The future of housing is in your own backyard with Samara CEO

HousingWire

This week on Power House, Diego sits down with Mike McNamara, the co-founder and CEO of Samara, a company that focuses on building pre-fab housing products and accessory dwelling units (ADUs). Originally born inside the Airbnb space, Samara is trying to revolutionize housing by providing flexible living spaces that serve a diverse set of needs, from generating rental income to accommodating multi-generational families.   Mike talks about how ADUs might be an unexpected solution to some of our housing shortage problems, especially in dense areas like California. He also talks about what the future looks like for diverse households and the community work that they’re doing to help wildfire victims in Southern California.   Here’s what you’ll learn:   Why backyard ADUs are becoming the go-to option for housing flexibility and supplemental rental income  How Samara handles the entire ADU process in as little as 7 months  What sets Samara apart from other traditional prefab builders  Why California’s zoning laws have helped ADUs take off, and what other states can learn from that  Inside Samara’s $15M initiative to donate homes to wildfire survivors   Related to this episode:⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   ⁠Samara⁠  https://www.samara.com/  ⁠Getting Smart on ADUs with Samara’s Mike McNamara⁠  https://blog.altosresearch.com/getting-smart-on-adus-with-samaras-mike-mcnamara  ⁠Samara | LinkedIn⁠  https://www.linkedin.com/company/meetsamara/  ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠   The Power House podcast brings the biggest names in housing to answer hard-hitting questions about industry trends, operational and growth strategy, and leadership. Join HousingWire president Diego Sanchez every Thursday morning for candid conversations with industry leaders to learn how they’re differentiating themselves from the competition. Hosted

Transcript

00:00At Samara, in this seven-month time frame, we take care of absolutely everything. We'll interface

00:05with the city, we'll design the unit in your backyard, we'll be your consultant, we'll give

00:10you a whole bunch of ideas about how to situate it, and we'll take care of absolutely everything

00:15right on to handing those keys over to you.

00:17Welcome to Powerhouse, where we interview the biggest names in housing and ask them about

00:30their strategy for growth. I'm Diego Sanchez, president of HousingWire. My guest today is

00:37Mike McNamara, CEO of Samara. Mike, it's so great to have you on the show.

00:42Yeah. Hi, Diego, and it's actually an honor to be here. So thank you for including us

00:48in your show.

00:50Yeah, I'm really excited about this conversation. Very interesting topic. So just let our audience

00:56know, what is Samara?

00:58Well, Samara is, we think about new ways of living, and we create housing products that

01:06support that vision of how people are going to live a little bit differently in the future.

01:10So we don't try to just have the most standard housing products of anybody else. But we actually

01:16try to have a product that's more innovative, and a little bit more supporting who people

01:21are, how they live their lives, how they build on their financial wealth, how they build life

01:28with their families. We try to build the kind of products that people really need in the future.

01:33So we try to be a little bit creative about it.

01:36And what exactly are those products? It seems like you've started out focused on the ADU space.

01:44Yeah, we started with ADUs. ADUs, quick, you know, stands for accessory dwelling unit. And what it is,

01:53is it's think about taking a small home, a small house and putting it in your backyard. So a fully

01:59functional house, a bathroom, a kitchen, living arrangements, you know, built like a real house,

02:06I mean, built to specs that are just as good and as high quality as your front of the house.

02:11But maybe it's small. So we have five different, what we call our ADUs, we have five different ones,

02:17they go from 420 square feet, all the way up to 950 square feet. But imagine taking a spot in your

02:24backyard and just putting anywhere from 420 to 950 square feet in your backyard, it goes anywhere

02:31from a studio to a two bedroom, two bath. And all of a sudden you have this accessory space

02:37that you can use in many different ways. And that's what we're trying to do is we're first saying

02:45this is a real huge trend, particularly in California. And we're eager to help people supply

02:52the products that they need in a really seamless way to help them realize how they could live their

02:58life differently if they have a little house in their backyard. So it might be more obvious to you

03:03and I, but why would somebody want to have a little house in their backyard? Yeah. So let's,

03:09let's think about it. There's, there's economic reasons. There's family reasons. There's just

03:16the way you live your life. You have your own hobbies and desires and interests. And, you know,

03:23you have a little tool now to go help you do all those things. So let's just, you know, unpack that

03:28a little bit. In California in particular, the cost of your house might be really high. And you think

03:34about how many different, so let me, let me talk before I get into too deep in economics. If you had a

03:41home in your backyard, you could use it many different ways. In California, the average

03:48homeowner is in, is in his house for like 17 years. So just think about almost two decades.

03:54And by the way, that's at 17 years. And I think it's probably going to go longer because, you know,

03:58everybody that locked in those three and a half percent interest rates who are real happy with

04:01them are probably not going to change them. Yeah. And 10 years going up across the country. So

04:06California probably won't. Oh, is that right? Yeah. Yeah. So I'll bet. So, but think about two

04:10decades, you're in a house for two decades. What happens with your life over the course of two

04:15decades and your inability to take that house and tweak it? You know, it's just hard to change

04:21your house. Once that structure is loaded into the ground on top of that foundation and it's in the

04:26ground, it's hard to, to move it around. So imagine having this accessory dwelling in your backyard.

04:31Now, over the course of two decades, you might use it for your work from home office because all of a

04:36sudden there's a pandemic, you might use it for rental income. Maybe you first moved into your

04:41house. It's a tough, it's a tough expense on your paycheck and you need to rent it for a few years.

04:48So you can have a rental income. You can have that rental income. You can have it for one month. You

04:52can have it for three months a year. You can have it for six months a year. You can rent it this year,

04:56but not next year. You can rent it for the next three years. And maybe you don't. So it's almost like

05:01literally income on demand. So that's an interesting use case. Maybe you've got yourself a

05:07promotion. You don't need that rental income. You don't want to go back and use it as a work

05:11from home office, or maybe you need to put granny back there. Now all of a sudden your mother-in-law

05:16or father-in-law get up in age, you know, when to go put them in a nursing home is anywhere from like

05:22eight to $15,000 a month. Wouldn't it be better to have them in the backyard? And then, you know,

05:29they get to keep their dog and maybe you have a babysitter and you have all these other benefits.

05:33So economically it's beautiful, but also from a family standpoint, it's wonderful. So maybe

05:37granny or your mother-in-law, your father-in-law, they go back there for a few years. Maybe usually

05:42your kid comes home from college and all of a sudden he needs to get on the ground. You don't

05:47want him back in the third bedroom. The amount of people that young adults living with their

05:54parents in this multi-generational world that we're in is higher than it's been in decades.

05:59But, you know, he doesn't want to be, or she doesn't want to be in your third bedroom either.

06:05So it wouldn't be great if they had a little spot outside to help them get them on their feet. So,

06:09you know, over the course of two decades, you might, you can use it in all these different

06:12ways. And the reality is over the course of two decades, you'd probably use it in all these

06:17different ways. Right. One of the biggest, one of the most frequent, one of the very frequent use

06:24cases that we see is the parents are actually moving out of the front house, giving it to their

06:31kids and their family and their children, and they're moving into the back house because they

06:34don't need this big house anymore. Interesting.

06:37They don't want to sell it. You know, it might have a lot of capital gains. It might have a low

06:40tax basis. It might have a low interest rate on the loan and they're moving into the backyard.

06:47And it kind of, you know, if you think about that too, it kind of cements their spot, you know,

06:52it kind of gives them a spot to go live near their kids. And the kids love it because trying to,

06:58trying to afford a new house, front house is hard.

07:00I love all these family and kind of multi-generational examples because it's,

07:06it's how we're living our lives. And there's also the economic impact, right? Because,

07:12you know, we're, we're probably undersupplied in this country in terms of homes by, by millions of

07:20units. You know, people debate about how much it is, but I think it's pretty clear that the data

07:25shows that, that we are undersupplied. And so ADUs add supply. Yeah. Yeah. I think there's two ways to

07:33think about it economically. First is think about all those use cases of using this home in your

07:38backyard. And now all of a sudden think about while you're using that, your, your ADU is real

07:46property. It's appreciated. It is just, the, the, the ADUs that Samara builds are as high a quality

07:53as most of the front houses that, that, or, or sometimes higher quality because it actually is

07:58brand new materials. It's modern materials. It's comes with a fresh warranty. I mean, there's like,

08:03you know, everything's a double pane window. Everything's the most advanced roofing materials,

08:07the most advanced siding material. It's, you can argue it's even a little bit better, but anyways,

08:11while you're using it over those two decades for all these different uses, it's appreciated at the

08:17rate of real estate. So if you think about real estate over the last 50 years, the average

08:21appreciation is 3% a year, you know, very often higher in many other locations. So while you're

08:28sitting there utilizing this in, in any way you so choose the value of your property is going up.

08:35So if you think about that, that whole multifamily wealth generation aspect of it's,

08:39it's a beautiful investment and people understand real estate. They understand

08:44that investing in real estate can be really positive. And a lot of people have, you know,

08:49that's the, the, the number one source of their wealth. I mean, across the United States,

08:53I think it is the largest source of wealth is, is actually the home. I think it trumps,

08:58you know, stocks and bonds and, you know, you know, 401ks and, and any other investments they

09:05have. So people kind of understand it, they can use it, they can touch it. So that's kind of

09:09interesting. And if you are going to rent it out, theoretically, the rent income is kind of

09:15appreciating at the same rate of inflation. So once you buy it that first time, maybe you've got an

09:22annuity stream of, of higher and higher rent income on just on the back of pure inflationary kind

09:27of pressures that you would normally see in, in, in rent. So, so I kind of mentioned there's two

09:33economic things. I'm going to kind of circle back to your other question. At the same time,

09:38you're actually solving some real housing shortage problems. We see that depending on the different

09:45areas that over 50% of the time people are actually using this for rental income, which means

09:51it's creating another housing unit is creating supply. So think about it from a jurisdiction

10:00standpoint or a government standpoint, they want to bring the cost of housing down. They want to

10:05have more and more housing units that are accessible to, to which by definition, if it's only 950 square

10:12feet, it's probably a lower, a lower rent payment. Or if it's only 500 square feet, it's an even much

10:18lower rent payment. So you've got, you're actually creating housing supply and that housing supply

10:25is getting created on the back of kind of like crowdsourcing almost. You're kind of saying anybody

10:30who has a backyard can put one of these things in and then, and then go rent it out. And all of a

10:36sudden you have another source of income personally, but the, the, the value to the, to the, you know,

10:47the, the municipalities, the governments, the, you know, to the world itself is high, which I've got

10:53some more stats on that, but I see you have a question. Yeah. Yeah. No, we'll, we'll dig in further

11:00for sure. Let's, let's talk a little bit about the origin story here and, uh, you know, dig in

11:06specifically on the, the rental use case. Uh, I think this, the company was, was born or incubated

11:14at Airbnb. Yeah. Yeah. So it's, uh, so think about Airbnb, think about how many housing units they touch.

11:23Um, I don't know how many different hosts they have. I mean, practically everybody in the world uses an

11:28Airbnb, but the actual hosts are probably six or 7 million active hosts. It's like they touch an

11:35insane amount of housing and they touch an insane amount of how people consume living. So, um, and

11:43it's one of the originations that people love to have supplemental income and Airbnb is a way of having

11:48the supplemental income. And it kind of started, um, Joe Jebbia, who's our co-founder, um, and my

11:54partner in terms of starting this up or co-founded, um, Airbnb together or Samara together. He's, he's,

12:00he, he co-founded Airbnb. I did. Um, but he kind of said, wouldn't it be really cool if we could take

12:05a unit and kind of truck it in or truck it in and like drop it into the backyard, um, and be able to

12:13rent it the next month. And it started with this idea of this vision because it came out of people

12:19wanting to supplement their income. So, so, so much, they'd like the experience of engaging with

12:25people. Many of the Airbnb hosts just really like to engage with people and like to manage people.

12:29They like the supplementary income. People love going into an Airbnb because it just gives them

12:34another option, um, in terms of where to live. And that's kind of the genesis of this. It's,

12:39it's, uh, you know, thinking through first off, um, with Samara being like an R and D unit within

12:47Airbnb, thinking about how people are consumed living in the future and simultaneously coming

12:53up with a very concrete way to add housing units into the backyard, using the backyard.

12:59So what is the timeline from somebody going to one of your showrooms and purchasing a unit

13:09to it being fully installed in their backyard?

13:13Yeah, it kind of depends on the jurisdiction. So, and it kind of depends on your, there's,

13:21there's a bunch of depends, um, but it kind of depends on your, you know, your electrical setup

13:25and whether or not you have to upgrade the, the, the electrical, um, outfit. I mean, it depends on a

13:31lot of things. So every, everybody's backyard is a little bit unique, but on average, you ought to be

13:36able to get one of these things in about seven months from the, from the day you walk into our showroom,

13:41you could probably have one in your backyard at the earliest about seven months and maybe at the

13:45latest, you know, nine or 10 months. So depending on, um, a lot of different things, what's happened

13:52is that, um, the jurisdictions and like the state of California in particular are not putting guard

13:59rails around how fast you need to respond to these permits. When you do an ADU permit

14:05in California, you have a right to put an ADU in the backyard.

14:10And when you have that right to put it in the backyard, you still have to get permitted. You could

14:13be in an earthquake zone. The soil might be a little bit different. You have to change the foundation

14:17around a little bit. So maybe there's a few tweaks that you have to make and you have to go study,

14:23but they've mandated timeframes by which to respond. So this is something that a lot of the

14:28municipalities have done. We got one permit, uh, request in one of the cities here, uh,

14:35just right near San Jose in four days. So think about all of a sudden you got your permit in four

14:42days and you're authorized to proceed and the timeline to get these in because Samara handles

14:48the whole process. So we, we believe one of the things was not just building a small home.

14:53It was a whole process of being able to acquire a home and get it installed in your property and get

14:58your keys handed over. That is usually really painful. Yeah. People think, do I have to even

15:04put it in the backyard? How far from the fence does it need to be? How do I need to engage with neighbors?

15:09Which permitting agencies do I need to take care of? Um, I need to take care of soil surveys,

15:15lot line surveys. I need to get my, the water mains checked out. And can I add an incremental

15:21wastewater, um, and interface into my wastewater system? Can I add some more electrical load onto

15:26my preexisting electrical box? Can I get, I need to go get it, the architect to design it. I gotta,

15:31I've gotta get the, the land architecture done because I've got to route my wires, you know,

15:36around the pool and to the left of the Oak tree. And I have to do all those things. And then I have to go

15:42figure out how to get it built and I have to go find a general contractor. And I gotta bid it out

15:45to three guys and I gotta do all this work. And then, you know, when it comes to general contracting,

15:50you know, I know you've seen a lot of stats that, you know, 75 to 80% of all jobs are late, um,

15:57over budget on average, over budget by like 30%. So all of a sudden you have to deal with that stress

16:03and people, it's a real technology to go manage all that. So at Samara in this seven month timeframe,

16:10we take care of absolutely everything. We'll interface with the city. We'll design

16:15the unit in your backyard. We'll be your consultant to say, Hey, maybe you can put it over here or

16:20maybe over to the left or put your, you know, you can put double doors or windows, or you have some

16:25options with our unit. Um, we'll give you a whole bunch of ideas about how to situate it.

16:30And we'll take care of absolutely everything right on to handing those keys over to you.

16:35So how do you, um, uh, have a price for that? Because, um, you know, with all the dependencies

16:44and potentially pretty complicated consulting that you'll have to do on some projects versus maybe not

16:52as much on others, um, is there like a base price that is fixed and then installation costs that can

17:00vary depending on all the dependencies? How do you, how do you charge a price?

17:05Yeah. So we, we break it up. Um, so we think about, think about the top unit. So everything

17:11on top of the foundation, it's a unit that comes in on a truck and it gets craned in and it gets

17:17dropped in and it gets connected in an hour. It's, it's actually an amazing to see.

17:22Yeah. I would love to see a time lapse video of that. That would be really cool.

17:27Yeah. Yeah. Maybe, maybe we can follow up with you and send you some pictures and things.

17:32But it's actually amazing to see the first time I ever saw it. Wow. Um, that's really cool. So

17:38anyways, that top unit, there's a fixed price. So we build that in a factory. I mean, it has a price.

17:43I mean, we know exactly how many materials we're going to use. We know exactly what the configuration is.

17:48We know exactly how many labor hours it takes to build. We build in a factory,

17:53so we don't have the variabilities of a contractor. Is that your factory or is that a factory right

17:58now? That's our factory. That's your factory. We, we absolutely believe to provide the customer

18:04experience. We actually believe you need to control all aspects of the supply chain. It's how you get

18:08the best price. It's how you get the best customer experience. And it's how you ensure that the

18:13quality of every unit is top notch. We, we control all of that ourselves, which is very unique

18:18in industry. Most people like bid it out to not bid it out, but they go to a contract manufacturer

18:24that maybe has a design that they put together and they sell you that they're almost very often

18:29edu companies are almost distributors of manufacturers of the product. And we don't do

18:34that. We, we, we take care of that whole process. So, um, we think about that top unit. So that's a fixed

18:41price. Now, what I talked about before is like general contracting projects going from scratch or

18:47typically over budget and the cost overruns and it rains and you, you come up with unexpected

18:52things. And you know, the general contractor are building that unit for the first time.

18:58They don't, it's not the same unit they're rebuilding over and over again. So anyways,

19:02we've got a fixed price for that top. Then on the bottom, we actually go out to the site. We do the soil

19:09survey. We look at the utilities. We understand how many feet it takes. We have to hook up water,

19:16wastewater and electrical. We don't need gas because our units are all electric and we figure out,

19:22Hey, we have to route this. We have to dig an 18 inch trench all the way around the swimming pool.

19:27We got to get to the electrical box. Maybe we need to do an upgrade of the electrical box. We have

19:32to interface this into the sewer system. Um, you know, maybe, you know, so we'll calculate all that.

19:39And because it's our team that's doing that, that knows our product that has put our product in the

19:46ground over and over and over again, our, our precision of what that cost is going to be, what

19:54the potential overruns are going to be. We, we worked that out at the beginning. So because of our cycles

20:00of learning, it's, and it's one of the benefits, you know, when we talk about splicing later, maybe

20:04by owning that end, end process, like I talked about, you get to have this feedback loop. That's

20:12really kind of amazing. You put one in the ground, you learn what went wrong and doing the site

20:17installation. What can we do better? How can we do it faster? How can we do more reliably?

20:21And you, you reincorporate those learnings into the next time you do it.

20:26If you think about a general contractor doing it or with unit is typically put into the,

20:31into unit. The general contractor is building the unit for the first time and he's probably never

20:35going to build that design ever again. So all that learning is lost. So it's a learning curve,

20:41the whole project. And then when it's all done, the learning evaporates. So there's the next time

20:48you do a project, you just have a cost that's going to end up being re-baselined and not take advantage

20:54of all that learning. So, so anyways, we, we will calculate the top is fixed, super easy. We just

21:00take out an algorithm. Do you want double doors? Do you want windows? Do you want,

21:05do you want, you know, different kinds of cladding? I mean, there's all kinds of these

21:09different options. Just pick what you want, like buying a car, like figuring a car, click, click, click,

21:14go on our website and do that. And then the bottom, we send our guy out or our team out. We'll go do the,

21:21do the analysis and we'll give you a price.

21:24So, and we've done a lot of times it's, it's pretty reliable. So we don't, we don't anticipate

21:31hardly any deviation from that. So with, with primary residences,

21:38you know, 60, 70, 80% of the population takes out a mortgage to, you know, be able to purchase that

21:48primary residence. How does financing work with, with, with, with your product, you know, where,

21:57you know, the, the top is fixed, the bottom is, is somewhat variable, but all in, it's probably going

22:03to be 350, 400, $500,000. Yeah. Yeah. We think, um, most people, um, are going to want to, are going

22:15to need to finance this product. Even, even most people finance cars just because they have a, they

22:20have a high ticket price. A lot of people finance solar systems when they put it on the roof. You

22:24know, I mean, the solar industry took off on the back of when they created finance products, um, that

22:30actually allowed you to not have a, just a pure cash capital outlay. So we expect the same here.

22:37We created, um, and there's some problems with financing ADU. So if you already have your front

22:43mortgage, you don't want to touch it, which you probably don't in most cases, you have to get a

22:48second. And the way a second is priced in, in our economy, it's priced as a second mortgage. It's not

22:57usually another house that's going into that second mortgage. It's normally you're consolidating

23:02debt. You're doing, uh, an improvement in the, in the main house. You're redoing your kitchen. You're,

23:08you're doing, you're putting in your swimming pool. You're, you're doing things that are, um,

23:15aren't necessarily income producing assets. So by putting a house in the backyard, um, most people

23:22are going to put it in a sec or they're going to put it in a heat lock or something like that. And you

23:25think about those, the first mortgage is like six and a half, seven percent today.

23:29You think about a heat lock or a second mortgage being more like nine and a half percent, right?

23:33So what we did about a year ago is we came out with our own finance product.

23:37So we're actually a licensed mortgage broker. So we said, if we're going to provide this seamless

23:41experience for the customer, we want to be able to finance it at the same time, because everybody's

23:48going to have to, now, if they want to buy it, they're going to go look for finance and

23:51they're actually going to come up at nine and a half or 10%. So we said, this is a mispriced asset

23:57class. We actually think about this as being an asset class because once you put it in the backyard,

24:03it appreciates like real estate. Once you put it in the backyard, it's income producing

24:09at your convenience, six months out of the year, one year, next year. If you get in trouble financially,

24:14you can just rent that out. If you got in really a lot of trouble, you could go live in the back and

24:19run out your front yard, front house, which is probably bigger. And I always say, if you got

24:24in really, really trouble, you can pitch a tent between the two and run them both out. So it's

24:30actually an income producing asset. So it's mispriced. It's not a swimming pool, right? This is,

24:35this is actually can generate income at your convenience. So it's actually a lower risk profile.

24:41I would argue that the front house is actually worth more as a result of having income producing

24:46asset at your convenience in the backyard, because it's so easy to manage as real estate income.

24:52And you've already paid for the land. So the value you get out of that rental income is actually quite

24:58high. So we actually price it at the, at the rate of a first. So think about now it's, we don't have,

25:06we don't charge nine half, 10% in our financing vehicle because it's ours. We get to set the price.

25:11The front house, you know, the current mortgage rate is six and a half to 7%. And we will finance

25:18the entire amount of that unit in the back by six and a half or 7%. And we think it's, it's not,

25:26it's mispricing risk because we can, when we put that unit back there, we know what street it's going

25:32on. We know the quality of the unit. We know it doesn't have any hardly any repair costs. We built it

25:39amazingly well. So the operating costs are extremely low just because it's so highly

25:44insulated. It's using modern materials. You can put solar on the roof. You can put batteries on it.

25:49So the operating running costs of this unit are extremely low. So we look at it and we know what

25:55it rents. We look on Zillow and say, Hey, this thing rents for, you know, 3000 a month. And we're

26:00going to have to do a loan on it for $1,700 a month. We go great, great economics.

26:08In the meantime, it's making the whole house unit. You know, we think that the main house goes up in

26:13price because it now isn't producing income on the back at your convenience. So we, we kind of view it

26:19as when we created our finance product, which no one else in the industry does, by the way,

26:24um, for, for ADUs. Um, you know, other, other people will do it, but they'll price it more like

26:31a second, but we actually do it on our units only. So we think it's a, it's a huge, huge leg up. And

26:38I think maybe 60 to 70% of the people take advantage of our financing option.

26:43So let's talk about supply chain a little bit. Um, so you, you have your own factory.

26:50I imagine you have a lot of opportunity in California because I believe the ADU law is

26:58statewide. Um, and so you probably have to go, uh, town by town in terms of the permitting process,

27:05but that's a big opportunity. There's a lot of homeowners in California who would benefit from

27:10this. How do you think about supply chain and the need for factories? Do you need 10 factories in

27:17California to meet the opportunity 20? Like, how do you think about factory siding and transporting

27:24these, uh, these tops, these, these homes, uh, to people's backyards? Yeah. Yeah. So there's,

27:31there's two pieces of that. Um, you know, let me, let me take the, the idea of, um, you know, each,

27:40each city has their different rules and laws and that sort of thing. California has passed so many ADU,

27:47pro ADU regulations that since 2016, I don't know how many it is, but they keep passing more every

27:53single year to make it easier, um, and take out more and more, um, challenges associated with putting

28:00them in. But just to give you some facts on, on how that's impacted demand, California probably in

28:072016, when they started passing the ADU laws had about 2000 permits per year for ADUs. If you fast

28:15forward to last year, there were 25,000 ADU permits last year, you've gone 10 X increase since 2016.

28:25And in fact, one out of every four to five permits in all of California for a new housing capacity

28:33is an ADU. So it's like a stunning. So what California did is passed regulations

28:41that made it a right to have one. They made it easier and easier to put in.

28:46If you put it, you know, a certain amount of, you know, it has to pass some rule, you know,

28:49a certain amount of feet from the neighbor's fence and a certain height, that sort of thing.

28:53You have a right to put one in at, at the state level. So you've actually taken care of all of

28:59California and the municipalities have to adjust and the municipalities, you know, California's got

29:05a real housing problem, which I'm sure, you know, you, I'm sure you've talked about that on your,

29:09on your podcast. Um, it's hard to get housing built in California and they've taken ADUs and said,

29:16we're going to make this so easy that we want anybody to do it. Now, when it comes to supply chain,

29:21um, it's just a question of how productive you can, how, you know, your productivity and just

29:28how many square feet you need to go build. So we look at it and say, we'll put up whatever

29:34capacity we need to meet demand. Um, so we just think about a factory as just, there's a certain

29:41capacity in a factory. And once it hits that capacity, we have to get another factory or expand

29:47the capacity we're in. So we've already, um, we've only been in business since 2022. We started, um,

29:55with 150,000 square foot factory. We've now added another 200,000 square foot factory in the same

30:01campus. So we now have a campus of 350,000 square feet. We think that'll last us for two to three

30:08years. Um, the, the right thing, you know, with what we can see in terms of what the opportunity

30:14is and that, and, uh, but I think about it as just capacity as you can have whatever you need.

30:22So big opportunity in California, are there other parts of the country where favorable legislation is

30:31being passed or is being proposed that you're eyeing as you think about the, you know, the time

30:38in your company's history beyond the next two to three years? Yeah. Yeah. The opportunity is first

30:44and foremost in California. Um, it's where we've started the company is where, you know, when you

30:49start a new company, you want to solve a real problem. Um, otherwise why are you starting a company?

30:54Um, so we, we think about this is where the housing crisis is the most severe. It's where

31:01the, um, the difficulty of building new housing is the most critical. It's been over-regulated

31:06for like decades and it's resulted in, um, very few new housing units coming online.

31:13So here's the opportunity to go solve and, and simultaneously from a homeowner standpoint,

31:19you've got really high rents as a result of constrained housing supply.

31:23Rents is really up. So if you did put a unit in your backyard and wanted to rent it out,

31:27you get amazing rental income. So it's kind of like bad that the housing costs so much

31:33and the housing supply is so limited, but it's great that if you did have housing supply and you

31:39want to take advantage of that situation, you as a homeowner can, can then go bring in some amazing

31:45income. So California starts in California. And from a company standpoint, from a smart standpoint,

31:50you know, before we go too fast, we have to make sure that we lock on, um, our processes,

32:00our system, the right products. We have to identify and be able to deliver the competitive advantages

32:07to compete in the marketplace. And competitive advantage usually means that you're doing something

32:12new and different. It means you're adding value to the, and you're being able to solve a real problem.

32:17So to me, um, you scale once you've created that, um, and you've really articulated and nailed your

32:22competitive advantage. What do we think about our competitive advantage? We think this is the

32:27perfect market to start in. Um, you've got California regulation, which is a huge tailwind for us.

32:33I mean, it's just enormous tailwind and still the regulatory environment for regular single

32:39family homes or condos is still difficult. So it's like the only thing that's like easy to go build

32:44in California are these, are these ADUs. So we love it. So we'll perfect our craft. We'll build our

32:50systems, our processes. We'll, uh, deliver on our competitive advantages. We'll expand our ability to

32:56deliver loans. And then we'll think about other states. And we always think that California kind of

33:04sees the problem first, um, in a lot of different things. I mean,

33:08first ones to stop smoking in public places. I mean, there's a lot of things that California

33:14does that other states tend to follow. Um, and we think ADU laws are one of them. So we're seeing

33:20a lot of ADU laws being copied from California that are going into Seattle, Oregon, Colorado.

33:26We've seen some in Texas. We've seen some in Massachusetts. Um, Eric Adams not too long ago

33:31was talking about it in New York, um, as a way of solving some of that. You're in New York, right?

33:36I mean, yeah, I'm in Brooklyn, Brooklyn. Yeah. So, um, everybody, so I think you'll see this wave

33:44of opportunity and it's not just, again, when, when I think about these ADUs, I don't think about it as

33:50just the, the individuals trying to solve the housing problem. You're not going to use your

33:55backyard to contribute to solving the housing crisis that California created. You're going to

34:00solve the housing, you're going to put in your backyard what you need to live.

34:04But all these people in these other states, I mean, wouldn't it be cool to have a little home

34:10in their backyard to put granny back there, put your kids coming home from college to have a,

34:14you know, standalone office to take the real estate that you've already invested in

34:19and build it out optimally economically. So there's just a lot of, so we actually expect these

34:26regulations to roll across. We'll let them roll across. We'll perfect, perfect our business.

34:32We'll build our competitive advantages and then we'll, we'll follow it. So we'll, we would expect

34:38that, um, the opportunity will then present itself in any of the cities that are experiencing any kind

34:44of housing stress that people want to earn additional rental income, that there's good

34:49rental income to be earned. Um, but it's also, it's just a way people live life. I mean, it wouldn't,

34:55wouldn't it be cool to have that space in your backyard to use any way you want to,

34:58it's your convenience. Absolutely. So as our, as our final question,

35:04could you talk about your partnership with Steadfast LA to build ADUs for LA wildfire survivors?

35:13Yeah. So, you know, obviously it's an insanely unfortunate mess. We don't have single family

35:21homes to start with and we had just said 15,000 burned down. Um, it's, it's hard. And when we looked

35:27at it, we just said, how can we help? Um, we, we started in California, um, and we just said, how,

35:34how can we help? And what we did is we ran across Steadfast LA, who was very committed. Um, and we

35:41thought would have the team to make as much progress as you possibly could outside of the government,

35:47you know, in a private, um, that we can build a private relationship with a private company that

35:52can actually help. So what we want to do was go help. And what we did was our co-founder donated

35:59$5 million to Steadfast LA to gift people free houses and not only $5 million, but he also committed

36:07to donate another 10 million as a matching program. And what we're doing, and then what Samari did is

36:14donated all its profit. So what we're doing is we're using that money to gift people homes.

36:21So not just hand them a box, not just hand them the house, but we're actually going into wildfire

36:28victims. We have a process, not we, but Steadfast LA has created an outside agency to fund, to create

36:34a process to gift people homes. And when we do that, we're taking one of our houses, our 950 house,

36:42our 950 square foot house. And we're gifting it to the people that are most financially disadvantaged,

36:47that are economically challenged, that have no way of recovering. Maybe they just have no income.

36:53They have no means to go start figuring out how to rebuild in a very complex, um, LA.

37:00And we're going to give them a home. So we're in process of, uh, handing out, we'll, we'll, we'll,

37:07we'll, we'll do the next, the first recipient in about two weeks. And then we'll be rolling about

37:11regularly. And we're going to go into these homes, particularly in these really disadvantaged areas.

37:16And we're going to hand them a home and we're going to, we're going to put it in there. It'll

37:20take us six months and we're going to hand them a key and they're going to be back to living life,

37:25right in the community. That was just so savagely pulled, you know, pulled out from

37:30underneath them. So we think it's a really cool program. Samara's, you know, part of the donation.

37:36We really appreciate Joe Jebbia for what he's done in terms of, um, you know, kicking it off.

37:42Um, and we, we love the partnership with steadfast LA, who we think is going to make a real difference

37:48and help and get people back on the ground in LA. So we're, we're right in the middle of it.

37:52So we may even have the first house up and anywhere in the fire, fire area, we're hoping.

37:59So you'll see, you'll see our first house up this year.

38:02Really, really amazing story and great way to close our, our fascinating conversation.

38:09Mike, thank you so much for joining me today.

38:12Yeah, you're welcome. And, uh, enjoy the conversation and, you know, good luck. I mean,

38:17housing's a big thing. It touches everybody, as you know, and, uh, the more we can do,

38:23all of us can do to help out, um, and make, you know, help housing is, is just, uh, to me,

38:29a great use of time. So we're, we're excited to be doing what we're doing.

38:32Thanks, Mike.

38:33All right.

38:34See you.

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