win across the board. First, we're helping that individual. We're helping that individual take advantage of owning a home. And, you know, especially if you look over the last few years, if we, you know, can help individuals become homeowners. You see how much home price appreciation has benefited those, and you start to feel bad about those who could not take part in that run up of home price appreciation. Well, that wasn't a one time thing meeting that home price appreciation. Home prices appreciate slowly over time, and that creates tremendous amount of net worth for those renters turned homeowners. You think about it from the community impact. When more people own homes in their community, they take better care of their homes. They have more civic pride in their neighborhoods. Crime goes down. And then we think about it from a society perspective. And in our country, home ownership rates are the same that they were 25 years ago with all of the wealth that's been generated in our country in the last 25 years and the advent of new technologies. It's shocking to me. that homeownership rates are still what they were 25 years ago. And the government and our country needs homeownership to work because of the societal advantages that come along with people owning homes. And so we are a very big contributor to first time homebuyers. Because we're uniquely positioned to help those individuals, right? 42 percent of all new construction single family homes that were sold in 2023 were JWB homes that were sold under 300, 000. 42 percent of homes under 300, 000 that are new construction homes were JWB homes. So we are in this unique spot. Where, you know, with 6, 000 residents that we serve to help our residents become homeowners and it's something that we've always been passionate about, but we've gotten even more strategic about it just in the last year, we had Tara Klein on the show not too long ago, and she was sharing how JWB Realty is in house realty services now for everybody who wants to buy a home, but specifically for our residents to become homeowners as well. So yeah, it is an unbelievable spot to be in where you can help so many people and everybody wins. And that's what we're really, really focused on making an impact.

Pablo Gonzalez: 1:08:38

I feel like I just got you talking about taxes. Like you, I just teed you up about something and you just blew me away with like a whole bunch of passionate stats and all this stuff, man. It's interesting. It's, it's interesting that we haven't. Talked more about it when there's so much happening behind the scenes on all this stuff and you know to me It makes a little bit of sense and like kind of like knowing you and your partners and and and how You know, you've always been doing these like community activities But you've always until I came around and like really started bringing hype man culture You were just really purposefully understated to a certain extent, but more than anything, you know the way I see it man is this idea that jacksonville has been this place where You It needed, it just, it, it was a very affordable place to live. And I think if you look around what it needed was a couple of improvements in quality of life and like the housing stock and these different things in order to bring up the quality of life, because it was still really, really affordable. So bringing up the quality of life was like the first part of it in these neighborhoods. And now that that quality of life is up and you really are on the precipice of like increasing median incomes and doing this downtown thing. And bending the curve on home price appreciation. Now this whole like affordability piece of it, it's like, you gotta, you gotta find a way to plug the renter into the economic flywheel. And you do that through home ownership, because now that it's going to start accelerating, there's this real chance of them getting left behind. So it is, it is the moment to get loud about it, right? It is the moment of like, Hey, It's been all good and well until now, because people could still afford a good quality of life in this wonderful city. But if you don't start kind of like taking that step up now, it's, it's time to plug in, right? Because it's gonna, if not, it might just, you know, leave you behind like I have felt in cities that I've lived in before.

Gregg Cohen: 1:10:26

100%. I can't think of a more impactful thing than doing what you just said right there. Helping everybody. enjoy the fruits of this wonderful real estate market, this wonderful economy that we have here in Jacksonville, this wonderful community that we have. And, and, you know, we sit in a unique spot to be able to affect positive change across all of those, those places.

Pablo Gonzalez: 1:10:48

I love it, man. So, you know, if you are again, fundamental, this one really is a line in the sand between regular turnkey and vertical integration, right? Like, Regular turnkey, not working on the economic flywheel, vertical integration, working on the economic flywheel, smaller turnkey providers working at least on the community flywheel, right? And if you get to work with a vertically integrated provider that's gotten to the point where they're really graduating and they're doing this stuff, then you really got to start talking about, hey, how are you plugging residents into ownership? Right, because if not, then it's going to become an unsustainable equation. And we started the talk talking about strategy and long term strategy. So it's like, it makes perfect sense that, you know, the more vertically integrated you are, the further out you're thinking, the wider the umbrella that you affect and the more that you can really drive benefits for. You know, investor, employee, and community member of, of, of the house.

Gregg Cohen: 1:11:45

Yeah. And let, let me just say it's beyond just the, the feel good of this message right here that hopefully feels good to all of you of, of, of helping. I mean, this is the best thing I can do to drive your return on investment, because if I can take 6, 000 renters and turn those into homeowners and more and more and more as we continue to manage more properties, that's significant housing demand. That leads to home price appreciation for you. That's more return on investment for you. If we can make Jacksonville the talent destination that, and the, the destination for a quality of life where people want to live. That's raising median incomes that allows rents and home prices to go up and people can still afford it. And that is the best thing that we can do. It trumps every other property management strategy. Man,

Pablo Gonzalez: 1:12:35

this is my business development strategy. Show up as the, you know, create the perception. That you are a, that your business is a place where somebody can get discovered, where somebody can be the stage to propel their career. You guys are doing this for a city, right? Like if, if Jacksonville shows up, not just as this place that's going places, but the place that you could show up to as a renter and leave as a homeowner, then you're going to attract all the best and brightest young people. to this city in order to make that leap. And that's only going to drive more rental demand, more housing prices, you know, better housing stock, continue the economic flywheel, man. So I just couldn't agree with it more. And I think Papa Oliver Shapiro over there, who's with us, didn't check in on the roll call pop up, but he says great going from me.

Gregg Cohen: 1:13:23

Pop up. Love you, man. I don't see that happening. We have an incredible mayor here, and I don't know if I'm cut out for that, but thank you for the support.

Pablo Gonzalez: 1:13:31

I disagree. I think you're very cut out for it, Greg. I think we should all, we should all just like start paper crushing you into doing it.

Gregg Cohen: 1:13:37

Oh, goodness. Oh, goodness.

Pablo Gonzalez: 1:13:38

That, events, networking, all the stuff that introverts like to do. Yeah, exactly. You're a really good public speaker, even though it, even though it gives you the cold shivers at night.

Gregg Cohen: 1:13:47

It does. I go home every night, and I just curl up like a little ball. Oh, man. We love you guys. Thank you, guys. I love it.

Pablo Gonzalez: 1:13:54

Quick summary, right? Just there is there is fake turkey. There's regular turkey and there's vertical integration from a very high level, you know, vertical integration just means how strategic are you with all things involved, right? It is having things in house that you can control. It is having deep insight into the things that you are doing. It is having deep influence with the people that you're working on his partners. And at the end of the day, Having a vertically integrated approach provides deep impact into the returns that an investor can have when they are working with them. It provides a deep impact into the lives of the people that rent from them and that live in their homes. And it provides a deep impact into the prosperity of the community and the city that they do business in.

Gregg Cohen: 1:14:37

Just feels good, man.

Pablo Gonzalez: 1:14:39

It

Gregg Cohen: 1:14:39

feels good.

Pablo Gonzalez: 1:14:39

That's good. That's good. That's good. All right. Nadeem Shah says, Billy, you wash your hands. I'm not really sure. I think I missed the back end of that conversation, but I gotta say feels good to have these conversations to restate it. Thank you to Mike Foster, who, you know, encouraged us to host this and redefine this for everybody. And especially because it gave us this opportunity of like where it's going, right? Like and and how this is doing and we love that whenever we do a show the community shows up So thank you to our to our community for showing you are the ones that make this thing worthwhile We never take it for granted that you take an hour out of your day to spend some time here With us on Tuesdays. And, next Tuesday, it's, uh, Natural Average Insights again, man. Ooh, it is. No, is this, or is next Tuesday when you're out of town? No, next Tuesday is Natural Average Insights. Sweet. Yeah, we get to jam on the, on the news of the day. A lot of news out there, man. Jacksonville got ranked the second fastest grow, what is it? What was the, what was the? Hottest job market. Hot second hottest job market in the U. S. We're going to talk about that. We're going to talk about the context changes of how the Apple vision pro being released and the impacts that it could have on real estate and a whole bunch of other really, really interesting new stories of things that are happening right now. Can't wait to do it. You see from now till then, anything that you recommend for our friends and family here? Don't be average. See you next week.