In this week's episode of the Real Estate Investing Onpoint Podcast, Peter, Ron and Wade dive into the booming single family rental (SFR) and built-to-rent markets. They analyze recent data on institutional investment, discuss opportunities in different real estate locales, and share strategies for multifamily investing. Discover effective strategies for workforce housing, understand the trends shaping the industry, and learn how built-to-rent fits into the institutional model.

Here are some power takeaways from today’s conversation:

• Institutional presence in top vs bottom SFR markets
• Demand drivers fueling SFR growth
• Built-to-rent communities and the institutional model
• Strategies for workforce housing investments
• Nontraditional SFR investment platforms

Episode Highlights:

[15:00] Institutional Investors and Top Performing SFR Markets

A recent Moody's Analytics article, analyzing the top and bottom performing SFR markets, reported a lack of institutional investors in many of the top markets, including Rochester, NY and markets in the Mid-Atlantic like Baltimore and Philadelphia. Larger firms have faced challenges acquiring sufficient portfolios at scale in these urban markets, which often involve smaller, heavily renovated properties rather than newer construction. Developing at the required size to meet institutional return hurdles may also be more difficult in these areas compared to suburban markets in the Sunbelt.

[29:00] The Appeal of Built-to-Rent Communities

Wade provides insight into built-to-rent communities and why they appeal to both institutional investors and the group's investment thesis. He notes that developing new construction projects on vacant urban land fits their strategy of investing in areas where large institutional competitors are not active. Built-to-rent allows stacking units efficiently while avoiding issues like uncertain rehab costs. Wade also discusses how building from the ground up is more predictable than heavy renovations on older homes, though new construction experience is limited within the group.

[43:00] Emerging SFR Investment Platforms

alternative SFR investment platforms are emerging such as portfolio lease-backs and fractionalization. The group debates the challenges and opportunities of these models, including their ability to potentially attract new types of institutional capital to the sector. In portfolio lease-backs, a company leases and then subleases an entire SFR portfolio. This could appeal to investors seeking a true triple net investment. However, they also note the long-term risks over a master lease and how margins may need to be thin to make the deals work.

Resources Mentioned:

www.gsprei.com

Moody's Analytics - The Superstar of Today and Tomorrow, Growth and Opportunity in the Single Family Rental Market

Curious about rising interest rates, supply and demand, and the impact of institutional investors? Tune into this latest episode for a deep dive into the real estate investing industry as GSP REI partners Peter, Ron, and Wade discuss trends shaping the market, factors like interest rates, supply and demand, and the impact of large institutional investors on the housing market. They also provide an update on Wade's HUD property due diligence for an upcoming auction – plus, their Thanksgiving holidays and Christmas shopping plans!

Here are some power takeaways from today’s conversation:

• Their Thanksgiving celebration and holiday plans
• Wade’s strategy for upcoming HUD property auction
• The pandemic’s impact on the housing market
• The impact of interest rates on the real estate market

Episode Highlights:

[15:49] Wade Shares Strategy for Upcoming HUD Property Auction

Wade provides an update on his HUD property due diligence for an upcoming auction, detailing that they submitted their preliminary model that morning after diligencing around 1200 of the 1500 total loans being auctioned. He discusses their strategy of bidding on most Florida assets despite it typically being very competitive, with plans to bid on around 300 to 350 properties in that state. Wade also notes some markets they will avoid bidding on and that he will make some additional edits to their model over the weekend before submitting final bids.

[24:11] The Pandemic’s Effect on the Housing Market: Wall Street Investors vs. Homebuyers

• The intense competition between homebuyers and Wall Street investors in the housing market has resulted in unprecedented price surges. Homebuyers, with their longer time horizons, are willing to pay more for properties. However, there comes a point where further price increases become unprofitable for Wall Street and investors. Notably, Wall Street's focus has been on specific markets, including Atlanta, North Carolina, and Texas, with around 35% of purchases concentrated in just 11 zip codes. It is important to note that data may not accurately reflect homeownership rates as it may not account for all adults living in the homes. There’s also a rising popularity of builder rank communities, which offer lower-priced homes that attract first-time buyers. Ultimately, the primary factor driving high prices is the significant shortage of available housing supply.

[30:11] A New Default Cycle in Corporate Debt Sparks Questions about the Fed's Actions

Amid the headline of a new default cycle in corporate debt, concerns about the Federal Reserve's actions come to the forefront. Speculations arise regarding whether they waited too long or did too much in a short period of time, potentially resulting in an overcorrection due to the lag effect. Driving up rates rapidly doesn't yield immediate effects, and although recent data shows a shift in the opposite direction, the full extent remains uncertain. Additionally, economists warn that the repercussions of rate hikes may not be fully realized until six to twelve months later than anticipated, possibly burdening the economy more than expected. Notably, corporate bankruptcies have increased, signifying the impact of the interest rate environment on businesses. The consequences of these developments are poised to reverberate throughout the economy, influencing job markets and labor dynamics.

Resources Mentioned:

www.gsprei.com

Discover the secrets to decode local real estate trends, master data-driven tenant screening, and build a rock-solid portfolio for an everlasting triumph. In this episode, Peter, Ron and Wade discuss the impact of rising interest rates on the housing market and offer their predictions for where rates are headed in 2023 and beyond. They also share tips for effectively screening tenants, including checking car cleanliness, and discuss the benefits of using property management software to document communications.

Here are some power takeaways from today’s conversation:

• Examining interest rate trends and predictions for 2024
• The shifting real estate landscape from multifamily to single family
• Establishing boundaries and expectations for property management
• Essential checks for evaluating potential rental tenants
• Maintenance requests and communication with tenants

Episode Highlights:

[02:45] Examining Interest Rate Trends and Predictions for 2024

There is a misconception among some Americans that 3.5% to 5% interest rates are normal, when in fact historically, they are exceptionally low. As rates continue to potentially decrease, there may be individuals who choose to wait on the sidelines, anticipating further drops. It will be intriguing to observe how the data supports these potential reductions, and to unravel the underlying factors influencing this shift. With various elements at play, it is difficult to pinpoint a precise trajectory, but it is predicted that by the end of 2024, interest rates could reach approximately 6.75%.

[14:43] The Shifting Real Estate Landscape From Multifamily to Single Family

In recent years, the multifamily sector has experienced a surge in popularity, with many investors flocking to this market. However, various factors such as interest rates, new developments across the country, and repeated trading of properties have shaped this space. As a result, there is now a growing trend towards single-family properties as investors seek good deals and value. Observing the demand in the real estate market, some experts predict a shift towards single-family homes. Additionally, industrial properties, outdoor storage, and flex spaces have seen increased demand in recent years, particularly due to the effects of COVID-19. For investors who prioritize supply and demand dynamics, the allure of single-family properties may eventually lead them to this segment of the market.

[28:41] Essential Checks for Evaluating Potential Rental Tenants

• When evaluating potential tenants, it's crucial to conduct credit and background checks. Checking their credit scores, performing NTN reports for credit history, and looking for red flags like evictions or bankruptcies are important steps. Verifying income, liquid assets, and rental references also help ensure the reliability of applicants. These standard checks allow landlords to screen out risky tenants and select responsible individuals who will pay rent on time and maintain the property.

[35:37] Establishing Boundaries and Expectations for Property Management

Implementing software as a communication filter provides a crucial boundary when it comes to property management. By setting clear expectations from the beginning, including maintenance standards outlined in the lease agreement, and informing tenants about quarterly property inspections, boundaries are established and maintained. This proactive approach ensures that all parties involved understand their responsibilities and helps foster a successful landlord-tenant relationship.

Resources Mentioned:

www.gsprei.com