How the ProActive Income Realty Fund Invests in Creating Affordable Housing
In today’s episode of the Double Wide Dudes Podcast, we’re speaking to Dr. Van Williams, founder and CEO of The Proactive Realty Income Fund. Tune in to learn how he’s working to address the affordable housing crisis by creating and restoring communities made possible by investor and individual fund programs through his organization.
Intro: Hey look, it’s the Double Wide Dudes.
Alberto Piña: All right. All right. Welcome back to another episode of the Double Wide Dudes. Today, I’m joined by our guest. Dr. Williams. I appreciate you joining us today sir.
Dr. Williams: Yes, sir. Thank you for having me. I really appreciate it.
Alberto Piña: Yeah, always good to bring folks in that are doing all sorts of cool stuff with affordable housing. For our audience, really quick, just to introduce him. Dr. Williams earned his Ph.D. In general psychology graduated magna cum laude from Madison University and shortly after that began venturing into the realm of meaningful multifamily and investing. We’ll get into a little more about what that is.
Went back to school and graduated from Allied Business School in Laguna Hills, California, and then became a registered professional property manager, certified green property advisor, and registered property manager. And if we didn’t need any more stuff to talk about, Dr. Williams also became a certified private equity professional. So, a lot of information. A lot of experience in his background. We’re excited to dive into that. I guess for starters, Dr. Williams, what was the initial spark that got you all excited about the affordable housing space?
Dr. Williams: Thank you for asking that question. The opportunity to go in and make things better in the affordable housing space. There’s not enough people who are doing enough in the affordable housing space to create housing security, home ownership, and those sorts of things for those who are underserved or those who are just in the lower tier of the socioeconomic scale.
Alberto Piña: Yeah. I couldn’t agree more. A lot of work to do for sure. And like we’ve talked about in previous episodes, now as cost of housing keeps rising much quicker than wages. The folks that need a sustainable place to live keeps growing and growing. From y’all’s end, what are some of the benefits you’ve seen in providing additional supply of affordable or sustainable housing in your communities?
Dr. Williams: So, some of the benefits are that you have less crime, you have housing security, you have people who start to dream because dreams come from stability. You have to be stable. Kind of like the hierarchy of needs like Maslow’s hierarchy of needs in psychology is that before you can do anything else, you have to have your basic needs met.
And so, once those basic needs are met and you have some housing stability, some housing security, then you can begin to advance forward, and hopefully, individuals can learn to serve and help others.
Alberto Piña: Yeah. Once you’ve got that foundation and you yourself feel secure, you’re able to start providing that beyond just you yourself and I. That’s something we talk about internally as well, both for the parents that are buying the home and for those kids that grow up in a stable place to call home.
One of the things we’ve looked at and discussed, there’re all sorts of solutions that are working to address this from the government side of things. There’s a lot of philanthropy in this space, but your business is really focused on the business side and working on the business side to address a need while making a return for your investors and your company. What is it that led y’all to believe that is the way to go and way to attack this problem as a sustainable solution?
Dr. Williams: Thank you. I’m glad you asked that. Because on the fund model and individual model, because we do have individual projects, as well as the fund model. We’re able to scale. We’re able to go into places and create impact, create housing, sustainability, and create great returns for our investors that otherwise couldn’t be possible say if you needed to get bank financing or if I were to go out and just do it on my own with my limited resources. I wouldn’t be able to scale and get as many properties that are well positioned to be rehabbed, to be stabilized, and to provide growth and returns for investors.
Alberto Piña: Yeah. And for our audience, what he’s speaking with in regards to the fund model that’s different than me as an individual trying to go and fix up a home. It’s a pool, it’s a collection of individual’s money that’s isn’t deployed and used as a whole. So, the buying power is bigger. And I imagine the impact can be bigger when you have that larger buying power, is that accurate?
Dr. Williams: That absolutely accurate. And one good example of that is a property that we acquired in Orangeburg, South Carolina, which is a 39 acre manufactured home park. And if we had gone out to get bank financing or tried to get any kind of loan to acquire the property, to rehab it, to bring it back online, I seriously doubt that we would have.
I came into the property, it was scheduled to be condemned within about 10 days. And most people saw it as just as a loser. And I didn’t see it that way. Myself and my team saw it as, “Wow, we can go in here and make some impact.” Came into about 80 code violations. We can take these old homes out, we can bring new housing in and we can create some affordable home ownership as well as some rentals for veterans and different people.
Alberto Piña: Yeah, it sounds like that was quite the project.
Dr. Williams: It was.
Alberto Piña: A lot of folks don’t know that factory build or manufactured home communities, that’s the largest source of unsubsidized affordable housing out there. And there’s a lot of these communities that are at the point where they’re about to get condemned. But when those close, that’s a whole mess of people that don’t have a place they can now step into to keep that roof over their head.
What was the turnaround like on that project after y’all got in and cleaned up the code violations? What did you see in the community as a result of y’all’s investment in that community?
Dr. Williams: Wow. We saw a lot of people who have taken pride in the community. The drugs are gone. All of the other bad elements are gone.
When I first came into this property, one quick example. The road that was from the stop sign to the other stop sign, which is a couple city blocks, because it’s a really large property, had so many potholes at a fence on the right side of the property had been torn down.
It used to be two manufactured home parks, A and B. It used to be called A and B mobile home park. And so, what happened was the residents had torn down a fence on one side and was just driving through. It was complete chaos. The place had not been actively managed for over two years.
The first ray of hope came when, and I knew nothing about manufactured housing prior to this project, came from, I started doing research immediately and found a solution for the road. It’s called slag because I couldn’t get a paver to come in right away. So, I put in a new slag road, the first eight days I was here in the property.
And then I moved. So, when I’m here in Orangeburg, I moved in the middle of the mobile home park. And soon as the residents saw the new road, I mean they just lit up. A lot of people, a lot of cooperation, a lot of help. We replaced the mailboxes with pedestal mailboxes. It was a huge transition.
Unfortunately, we had to do about 85 evictions because there was chaos here. Drugs, violence, domestic violence, all of those things. It was not a safe area. And so now the people, the residents that are left, we have about I’d say about 18 core residents from a hundred. And those residents are very happy.
And now this is a place that people want to come to. They’re proud of. We plan to bring a daycare facility here. By the grace of God, I’ve established a dealership here. Right now, as we are on the podcast, I’m the only black retail manufactured home dealer in the state of South Carolina.
They have had one or two in the past, in the early 90s. You have a lot of black general managers. However, I’m the only one. And the other unique thing is I’m the only one that has a manufactured home park and a dealership all on the same parcel.
Alberto Piña: That’s awesome.
Dr. Williams: Yes. And so, we’re able to create a lot of affordable housing. I work with Legacy Housing Corporation. That’s based in Bedford, Texas. They also have a plant in Eatonton, Georgia. They sell affordable housing. They promote affordable housing. I’m able to sell their product and create homeownership for people who otherwise thought they could not have homeownership. So, I’m excited about that.
Really, it’s like an extension of ministry here. So, my background is in Christian ministry. However, when it comes to affordable housing, comes to placing some people, it’s all a faith-type project
Alberto Piña: That awesome. And it really has… You’ve got to have a place folks can afford, but, giving them a place, they can afford that they can’t necessarily take pride on, that really doesn’t solve the problem. And in a lot of cases, like you described, the drugs, the crime, in a lot of cases just makes it worse. And so, it’s the balance, a strike and a balance between what’s going to keep it affordable and what are the things in my community, like the road in the park you just described, that I can be proud to drive up to my home every day I come back.
One thing I learned about South Carolina. Per capita, that is the largest percentage of factory build housing of any state in the country. So, sounds like y’all are addressing a big, big need there.
Can you talk to some other examples of other communities and buildups and projects that y’all worked on that have had a similar impact in those neighborhoods?
Dr. Williams: Yes, sir. So, this is my… So not in North Carolina, this is my 24th year in real estate. My third year as a fund manager. Wait, yeah, this is my third year. As a fund manager.
Pandemic 2020, we were able to return 12% to our investors. We didn’t miss any payouts, any distributions. A lot of large players ceased distributions or paused distributions for several months for their investors. We did not.
That’s one of the great benefits of being in a class C/B- space. Being able to provide affordable housing and quality safer housing is that we keep people lined up for it.
Another example of a project. Let me see. What comes to mind is 2540 Fremont Street, Las Vegas, Nevada. Bought that property in 2017. Got into that property at one seven. Exited at about two eight. It just recently traded in early 2018. It just traded, last year, May 2021 for 6.3 million, heavy value add.
I went to Las Vegas to find a condo. Real quick story. And while looking to find a condo, I came across an agent and I asked her, “Does she have any commercial properties for sale?” And she says, “No, I’m don’t deal with it. What are you looking for?” I said, “We’re looking for 50 units or more. We’ll put 225,000 down. We’ll have the owner carry the paper, no payments for the first six months while we get the property straight.” And she looked at me with an incredulous look. She says, “Well, Mr. Williams, if we had a sweet deal like that it’d go to a local investor.”
She called me two hours later, she says, “You know what you asked for?” I said, “Yes.” She says, “Write down this address, 2540 Fremont Street.” She says, “Meet me there tomorrow at 11.” Went to a Cirque du Soleil show on a strip, went to the property about 1:00 AM in the morning, complete madhouse, located right across the street from a liquor store. It’s 53 units. Everything you can imagine and can’t imagine was going on there.
The next day met with the manager there. And he says, “Hey,” he says, “Okay, you got the deal, the terms you asked for.” He said, “Oh, but we need to have a meeting.” I said, “Well, what you’re talking about?”
That afternoon, I met with code enforcement, chief of police, fire chief, Southern Hope of Nevada social services’ agency. That property was slated to be condemned. They were moving the last eight residents out within about the next week.
They said, “What can you do here that we haven’t done?” I said, “I’ll get the place cleaned up. Give me six weeks.” So, myself and my team, they gave me a shot at it. Got the code violations within about five weeks. Four and a half to five weeks kids were back outside playing. The whole element had just dissipated. And that was just through a number of measures that we used. Security cameras, clean-up negotiation with squatters, and just said, basically, “Hey, you don’t pay, you don’t stay.”
A lot of people just left on their own. We were able to put gates up on another side and just come in and care about what was going on at the property and residents were extremely happy. The local shop people in the areas across the street from Lowe’s. I had a Lowe’s manager to tell me, he says, “Since you’ve been here for the past four or five months,” he says, “The shoplifting has gone way down.” People trying to steal power tools and different things to sell to score drugs or what have you.
Southern Hope of Nevada couldn’t believe it. They said we never thought we’d place people back in this property. Forget about the people, it was in complete disrepair and just went in there, got it stabilized. And we liked properties that we can go in and we can see the light.
So out of the 53 units, about 22 units were ready for immediate rehab. That took about all of 10 days. And out of those 22, 10 units were already occupied with paying residents. And so first we went into those units, updated, made some changes, repairs to keep the cash flow going. Increased the cash flow. Before you knew it, the entire place was full with a waiting list.
Alberto Piña: That’s awesome.
Dr. Williams: So, we like to really reward our investors. On that deal, I had not formally started this fund yet. And so, I had about three private investors who were extremely happy. And we provide updates and that was who encouraged me, was like, “Mr. Williams, you need to go into having a fund because you really know how to do this. You really know how to serve people and help.” And I said, “Okay.” He said, “You’re really making a difference and my investors were happy with that.”
Alberto Piña: That’s awesome. Yeah. It’s one of the core values here at Braustin, for for-profit and for people. And when you’re looking at it affordable housing, you mentioned addressing the problem at scale. To address it at scale, you’ve got to be able to make bank money and you’ve got to be able to be profitable for investors, for anybody getting into the fund. Or like us, for business that’s trying to grow, we firmly believe, and it sounds like y’all do too. If you don’t a problem profitably, at some point the scale of the impact gets cut way, way back.
At the same time. We’re both in the affordable housing space, so it can’t just be about the dollar. It’s got to be a mix of both sides of that. And sounds like y’all have really found that happy balance there.
One of the things we’re looking at in San Antonio and just communities all over the country are working through is how do we clean up some of the areas that are distressed? How do we do things? You mentioned that park or the project there in Nevada, without creating additional problems that come with gentrification and raising property taxes to the point where residents that have been there for generations can no longer continue to live there?
Your business speaks to transforming distressed communities without the gentrification. Can you speak to that?
Dr. Williams: Absolutely. So, for example, we have properties in Harvey, Illinois, apartment buildings. A lot of properties in Harvey, Illinois, have the highest taxes I’ve ever seen in my life. However, you can fight them and get them lowered with a good tax attorney, which, they have a whole Rolodex of those in Illinois.
For example, two properties that we bought, and we have options to buy six more buildings in that same area on West 154th Street, is we got into two, six-unit buildings for less than 50,000. And those buildings are structurally sound. An engineer checked them out, and it’s a rehab.
So, each building is 175 rehab. And then they’ll generate for investors 6,500 per month gross. And out of that, we clear about 48/4900 net for investors.
So we go into communities, we create safer, more affordable housing without gentrification. That’s our goal. That’s our focus. If a building isn’t structurally sound or certified by an engineer, then we have to pass on it.
We just got into talks with someone that does modular affordable housing. So that’s a really viable option for some places. If we get a property for little or nothing, then we tear it down on the same lot. They do workforce housing. So, they build units. They can produce 80 units to 100 units in a month. So yeah, of good quality, sound housing.
It’s great in neighborhoods when a bar goes up organically and things start to improve in the community. Rents start to rise. People start to see more. However, when it artificial, when it’s done through gentrification of low income people, it’s not good because it displaces people. It’s bad for the area, for the neighborhood and causes a lot of resentment.
A lot of that resentment rolls over into deviant behavior, into crime, into alcoholism, drug use, into despair, poverty. You name it.
You touched on you’re in San Antonio and I’m sure you’ve seen in San Antonio, because of a lot of tech companies that have moved there, their prices are much more different than they were just a few years ago.
Alberto Piña: Yes, sir. Yes.
Dr. Williams: Yeah. So, in Oakland, California, housing is very expensive from just five, six years ago. Even people who have liked to section a voucher or veterans or different people are just displaced because a lot of landlords are just thinking about the buck and saying, “Hey, well, you know what, I own this fourplex. And hey, I’m going to get 2,500 a month instead of this $1,100 a month I’ve been getting.” And a lot of greed comes out and it’s just gentrification can be really bad for a lot of areas and push a lot of people out and displace a lot of families.
Alberto Piña: It’s important for folks to talk about who this problem really impacts. And a lot of folks understand that it’s an issue for low income, section eight, and that kind of thing. But you look at West Texas where entire school districts can’t hire teachers; because teachers can’t afford to live and compete with what the oil companies are willing to pay for a house out there. And when teachers; or first responders, when they can’t afford to live in the community you start to lose what is, that community that used to be a part of.
One of the favorite things, when we were looking into proactive fund was this… Y’all talk about the impact rate of return, which I thought was a phenomenal way to look at housing. And that strike in that balance between making a profit and being for people. Can you speak to what impact rate of return is and how you, as the operator of the fund and your investors, really buy into that idea?
Dr. Williams: Oh yeah, absolutely. So, we have a third-party fund administrator. It used to be called NES Financial. It is now called JTC Group. JTC group bought them. They’re a publicly-traded company on the foot C London stock exchange. They have over 150 billion AUM assets under management. And they came out with the impact scoring model that they worked with Warren Buffet’s, grandson, Howard Buffet to create. And it’s a scoring model.
And so, it has a lot of variables and factors. So, when we go to invest in a property, we can contact JTC Group, our fund administrator, and say, “Okay, what would the impact score be on this property with a hundred being the most impact? And of course, one being the least amount of impact?” And so we go after properties that are usually 70 or higher. Right now, we’ve been averaging about 82% on the impact metric scale.
So, it was created by Howard Buffet. He also has a great book out. He does great work. His dad does great work in social impact. As you know, Warren Buffet has signed the pledge, when he passes on, to distribute most of his wealth to charities and donate it to philanthropy and to forward the cause of helping others.
So it’s a really great model. I like it. A lot of investors like it once we explain it to them and tell them what it entails and what it’s about. And another group that uses it are Terrace Investments, they are Terrace fund, which is a really awesome fund that does a tremendous amount of social impact. And that they’re really for real.
As I’m sure you’re aware ESG is a term that’s used with anything these days because there’s so much impact washing. And when you peel the onion back and say, “Okay, so what is their impact?” A lot of companies, you can’t really measure it properly or you don’t understand it.
Alberto Piña: So, this new rubric that y’all use, what are some of the factors that go into achieving an 82 score on a project y’all work on?
Dr. Williams: Yes, sir. I’m glad you asked that. So, it’s based on a census tract. And the area is based on education levels. It’s based on poverty, it’s based on impact for direct jobs and induced jobs, which are indirect jobs. The scoring model is also based on housing security and a social impact in keeping communities together and building communities.
Alberto Piña: Yeah, I was looking, we had another guest on talking about Rock communities for factory build housing. Where the residents would pool together and kind of create a fund to where they would buy that. And one of those social impacts that really kind of gets left untalked about. If you’re an elderly family, or a couple, or individual living in that community, your neighbors in that community are some of the ones that are helping make sure you get your meds and get your food and helping where, without that safety net of your neighbors, if you lose that, in a lot of cases, people are just left high and dry with friends and family and things that maybe they relied on to help them get through and live on their own.
They’re going to be folks that listen to this and think, you’re a business, your a fund, talking about 12% return investors. How is it that a business that is designed to get a return for investors can legitimately stand and say they care about the people in the home? What would you say to the critics that may think it’s too good to be true or that kind of thing?
Dr. Williams: For first off, it’s by the grace of God. And so, for me, it’s God. Whatever that higher power, whatever it is that you acknowledge or believe in, or that whatever that whisper is. It is, for me, it’s by the grace of God. God gives us so much grace to deal with certain things. And for me now, honestly, and transparently, Class C properties, coming into rough properties and dealing with problem tenants, or trying to get a place turned around. It’s no cake walk, not even close too.
However, those tend to be the properties that are very rewarding and highly profitable. Love covers a multitude of sins. So, I mean, love, what’s the song, Love Conquers All. Is if you go into a place and you have the right attitude and you go and you have the right intention, then I think that, well I believe that, you can accomplish great things. And with great things you can accomplish great returns. And in giving back, it just kind of multiplies.
It reminds me of a book I read by Jack Canfield called The Success Principles. And in The Success Principles he spoke of how, when you give in the universe, when you put it out in the universe, it comes back.
So as a fund, when we go and we care about people and we’re trying to make a difference, it comes back to us in social capital as well as financially.
Alberto Piña: Yeah. I love that. And for our company, I imagine y’all’s that we believe that is the most sustainable way to drive a business again, being for people and for profit there.
I imagine there’s going to be some folks on the other side that hear a 12% rate of return through a global pandemic and want to be a part of that. Definitely a better return than what Bitcoin was depending on when you got in. But how can folks learn more about what y’all are doing and get involved either in participating in the fund or just being a cheerleader on the side, where can they go to learn about all the cool impacts you and your team are making?
Dr. Williams: Okay. Real quick because I know we just have a few minutes left. I wanted to backpedal just a little bit. And to your point, remember you were saying about the community and about neighbors and the safety net? The other thing that’s really important is when a neighborhood is cleaned up and it’s a community, other people, other services, are now available. So, there’re places, Meals on Wheels is an example, and I’ve seen this firsthand.
Meals on Wheels, which bring seniors meals, nutrition. They get a bag with snacks, different things. They also can check on them, make sure that they’re alive. Make sure that they’re well. Relatives who live out of state have a point of contact. So, when a neighborhood is good, services are available, and it helps the community thrive as a whole. Like you say, for elderly people, especially, they have more services.
The home health nurse has no problem coming in, “Hey, I’m not going to get my purse snatched, or I’m not going to get my car broken into.” And these are real factors that happen. I come from the Bay area, the Bay area has one of the highest rates of auto break-ins and thefts and things of that nature in all neighborhoods. But it’s very important that communities be safe and not experience loss of services.
So anyway, we have our website, proactivefunds.com for the proactive income fund. And our number is 1-800-626-2089. And we also offer an investor portal. So, when we do have investors, like you were saying, “Oh, it’s too good to be true.” Well, we’re transparent. Our investors come first period.
So, I mean, that’s just the bottom line. All of our properties, when you sign up into the fund, we have different terms. If person wants to be in for two years, if they want to be in for five years, whatever the case may be, its immediate income. They invest one quarter, they receive distribution payment electronically the next quarter. And that’s about it.
Alberto Piña: I guess.
Dr. Williams: So, and I’m really thankful for this opportunity to talk about affordable housing, because a lot of times it seems like in this space, your work kind of goes unnoticed at times.
Alberto Piña: Well, I appreciate you coming on. And hopefully by the time we’re both done with our respective companies, we’ve changed that conversation a little bit more. But it comes back, for profit, for people, is the way we’re going to attack this as a nation in doing what your company’s doing, doing what our company’s doing, and just genuinely caring. Like you said, leading with love. If you lead with love, with housing, the dollar tends to follow right behind it.
Dr. Williams: Yes, sir. And I have a book coming out. Let’s see, this is February, March. A book coming out. It should be out either the first or third week of April.
Alberto Piña: Very cool. What’s the name? Can you tell us the name or still under wraps?
Dr. Williams: Well yeah, it’s still under wraps. However, it’s dealing with the manufacturing home space and also the multifamily space and meaningful investment and entrepreneurship and those things. Just a path for others who want to follow.
Alberto Piña: That’s. Awesome. Well, maybe we can get on your book tour when that rolls out and get you back on the podcast and talk all about it?
Dr. Williams: Absolutely.
Alberto Piña: All right. Well, thank you so much, Dr. Williams for joining us. I learned a lot. I hope our audience did as well. As always, thank y’all for tuning in and we’ll catch y’all on the next one.
Outro: Safest, easiest, lowest priced. Find a better way home with Braustin, the nation’s first virtual home dealership, call us, or visit us online at findmymobilehome.com.