Hey, everybody, it's Bill Courtney with an army of normal folks. And we continue now with part two of our conversation with Michael Gosman. Right after these brief messages from our general sponsors. So the city agreed to that deal, and you guys went out and let the community know what existed. He started getting people in homes. So now I can't help but think just from the business side of me, all right, great, you can buy the home for one thousand dollars or a dollar, but code's not going to
let you move into it to it's right. Sure, so you've got to have money to fix it up, which means you got to borrow money, which many families in these situations can't go to Bank of America and get a loan for this. That you guys came up with a fix for them.
That's exactly right.
So we never had any aspirations of being in the mortgage lending business.
Yeah, this was things kind of roll downhill and get big.
Yeah, that wasn't.
That wasn't on the Bengo card when father Dennis and John Worm were founding acts and we still partner very significantly with banks and credit unions to get provide most of the mortgage financing for our families. But what we saw in the aftermath of the foreclosure crisis was that banks were we're trenching. They weren't lending as freely for some good reasons and maybe some not so great reasons, And in particular, they weren't lending to families who were
purchasing distressed homes. It's one thing for a bank to lend on a move and ready home, but a distressed home, a home that's not livable, the bank looks at that as a much bigger risk.
Right well, and in fairness to the bank, it is it is. Yeah, I mean, how are you going to land fifty thousand dollars on a place that today is worth literally a dollar.
That's exactly right, And.
You can't really blame the bank. It doesn't mean they're predatory, but they answer to a board of directors, they answer to shareholders, they answer to whoever's holding the bag. No loan officer can justify that, So I kind of get why that's a barrier.
I think that's right.
I think they and so we quickly realized and we had good relationships a lot of local banks. We pushed them to do as much as we could get them to do, and we realized they're not going to do this. There's no way that they're going to land on these homes at the scale we need, and so we piloted.
Our own loan product.
Hilarious would get it. You know.
The idea was sort of a return to common sense underwriting. Let's look at their rental history. Let's make that the most important thing. Are they paying their rent on time every single month? What's their rent okay, what's their new mortgage going to be? That's a great indicator of whether they're going to pay their mortgage right. Are they paying their rent on time?
And I read you guys are actually trying to get them into a mortgage that is actually a little less than what they pay for rent, So they're getting ownership and paying less.
That's the case scenario.
And especially in this period where I'm talking about, where we were offering the ax lending product, we had families who were spending eight hundred one twelve hundred dollars a month in rent who wound up having a new mortgage payment including taxes and insurance that was more like five or six hundred dollars a month, So just many hundreds of dollars of savings for the lowest income families, working
families in our in our community. But getting those deals done we're not easy, you know, setting up your own mortgage lending effort. Turns out there's a fair amount of compliance requirements that you got to really pay a lot of attention to. So we had to be very strategic in terms of who our volunteers were, because we didn't have the money to hire a bunch of folks who were going to spend there all their time on regulations.
But we had some great lawyers and compliance folks who volunteered for us because they believed in this and thought it could be successful, and.
We just started doing We started doing loans.
I will tell you when I joined, So I didn't join the organization. I've been on the team now for thirteen years. I was a volunteer for a couple of years before that. When I joined the organization, we just started this lending work, and we'd gotten pretty good at lending the money. So we were doing maybe you know, ten fifteen of these loans a year, lending families purchase and fix up these homes.
But we weren't really great at getting paid back.
And when I was a volunteer, I was like, oh, that's that's a little bit troubling, Like it would it would be good if we were getting getting monthly payments people.
People weren't paying their notes.
And so you know, there's a question of okay, well this only works if people are actually paying us back. So let's figure out what's going on. And the organization. You have to understand we were tiny. You know, I was a volunteer for the organization, but there were only six full time staff members, and so as a volunteer, they let me dig in a little bit to the lending work because again, there wasn't someone to do everything. So all right, you got this guy who's volunteering to
help out. Let's give him as much as they'll take.
And when I.
Dug in, I realized that we weren't invoicing families. You know, they weren't getting any sort of monthly reminder that do.
So that people get why this might be what would what before this world? You would what was your discipline, your occupation?
Yeah, so I was practicing law.
I was working at a sort of large Milwaukee Milwaukee law firm and was completely unsatisfied with the practice of law.
Where'd you go to law school University of Chicago?
You're smart? How'd you pay to go to that place? It's expensive?
Oh well, that's that's a whole nother story.
I actually so I started law school, and I started law.
School in two thousand and four.
And I don't know if you're I don't know if you're a poker player at all.
Actually, I love like, that's why you wanted me to ask. I'll be in a place out west, in the very southern tip of Nevada, playing poker, fearing about ten nice.
Yeah, well, so I grew up in a card playing face. I learned cards from my grandfather, a lottage and rummy, a lot of jen rummy, a lot of fun and then and then a fair amount of poker. And when Texas Hold Them started to get a little popular in the early two thousands, I started reading Texas Hold'em books because I just I'd always liked poker and I was sort of curious about it and the game. You know, for anyone who plays pot, it just exploded in popularity.
It just became it went from being something that most people had never heard of to being something that was televised on.
TV and Chris Moneymaker, Chris.
The money Maker effect exactly.
And and so I'd read, you know, sort of the poker books, the best books of the time.
I sort of understood them.
And what I found very quickly was and I was playing at fairly low stakes at first, but just having done that little bit of work and also then being able to take what I learned and apply it, it meant in two thousand and four, two thousand and five, two thousand and six, you had a massive edge on a to any game you'd play in. And so I went from playing very low stakes to playing sort of
incredibly high stakes a poker, cash games. I wasn't a tournament player, and that wound up being how I how I paid for my law school for my wife's graduate school.
You paid for school at the University of Chicago being an attorney playing poker.
Yeah it wasn't it was that.
Yeah, I got your wife's graduate school. Yeah it was.
It was an interesting period.
I never thought that I would I would make a living playing playing cards.
I never thought it was going to be a career.
But there was a moment where there was that you know, really significant opportunity. And I didn't have the vision at that time to realize the difference that that that that
income would make on my life's trajectory. But it's the very rare, I think, like poker success story, because if I had not been able to pay for my graduate school, my wife's graduate school with poker, I think I would have felt compelled to stay working at the law firm, even though I was pretty unsatisfied because I had a lot of debt to pay and you know, we were
starting a family, we had kids. But because I had that freedom of not having that debt, when I started volunteering for ACTS, and I just I saw that my work there was making a difference. That this extra you know, the extra effort that they would be able to put
forth with another member of the team was significant. I was able to transition into a job that I thought, you know, could be deeply meaningful and not be as concerned with the fact that, you know, the pay wasn't quite quite what I was making at the law firm.
Is a credit. Did you you still play?
I play very recreationally now, but I still love the game, and yeah, I try and play, you know, ten fifteen times a year.
Do you know? For me, it's really not about the stakes. I want to play, right, h I played a lot of chess coming up. Oh okay, so I see the game the same way, and so it doesn't matter if I'm playing one, three or fifty hundred. I want to I just want to play well. I want to play right. I don't want to get had and I want to you know, I don't want to be a fish. So it's it's more about playing the game than it is about stakes for me, is it? Is it the same for you? By any chance? I'm just curious. Yeah.
So I love and I love playing with people who are trying to win. I think that's really it. If I'm playing with people who all are really trying to win, that's a fun game.
That's fun.
Is a fun that's a fun game to be a part of, regardless of regardless of.
Okay, well I chase like like a squirrel up a tree. It has nothing to do with the story except I think it's that's hilarious. That's the greatest thing in the world. I could talk to you about that for four hours too. All right, So back to where we are. So which you're so you guys start lending money, right, And because you're an attorney and from u Ver Chicago and pretty bright and a volunteer, at this point you found out that maybe one of the reasons people are paying their pills,
you guys are sending them a bill. Right.
And you know this was.
This wasn't a brilliant observation, right, And they knew it, right, they knew they weren't doing it. But the reality was tiny operation, lots of things going on. There wasn't anyone to set out the invoices. So I became the invoice guy. Right, So if I get the invoices out, let's see if that makes a difference. And lo and behold, you know the portfolio went from like being deeply distressed to performing great with the addition of the invoices. Right, we just
need to remind people how to pay us. We needed to remind them that we wanted to get repaid. And very quickly the payments started coming in.
And so it begs the question because if I'm just listening to story, this is the first thing it is. Okay, so now you're helping people get the houses, did they acts thing? You've got this kind of private public partnership for access to the house. Is it cheap? You've got this this mentorship, and what to do with the house is to fix them up to get code I would imagine the code enforcement department knows what you guys are doing and is somewhat helpful. And now you're lending money.
What is the what is the default rate?
Yeah, so when we started this loan program, there was a lot of a lot of naysayers. You know, a lot of the bankers who saw what we were doing said, you know, this will never work.
It's not done that way.
You know, you need to focus on credit score, you need to focus you know, look at these loans differently. And what we found was because of the stability that home ownership offers, because of how affordable these homes are, families are, they're going to do everything they can to keep these homes. And so we now have been We've lent more than fifteen million dollars over the last decade
to families. That's spread out across two hundred plus loans that we've made, and we've had total write offs in our portfolio of eighty thousand dollars.
Yes, that's less than time for percent. Yeah, and look at me, do, Matt.
That's very good, And it's even better than that because those are the right offs. But typically even on the three loans that we've written off, we wind up getting some of that money back right because you know, right off just means that we decided that the loan isn't isn't doesn't have a highlight gohood of prepaying. But typically we're still able to work with the families to figure out a way either upon transfer or if they need to sell the home.
And so it's been a remarkably sustainable program.
You know.
The great thing about there's two things.
You mean, the poor people, poor people who don't pay their bills and bad areas. It turns out that actually, if you give them access and a chance, they actually will do what they're supposed to do. Is that what you're saying to me?
The strength we see every single day in the community is remarkable.
You know, he's probably going to look this up if you don't know the answer, But I'm curious, do you have any idea what the default right is for traditional banking relationships on home loans?
Well, so I don't have that answer. That answer is actually a shockingly low number. It's even lower than what what our families have done.
I just wonder how compares.
But we did an analysis over the last thirty years, looking at all the families who've bought homes through acts and comparing them the foreclosure rate for the four thousand alumni we now have. And these aren't all loans we've originated, right, most of them are loans that banks and credit unions have done.
But these borrowers, our borrowers, are.
The lowest income sort of you know, on paper, the least prepared for home ownership as compared to the overall market. And we've seen that the foreclosure rate that our families have experienced is about fifty percent lower than what's been experienced overall in the market.
So for prime borrowers, look it up because you cued that for me. So for prime borrowers it's one to two percent. For FHA loans it's three to six percent, and for some prime mortgages it's ten percent plus.
What is what foreclosure? What's the way? Look is that that's foreclosure saying default rates, default rights.
So and what I shared was a little bit I shore I shared write offs, right, So what I would say, well, and that's a different.
Yeah, that is different.
What I would say is, and this is maybe important for people to understand our portfolio. Performing well does not mean that we get paid on time every month from every single borrower. In any given month, we might have between three to seven percent of our borrowers who are going to miss a payment because these are the lowest income families who own homes, and if they are in a car accident, if they've got a death in the family, if they lose a job, sometimes there's not enough savings
for them to meet all their obligations that month. The beauty of us having the relationship we have with these families is that they let us know when they're having
these challenges and we work with them. Right, so, we need to get repaid on this loan, but if we need to reduce the monthly payment on the loan for a few months because we nderstand the challenge they're dealing with to help them get to the other side of that, and then move those payments to the end of the loan, that actually doesn't cost us very much, but it is a huge investment in our vision for what these communities can be and it can be the difference between a
family maintaining their home, which are families. Through our program, we haven't needed to foreclose on even one family. Who's who's who we've lent money to. So the sustainability of it's been really significant and it's well worth, you know, for our vision. The last thing we want to do is foreclosed. So so long as it's a hard working family that's trying to make things right, we're going to go on that journey with them right and figure out how to make sure that they can maintain that home.
Where do you how do you establish interest rates?
So our interest rates are actually set based on sort of the prime rate. We charge a fifty basis point premium over the prime rate a half point a half point, so it's it's, you know, depending on who you ask.
These families can't get credits.
This is this is you know, you could think of it as reduced rate, but we think it's important that we charge a fifty fifty basis point premium or or a half a percent premium over what the banks offer only because if families can access a banking relationship, if they can get a mortgage from a bank or credit union, that's great. You know, we want them to be full participants in the market, and so we're not trying to be like we don't want to be we're not competing
with the banks. But if there's good loans that the banks for a myriad of reasons aren't able or aren't willing to do, we want to be able to do those and we want to be able to do so sustainably.
And that's also really important.
You know, long term, our lending program is designed to be a self sustaining program. It doesn't require philanthropy in order for us to do this work, and we think that's really important because there's lots of things that require philanthropy and aspects of our program that require philanthropy, and we're going to ask for those funds and we're grateful when partners in the community support us in that way.
But it's really important that if we've got an offering that doesn't require doesn't need giving, we.
Why would we not make it self sustaining.
It's going to be able to do more without needing sort of the community to step up in that way.
That's also a selling point when you go up and ask for philanthropy, because if you go to somebody and we want these donations. But let me tell you, the people that you're helping, they're meeting you halfway. Absolutely, So it's not just a giveaway, it's not a handout. That's actually it's a legitimate help AUP because the people that you're your hard earned dollars you're donating to are meeting you halfway because they're in the game with you. That's exactly.
That feels like an easier sell when you're out trying to raise money too.
Yeah, we have you know, we've got our organizations collectively now have around a fifteen million dollar budget on an annual basis, and about three and a half million of that is philanthropy.
You know.
The rest comes from you know, nonfilanthropic sources earned income, and we think it's really important to have as sustainable an organization.
As we can.
Everything about this makes so much freaking.
Bill I got the right off rates. So for prime borrowers it's point oh one percent two point one percent, okay, FHA and VA loans zo point five percent to two percent, and subprime per two thousand and eight it was ten to twenty five percent.
Actually, yeah, so we're you're right in there.
Yeah, so we're right in line with the FH FHA and VA loans.
Yeah okay, But the point is you're right in line with FHA on default, but you're making loans that the FHA would never make correct freaking unbelievable. We'll be right back, okay. So you get this partnership with the city so that you can find these places and after thirty sixty days they're done. Then you've got the mentorship on how to fix it up, and now you got the loan to
fix it up. And we touched on it earlier. But you also found out that having an in house real estate brokerage helps, So you guys went and did that.
Yeah, that was a big key to our success.
Was the reality was when our families, you know, these mung families, or over time as we helped more African American Hispanic families through the program, they often struggled to find the right real estate representation because of their low preapproval amount. They might not be able to find an agent that really wanted to work with them, or an agent that was comfortable doing the work of finding the affordable homes. These, you know, often were homes that were there were the dollar homes.
They were twenty five fifty.
Thousand dollars agent making live in selling a dollar hunt.
Not a big commission on those, you know.
Seven so it's not much.
And so typically the agents who are working in that part of the market, they're representing investors, right because the investors will buy a ton of properties, and you know, they'll have some some rate that they're charging that doesn't
make sense. And so we gave an opportunity for members of the community that were agents that really wanted to work with families to become a member of our team, be a part of the mission and focus on helping families find homes they could truly afford without having that mean that the commission was so low that you know, you couldn't you couldn't give them good service.
So that's been a big part of what we've done.
We've had we typically have a handful of agents that are actually under our umbrella or our own real estate brokerage, and that's been a key ingredient to helping families be successful.
And there's also the trust component.
Once a family starts working with us and they're getting prepared to become a homeowner, throughout the journey. They know you've got a team here that wants to help you. And it's not just that that your home buyer coach who you're working with now, but we're going to add a real church to your team. We're going to add a home rehab coach to your team if you need it. We're going to connect you to lenders, whether that's a bank or credit union, or maybe it's a lender in house.
And so it gives them confidence knowing that throughout the whole process they've got a partner that wants them to be successful and isn't just focused on sort of you know, what's the largest profit I can generate from working with this one family?
So you said, was it cha, Bliah?
Cha?
Yeah? All right. She retired in twenty seventeen after twenty four years, and you said she helped eight hundred families by home.
I think that I think that's right, which is just I mean, it's sort of stunning to think that that number of families is possible.
But then I think for the Hispanic group, you found Rios or somebody named Rios or another situation, another type agent. Right, what's the.
Story critical to our success that we have agents who represent the communities that we serve, and so we've had a lot of success over time, whether it's in the Hispanic community or the African American community, finding really good people who care about their communities and see real estate and helping families a chief home ownership is something that can be important, and we've been able to have them on the team, have them earn a nice living, and
have them just have this incredible impact that I know.
I'm just so proud of what they've been able to achieve.
So Hilaria Rios is the name I was thinking coming up with that. The thing is, if I'm remembering all this right, is Jah helped in that Washington Park area around the church, but then there was on the south side of Milwaukee, I have a Hispanic area, and then this Hilario Rio started doing for her community what y'all did for her community. And now all of a sudden access expanding beyond what the priest originally thought for his community around as church to the whole city.
That's exactly right.
You know that after a decade or so of success, there was a moment where the organization sort of took stock of itself and said, well, this is great that we're doing such a good job serving this refugee population. That's that's it's been wonderful for the neighborhood. It's been good for families. What about the rest of the families who live in our community. What about the Hispanic population, mostly on Milwaukee's near south side growing population, They also
are having trouble accessing homeownership. Milwaukee, you know, the largest has a large black population, that that community has not had the same opportunities for homeownership that other families have had. How do we make sure that there's a pathway that's meaningful for them towards home ownership. And through these key hires of real estate agents, we began making inroads in those communities and.
Really community real estate agents from the community that knows the market, that knows the neighborhoods and can connect the neighborhoods to the community. And candidly, if I'm a Hispanic person in the South side of was Milwaukee, I'm going to connect within trust Hillary Rios a whole lot more than I am a white guy named Bill Courtney. So the connection to the families is in a grole because this agent is this from them. Is them right? I mean, is that not?
It makes It makes a huge difference in terms of building trust.
And that's something that you know, we've taken very seriously and a huge part of the recipe is that our agents aren't seen as other you know, they're seeing they're from and all of the communities that they're serving. And they also just then build great networks they have. They come to us already having a network in their community, and that grows over time. And you have someone like
Billia who helps eight hundred families purchase homes. You know, think about how many how many of those deals, the vast majority of them, they wind up being referrals from from these past families who've been through the program. People look at a new homeowner and they say, how did you do this and they say, you know, we hope they say, it was really hard work, but I was able to do it. You can do it too. By the way, there's this group X Housing. They could probably help.
They can put you in the right direction, they can help support you on the journey.
And let me tell let you talk to someone who looks just like you named Chaw exactly.
Let me make that connection.
How once again, this really isn't you know, rocket surgery. It all just makes so much fundamental sense. Okay, so that's the beginning from the end of the Vietnam War and refugees coming to Milwaukee and the priest and the housing and the community and all these things going up. So now let's get to you. All this is set up,
and so tell me about acts. Once you decided I've played enough poker that I don't have to be an attorney anymore, and I think I can do something really meaningful with my life.
Yeah, well, I was really just so impressed with what the team had done. And so there were seven employees. I became I think the eighth employee. They brought me on in the assistant director role. So I was sort of, you know, a little bit of everything. My job included answering the door because I was usually the only one in the office. I was doing our fundraising, I was doing our marketing, and I was running our loan fund.
So those were my sort of funds.
I say, when you said, you know, I've put myself through the University of Chicago and got a law of degree. I mean a law degree from the Universe Chicago is meaningful. I mean, you're humble and everything else, but I'm going to say it. I mean, that's top ten boss daddy stuff right there. What did you and your wife got her degree? Or you said her graduate degree and what in NBA?
I guess no, No, So my wife's a teacher, so she has multiple graduate degrees in English and in education.
I bet your children are really dumb coming from it. But anyway, so what does she say? Yeah, when University of Chicago guy who's obviously a tactician. So you because you're good at poker, so you read the room, well says you know, I know you married a lawyer from the universe Chicago and all this, but I'm gonna go work for this thing called acts and probably take a massive pay cut. What was her.
Reaction, Well, I married exceptionally. Well, so, my wife is a teacher. She loves being a teacher. She spent most of her career in urban education. And she had found before I did, a career that she found great meaning in and she saw how how important that was. So she was only encouraging of me pursuing this, and you know, just speaks to the importance of having shared values with the person you're going to spend spent your life with
in terms of her support for that transition. And I should say one of the great things about Malwa is you don't need the most massive income ever to make it a great place to live. Right, So we lived in New York City for the better part of seven years, you know, making this sort of transition. If I was in that sort of environment, I think would have been extremely difficult.
It would have required massive sacrifice.
I feel like in a city like Milwaukee, it's sort of the best of both worlds where if you are in a good income and you've got two people who are working, you can do well enough and you can and if you love the work you do and you find that there's meaning in it, it's really tough to imagine doing something else.
Yeah, we say almost every show the magic happens when somebody's passion and abilities intersected opportunity. Sounds like that's exactly what happened with you, all right, So you joined as session director of two years later become the president CEO of this thing. You're clearly passionate about it. On fire Forward, tell me some things you've been able to do at ACT since you join, give me some success metrics, yeah, you know, and any other stories that I know that
you know, I'm going to want to hear about ACTS now. Well, so that since you became the bram poo Bah.
The thing I'm most proud of is so when I took over as as CEO, I replaced this legendary guy, Carl Quindel. He'd been the executive director there for six or seven years something like that, maybe eight years. Unbelievably smart, and he knew everything about every aspect of our business. He was this guy who could do anything in the world and he chose to devote his energy to ACTS for that eight year period. Just remarkable. But he he'd sort of shown a vision of leadership that I wasn't
going to be able to. I was never going to be the best person at every single thing ACTS. Did you know this is a guy who knew everything about rehab, he knew everything about home construction, he knew everything about the real estate market. And here I'm coming from you know, law school and these different you know, different talents.
He apparently didn't know anything about invoicing.
But so when I became the CEO with an understanding from the board Hey, we're going to need to build a world class team, because the only way that we're going to be able to do a lot more is if we have someone leading each of these important functions who is the expert, because I can't be the expert and everything. If if we're trying to make me the expert in everything, we're not going to be as successful
as we need to be. And so I'm just truly proud at how we've been able to grow our team and bring in people who are better, more knowledgeable, who can add value that I couldn't possibly add. And the result is sort of magic in terms of how our program has evolved, how we've been able to offer better and more services, and how we've been able to set families up for success at a scale that wasn't imaginable when I joined the organization.
Tell me, so, what does that look like? Give us some numbers.
Well, every single year now we're helping more than three hundred families purchase.
Homes, three hundred a year, three hundred again, three hundred families get off the rental rolls oftim beating slum lords. And now we're talking monks, Hispanics, African Americans, and I assume even white low in white blue cover brogues across the space.
Anyone with challenges to home ownership, who wants to pursue home ownership, we want to support. Right now, more than half of our graduates, more than half of our purchaser are black families. But we serve the whole community, anyone who needs who needs the support. So yeah, more than three hundred a year. We just celebrated our four thousandth homeowner through the program. So we have four thousand families who now own homes who you know, previously were renting in three.
Hundred dilapidated properties on the tax rolls, fixing up light in communities.
Well, Michael, did you say, I just want to clarify before we keep going down that train. I think four thousand total, and one thousand were from the tax rolls.
Yeah, so four thousand total, one thousand foreclosures, I got it. Of the thousand four closures, it's probably fifty to fifty between tax foreclosures and bank foreclosures.
Okay, Still, yeah, twenty five percent are crappy. But even if they're even if they're not foreclosures, there's still houses probably that need attention and a lot of it.
Yeah, their houses that typically haven't gotten a lot of a lot of love there. We're helping families typically buy the most affordable homes in the market. So this is the bottom of the market we're operating in. And the belief is is that transitioning a home from renting to owning benefits that family and benefits the block, whether it's a modest amount of work that goes into the home or a massive amount of work that goes into the home. Homeowners they take care of their properties and the way
landlords don't. They're more concerned about putting flowers out right, they're more concerned about connecting with their neighbors, all those things, and the stability of home ownership that we've seen is really remarkable. So, you know, I mentioned before foreclosure rates for families through our program are about half of what otherwise has been experience in the neighborhoods we work in. And what I think is really important. It's not talked
about a lot. You know, when people look at the cost of home ownership versus the cost of rent, first of all, they often look at that as what is it right now? If I bought a home now what's the cost going to be, what's my monthly cost going to be, and what's the cost of rent? And in many cases through our program, immediately there's a cost savings.
But there's also times, especially.
As the market is improved, homes are more expensive where families are spending somewhat more to own than to rent, but the rent keeps going up every single year.
I was going to say that fixed on a fixed rate over fifteen, thirty, twenty years, it says the same rent goes up. So it may be a little more now, but in five years it's going to be less than what you're eventually going to be paying. And that's what you're saying.
That's exactly right.
That's so true.
And home ownership offers a couple of things. Being you know, it offers some great things for the family in terms of the living opportunity, in terms of the structure, but financially it offers a couple of things. One that people don't talk about anywhere near enough is the force savings of home ownership. The fact that every month when you pay your mortgage, you're paying some of that payment is principal. Right when you make your rent payment, that money's gone.
But the contributions you're making to your principle, the paid down to your principle, that's now equity. And we're working in communities that often you know, when they start working with us, these families do not have a positive they don't have a positive net worth, and every single month when they make that mortgage payment, they now all of
a sudden, are building equity in their home. Now, appreciation is also wonderful, right, and so when homes go up in value, that's tremendous and that adds to that equity. We now are at a point with our alumni homeowners, those that still own their homes, that group collectively has has achieved and built one hundred and forty three million
dollars in equity in the homes that they own. Hundred and forty three million dollars right, real wealth, real wealth, and the difference that that can make in terms of their ability to overcome challenges, their ability to invest in themselves, their ability to provide for their kids' education. It's really significant that those are funds that can be drawn on or if you don't need to draw on it, which is great. We have a lot of families who are passing these homes down, right, I was.
About to say, and for the first time ever at these and this demographic is second generational access and opportunity that breaks that proverbial generational decline.
That's exactly right.
And we think it's fascinating how clear this is to the families in our program when we say, we always ask them, as part of our coaching, why are you pursuing home ownership? Because then that's something their coach is going to remind them of throughout the journey when things get hard, we want to remind them of why did they say they were pursuing home ownership. One thing they always often say say. The first thing they say is freedom. The freedom to be able to paint my house the color.
I want the freedom to be able to do what I want to do. No one's gonna tell me so long as I'm paying my mortgage and paying my taxes. No one's gonna tell me what I can and can't do. No one's gonna tell me I need to leave. So freedom is a really big one. But the number two thing we hear from families purchasing Home Star program is I want something to pass down. I want something that's mine that my family's going to long term benefit from.
And so that's something that's really important in something that now you know, four thousand families who are graduates of our program are able to do for their for their kids.
We'll be right back. Agency and legacy. This is what you just said. And I don't know a human being on earth that doesn't want to have it. Agency and what they're doing, and a legacy left behind. And you know, on Maslov's hierarchy of needs, I mean, you're starting to bring these folks up the pyramid, you really are. You're giving them self actualization, you're giving them fulfillment, but you're not giving it to them. You're helping them.
That's exactly right.
We're not giving them anything, but we're helping to make the market work for them. We're helping them understand how to navigate these complex systems, and then they're doing the remarkable work of getting it done and then being not only successful homeowners but leaders in their communities.
So let's discuss a little bit the state of housing and America today and your new announcement.
Great So, one of the big challenges that we faced in Milwaukee, and this is a challenge that it's not a Milwaukee challenge. It's a lot of a lot of communities throughout the country have seen this is that single family homes have become an asset class, right, and used to say that again, single family homes have become an attractive asset class.
Okay, what do you mean.
Private equity funds have realized that in a lot of these markets, homes are relatively affordable, rents are relatively high, and that buying up large swaths of communities and having a rental program, you know, is something that they believe can be financially viable, can be successful, and they're able to attract a lot of equity, a lot of investors who want to be a part of that.
Yeah, that's why forty percent of Memphians rent because so many of these homes in these neighborhoods are bought up candidly by people out of New York and Boston and Chicago. You would be shocked how many homes in Memphis are on about people who've never set foot in Memphis. And then they've got some kind of management like rental manage group that goes around and slaps pain on them, fixes them up, and then Clucks Front.
Yeah, that's exactly right.
Well, that doesn't build any community.
Yeah, it's not. Listen, our communities need great landlords. Not everyone is going to own or want to own at any given time. But it's our firm belief that typically great landlords, they typically come from the community, they have
some relationship to the place. When you talk about these outfits that own thousands and thousands of homes throughout the country that aren't you know, that are based in other places, the likelihood that they care about something other than just sort of getting every last dollar out of this home is pretty low.
And so so that's the asset So that's.
The asset class that's you know, all of a sudden, it's not just competing against maybe a local landlord who might want to buy another property. It's competing against these enormous private equity outfits that want to buy up these homes. And so increasingly, what we saw over the last handful years was, you know, we're doing this hard work. The families are this hard work. We'll have two thousand families a year that start our program that say I want
to be a homeowner? Can I start home by our education? And we've got a great way of getting them started. They work with a coach and then they do the incredibly hard work of getting ready. Sometimes that takes years, depending on how much work they have to do and when they're ready. We see them losing consistently in the market because the best deals are going to these private equity and other investors who are making cash no contingency offers.
So our families are often offering more money. It's not that they can't compete on price, but they need an inspection contingency because there's no way we're going to let them buy a home without knowing what work it might need. And they need a financing contingency because they don't have enough money to pay cash for these properties. And so increasingly all the best deals are getting snapped up by the investors, leaving our families, our alumni who've done all this hard work sort of with.
The dregs, actually live in the city. You live in the community, and got their kids go there and spend their money there.
It's inverted, it is, and so we felt like we were letting our community down. You know what we've always told families, the promise is if you do the hard work of preparing for home ownership. We're going to help you find a good home that you can afford them meet your needs. And over the last several years, we found at times that we felt like the families were
doing their part of the equation. And because of this, these investors coming in from all over the country, we weren't actually holding up our end of the bargain because the only homes available to them weren't really the homes that were good deals. And so we spent a couple of years we worked in partnership with some other local
groups that cared about this cared about this work. We talked to a number of philanthropies and supporters who you believed in us, and we were able to launch a two and a half years ago a program where we're actually now a large buyer of these homes in the city. So we're competing with these private equity groups. We're buying
portfolios of homes. We're buying homes for cash. But unlike these investor groups that you know are based wherever they're based and are focused just on a financial profit, we're focused one hundred percent on converting these homes into owner occupancy and making them good affordable home ownership opportunities for graduates of home buyer education.
And you're blocking them out and.
And we're we're competing, We're we're doing well. So this year, our goal from inception was we wanted to be able to sell at least one hundred of these homes every single year to families who graduate Home by your Education.
So one hundred times what's the average price of a home in your group, Probably.
The ones that we're selling, the average price right now is one hundred and twenty five thousand dollars.
Well, then that's twelve million dollars.
Yeah, So it's a big investment, big investment in the purchase and the rehabit these homes that you need. We've been successful at raising most of the philanthropy we need, so we've got a revolving fund that lets us do this purchase and rehab activity. We've raised just about ten
million dollars actually to do that work. And this year, two and a half years into launching this initiative, we're confident that we're actually going to sell a hundred of these homes to families who are graduates of our program. And the thing I'm really proud of is that not only are we doing it, but it's it's very sustainable.
And so the way this model works is, you know, we're able to buy the home, rehab the home, sell the home at an affordable price, but there's enough enough profit and I'll put that in quotes that we're able to cover all of our staffing costs of doing this wedside.
There's enough coverage, enough coverage that when you sell it, that sale goes to the kitty to buy.
More home exactly.
So we're hoping and we believe we can grow this fund, this fund beyond ten million dollars just through the operating of the fund, not with needing additional philanthropy, but because you know, we approach this work in a smart way. You know, this is we're nonprofit, but this is a business.
We're trying to do it in a strategic and thoughtful way and the result is a really good product for families and a sustainable program that we believe every single year now will contribute at least one hundred new owner occupants in the communities we operate.
So we're really we're excited about that.
I have done two years of shows now and I have loved all my guests and everything else. Us is one of the most sensible everybody wins ideas except for maybe New York slum lords that buy us maybe they don't like it, But everybody else I am I'm beside myself thinking about what this need want I want. I want this in my city so bad, and everybody else should do. Where are you expanding to? You got to be scaling well.
I appreciate that, Thank you.
And what I'll say is it has been really cool to see that the work we do it resonates, and it resonates across things that normally separate us. And I think at a time when there's so much division, it's awesome to be working in a space where, you know, we have people with different political beliefs, different religious beliefs,
all different sorts of beliefs you might have. It is not controversial that giving families the chance to own the homes they live in is a good thing for them, a good thing for the community, and so it means that we get to have a lot of partners, and that's a fun space to be in. We've been really cautious about growing beyond our current geographies, so we operate in the city of Milwaukee. That's where we've done this work for thirty years, and then we haven't starting with
the exactly wouldn't be here without them? And then seven years ago we opened an office in Beloit, Wisconsin, which is a small a smaller city on the border with the state of Illinois.
How far is that from the walk about now ur.
And fifteen minutes?
Why there?
We wanted an opportunity.
To see in a community where we had no name, recognition, no awareness, if we could replicate the success of our work in Milwaukee. But we wanted it to be drivable, and we wanted to have the support of the local community. We needed the churches to want us, We needed the neighborhood groups to want us, We needed government to want to partner with us, and we needed philanthropic partners that would support the initiative right and bloy it's an amazing city.
It was pretty incredible to see how quickly things came together there, starting with a philanthropist who was very excited about the work, but quickly then spread into government, doing a lot of work in community with neighborhood groups to make sure that you know, we would be seen not as an interloper but as a group that could really help address one of the community's big challenges. And it's been incredible sort of bringing our work there, it's been exciting.
It has been a huge challenge. We have learned so much trying to you know, it's one thing to do something well in one place, and it is a different thing to all of a sudden, you know, open up an office somewhere where your brand new hire new people, trying to track this work, try and do this work the same way. And pretty often you realize, well, most of what we do works well somewhere else, and there's
some things that are very different. And so we've learned a lot about how we need to approach attracting families to the program. It's very different in Beloit than it is in Milwaukee.
Michael's Beloit is that where they had a Forward plant closure or a GM plant closure. That region had some challenges, right Jamesville, which is a right nearby, right right nearby.
Yeah, so it's it's a community that you know, has a sort of a thriving history. Definitely, you know, with sort of de industrialization, fell on very hard times. It Beloit is a remarkable place, extremely resilient, there's a philanthropist's who's from Beloit, Diane Hendrix, who has made a major commitment to the city, and so she's she's part of the reason that Beloit right now is a remarkable place,
great place to visit. You know, They've got a brand new minor league baseball stadium, they've got new hotels, they have extremely low unemployment, and they have actually a big challenge around enough affordable housing because it's become a really attractive, you know, attractive place for people to live and work and play. But we've learned a lot through that expansion, and one of the things we learned was that it
can be it can be a distraction. And so while I am very excited about what we've done in Beloit and we are in a really good place in that community now and we're going to continue to grow and do more in the city of Beloit, there are times where we were asking ourselves, you know, is this work that we're doing in Beloit detracting from our ability to serve what was our primary market, Milwaukee, right And so
this is how we think about expansion now. We believe we owe it to the rest of the country to take some of the things we've learned and share them and we're committed to that. That doesn't necessarily mean we're opening up offices all over the country, you know. It might mean that certain of the things we do we can provide to other communities that have key partners that
are already doing maybe other aspects of the work. It might mean that we train and develop individuals who are excited to sort of start things that look something like what we do, but then we let them sort of, you know, run with it and flourish and develop new ways to build on the strategy. So we're not we haven't sort of made that call yet in terms of exactly what a larger expansion.
What scale look like for it.
And a big part of that reason is, you know, I mentioned the effort to buy, rehab and sell one hundred homes a year.
That was a big lift.
We also are right now in the process of massively expanding our lending function. So we had been doing two to three dozen loans a year through our affiliate acts lending. Our four year plan has us scaling that to two hundred loans a year. So we're sort of massively expanding the services we can provide to the two communities that we have committed to, Milwaukee and Beloite.
But I have to tell you.
Now that we are proving that the ax homes model works so well, now that we are expanding our lending model that has been long term sustainable, it has us thinking much more intentionally about, Okay, how do we take these key pieces and how do we make sure that if there's other cities that could benefit from them, we have a compelling way to share them that can set them up for success.
Methis, barbeque, music, cool downtown is right for this, but for bringing you back, Michael. If people want to hear more about this website, where do they go? It's something that people can find out more.
Absolutely so if you go to our website, which is actshousing dot org, all sorts of information about our program, report that sort of stuff. I do want to caution your listeners. You know, we are providing services now to
families who live in the communities where we're located. So occasionally, when we're fortunate enough to get some national exposure like this, you know, we'll start to get you know, someone who's an aspiring homeowner in California or in Texas and Unfortunately, we don't have the capacity to do that yet, but who knows what the future might hope.
We'll be right back. I dude, I cannot. I just this is it's a sweet spot for me again. I
love all the stories. But ironically enough, a very dear friend of mine, who I've known since high school I played football against, who coached football with me, who played at the University of Alabama, was our Shelby County Assessor at one time, which is a publicly that he had to run for office and one and through a couple of conversations over copy work, more than a couple mini conversations over wine and beer and coffee with him, I learned from him the drag it is on the county
and the community to have all of these blighted properties hanging around. And I learned what the drag it is on city revenue not to have these properties producing property tax dollars, and how destructive it is to communities and the people that live in them. And it has been on my mind for fifteen years, and in this story, and you come along, and it's the answer to something I've been thinking about for ten or fifteen years and
bothered by legitimately bothered by. I mean, tell me this, I'm just curious to schools improve in the neighborhoods too. I mean, I would think that even the school system gets better. I can't remember who the guest was, Oh, I think it was from Charlotte, but one of the one of the things he taught us was one of
the problems with elementary education was transiency. Because if a kid moves in the middle of their school year in first, second, third grade constantly because they're being put out or have to change rent or whatever, when the kid goes to the new school midyear, they're having to go all the way back and catch up. And if you do that two or three times, by sixth grade, you're just behind.
And then I have another friend who has a thing called coaching for literacy, and his demograph or his metrics say that if you're not reading on grade level by third grade, that you are three times more likely to be unemployed by the age of twenty one than you
are if you are reading on third grade. So if you know that poverty and unemployment in large part can be predicated by whether or not you read on grade level by third grade, and then you also know that transiency among renters almost guarantee that the children involved in those transients are not going to lead on grade level
about third grade. You can, therefore, because if agles be in Begal see egle Cee say that unemployment and poverty has a lot to do with being transient when you're third grade and before as a result of your parents.
Mean so, given that if instead of renting and moving and having transient children who end up being unemployed by the age of twenty one because of the school and because of the reading things, if those families own a house and aren't transient, the children will be better two decades from now, and the schools will be better because they're not dealing with kids in an out of money time. Now, am I.
Stretching No, I think that's very well said. You know, the average tenure of home ownership through our program is fourteen years. That's how long the typical family owns the home that they buy through us. And that's stability of home.
I mean, there's myriad research, whether it's the impact that has on education, the impact that has on health, the impact that has on actually violent reductive violence reduction, all these things are related, and I don't mean to suggest that if we just solve home ownership, we fix everything, but it is one of those key building blocks that if you can address it in a significant way, it makes the education. It makes educating easier, makes the job of the police easier, it makes the jobs of our
hospital systems easier. And so that's one of the reasons I think we've been able to attract a real strong coalition around this work.
Acts. Everybody acts in Milwaukee, Wisconsin and has a lot figured out. And I'm raying that you guys remain your growth is. You can just see your systematic growth since the beginning to now, and I just have to believe with a guy with a brain as big as yours and a passion as big as yours, that you're going to figure out how to scale it. Dude, I just I so bad want you to come back to Memphis and talk to people here. I absolutely believe in what
you're doing. And most importantly, I can't thank you enough for sharing your story with the stuff.
Well, thank thank you. It's been a real honor. I would I would certainly love to come back. And did you have do you have a second for one digression?
Please?
One because we had something happen to this week that was really special and I think good.
I wanted I was going to say close us with a cool story, so you you you transitioned well for us.
So we had an event earlier this week.
It was celebrating our four thousandth alumni homeowner and it was a cool event. The mayor came out, he proclaimed it x Housing Day, the mayor of the City Milwaukee. It was really really fun. But we had a problem, which was, you know, we had press there and it was sort of a big event for us, and we had this amazing charismatic alumnus of the program who bought a house about eighteen months previous, who was going to be speaking, and forty five minutes before this event event starts,
she gets called into work. So we're not we're not in the business of telling our alumni homeowners that they need to put their jobs in jeopardy.
So, you know, she needs to go to work. Okay, we we get that.
We will have given her a pass, I know, right, I know, I know.
So so we're scrambling a little bit because you know, it's not every day we've got events of the mayor, and we got pressed there, and we were hosting this event in the near west side of Milwaukee in a challenge neighborhood, but a neighborhood that's got some some some good, some good momentum. And the venue we were hosting the
event at had this caterer. She runs Fruition, which is a cafe and a catering company, and she she was putting out the beautiful breakfast spread for us, and she hears what's going on, and she tells one of my colleagues, do you know I actually I bought my house through acts like ten years ago, so I don't know she own and she owns, She owns the cafe, she owns the catering company. So I don't know if I could be helpful, but you know, if if there's something I
can do to help, I'd like to help, righte. And so turns out, and this is the way I bet Memphis is the same way. So it turns out once once our vice president of programs gets there, they wound up. They'd gone to high school together, so they like knew each other, right They went to John Marshall High School in Milwaukee, and she wound up being like, you know, the speaker at our event talking about how she bought her home. It was a home that was taken through
tax foreclosure. She'd been renting it. The home got the landlord lost it. She was renting it from the city. She got introduced to acts. She never thought that she would be a homeowner before. You know, she didn't have She thought she'd have a homeowner, she said, when she had a husband right now, she didn't.
She know, she wasn't married, she had a kid. She didn't think she could do it.
But she's clearly an incredible person. She put in the hard work, she worked with our teams, she got ready, she purchased the home, she fixed it up. The home is just a few blocks from the venue where she now owns the catering business. Right, and she was able to talk so passionately about, you know, the stability that
home ownership has offered her and her son. And it was so cool because I know these things are happening sort of academically, and sometimes families will share their testimony, but this was like in the wild, right, This wasn't a planned thing. This is just this incredible entrepreneur and that we are this footnote in her story and hopefully you know where the services and the support we could offer her could sort of help her take those next steps.
Who knows where she's going to be, you know where her business is going to be, where she's going to be. But it's amazing that we get to partner with families like that. And as those numbers grow, you know, from the early days when it was the dozens of families a year and now it's hundreds of families a year.
How can we create more of that opportunity in Milwaukee and Beloite and in communities across the country so that more families can experience of the empowerment and the joy and the stability they can come.
From home ownership. Amen, Michael, I love what you do. I love what you guys have and thank you so much for sharing it and the last time them to say it, promise me you're going to come.
Back well do. Thank you so much. This has been a.
Joy, it's been a real treat. And thank you for joining us this week. If Michael Gosman has inspired you in general or better yet, to take action by possibly exploring as Housing's model for you, community, donating to them, or something else entirely, let me know, I really do want to hear about it. You can write me anytime at Bill at normal Folks dot us, and I promise you I will read it and I will respond. If you enjoyed this episode, share old friends and on social
subscribe to the podcast, rate and review it. Join the army at normalfolks dot us. Consider becoming a premium member. There any and all of these things that will hold us grow an army of normal folks. I'm Bill Courtney. Until next time, do what you can