PadSplit's Rent-by-the-Room Model Solves Housing Affordability

Key Quotes

"I started really buying houses in 2008. I had been a commercial real estate broker, and then in September of 2007, my first son had just been born. My wife told me that she was going to leave her job, and over the next three weeks, all of my deals collapsed, and I had no income for all of 2007. But fortunately, I bought a house out of foreclosure when I was 23 that had some equity, so I could borrow 50 grand against that house. With that money, I started looking at what houses were available in Atlanta, where I live now, for around 50 grand a year."

Atticus LeBlanc explains that his personal financial crisis in 2007, triggered by his wife leaving her job and his deals collapsing, forced him to find alternative income streams. This situation led him to discover a significant number of affordable houses in Atlanta, which became the foundation for his real estate investment journey. LeBlanc highlights how personal adversity can uncover unexpected opportunities.

"So when I had this vacant house, there happened to be a rooming house right next door, and there was this guy named Mitch, who was earning social security income at the time. He was on disability, made 735 total income per month. Mitch comes to me one day as my house is vacant, and he's like, 'Hey, our house is getting foreclosed, and we're all going to get evicted. Can me and my buddy Otis come rent rooms in your house?'"

Atticus LeBlanc recounts a pivotal moment in 2009 when a neighbor, Mitch, facing foreclosure, sought to rent rooms in LeBlanc's vacant house. This interaction revealed a critical problem: Mitch, despite having a stable, federally guaranteed income, could not qualify for traditional housing due to common rental criteria like income multiples and upfront deposits. LeBlanc uses this anecdote to illustrate the systemic barriers to affordable housing.

"And yet, I did the math, and I had four bedrooms in this house. If Mitch moves in, he was paying 100, 125 bucks a week. Otis was paying the same. The third person who moved in was a woman named Linda, who worked at Wendy's. Interestingly, she's still there 16 years later, right now, in the same exact room. But yeah, I had these four rooms, and I realized, 'Wait a second, if I have four people paying me this rent on a per-bedroom basis, even after I take away all the utilities and furniture, which was the stuff that they needed in order to make it work, I still make more money doing this than doing it the old way."

Atticus LeBlanc details the financial realization he had after renting rooms to Mitch and others. By calculating the income generated from renting out individual bedrooms in his house, LeBlanc discovered that this model was significantly more profitable than traditional single-family rentals, even after accounting for additional costs like utilities and furnishings. This insight was the genesis of the PadSplit model, demonstrating the economic viability of room-by-room rentals.

"So when I got to a very different point in my career, where I wasn't struggling to pay the bills, I had four kids at that point and wasn't worried about college, had really gotten to the point where I wasn't stressing and I had found financial independence through real estate, I thought, 'Well, what do I want the next part of my career to be, and what do I want to do with my life?' It was, 'Hey, if I get hit by a bus tomorrow, how do I make sure that I have left some legacy for good in the world?'"

Atticus LeBlanc explains his motivation for founding PadSplit. Having achieved financial independence through real estate investing, he shifted his focus from personal gain to creating a lasting positive impact. LeBlanc was driven by a desire to solve the significant housing affordability problem and leave a meaningful legacy, which led him to revisit and scale the room-rental model he had previously discovered.

"So yeah, that was the beginning. For listeners who don't know us, PadSplit is a two-sided marketplace, very similar to Airbnb or Uber. We provide access to private rooms in these typically shared homes, they're not always, and we focus on the 50% of the American population who can't afford their rent. Anybody who's working hourly jobs, anybody who works at an airport minus the pilots, anybody who works at a hospital minus the doctors, literally anyone who works in retail."

Atticus LeBlanc describes PadSplit as a technology-enabled marketplace designed to address housing affordability for a significant portion of the American population. He likens its model to Airbnb and Uber, emphasizing its role in connecting individuals who struggle with traditional rent costs to available private rooms in shared homes. LeBlanc clearly defines the target demographic as hourly workers across various essential industries.

"Yeah, our effective collections rate for owners has never dropped below 97.5%."

Atticus LeBlanc presents a key data point to counter common assumptions about renting to low-income individuals. He states that PadSplit's effective collection rate for property owners consistently remains above 97.5%. This statistic directly addresses concerns about payment reliability, demonstrating that the platform's model, despite serving a population that may have lower credit scores or face financial challenges, achieves high collection rates.

"Recognizing that the people who are close to the problems are the best equipped to solve them. We were talking about that before we got on. I mean, I was only a successful real estate investor in Atlanta when I started my career because I knew those neighborhoods like the back of my hand, right? And I knew that when I was starting this marketplace, that there's no way I would ever know Maryland as well as you do, right? But I also had confidence that there were people that knew it, that were there on the ground, that just needed the right incentive and the right set of tools to be able to go execute."

Atticus LeBlanc identifies empowering individuals closest to a problem as the best decision in building PadSplit. He explains that understanding local nuances, whether in Atlanta neighborhoods or Maryland housing markets, is crucial for effective real estate investment. LeBlanc emphasizes that by providing the right incentives and tools, PadSplit enables local individuals to leverage their knowledge and solve community-specific housing challenges.

"You know, I think this is something I still struggle with a little bit, is just I came from a place of scarcity. So even though, like, you're talking about the company's really big now, I do wonder if I could have swung for the fences earlier and like just risked more, right? I mean, looking back in the early days of investing, I certainly wish I would have bought more houses from 2008 to 2012. But yeah, I have this saying that if you want to go whale hunting, you better be able to catch minnows along the way. And I think to some