Private Equity Real Estate's New Favorite Asset Class

Private Equity Real Estate's New Favorite Asset Class // In June of last year, I put out a video that talked about what I thought was the most promising property type that no one was talking about at that time, single family rental homes.

With housing prices largely unaffordable for many buyers across the country, people looking for more space and in-home offices more than ever before, and the rise of remote work allowing people to move from densely-populated major metros to many smaller, more remote cities in the US, I was pretty convinced that single family rental homes were primed for growth heading into the second half of the year.

Well, fast forward about 8 months to today, and it turns out that I wasn’t the only one that thought this, and during the third and fourth quarters of last year, more private equity firms jumped into the space than ever before, and institutional investment in the acquisition and development of single family rental homes approached $5 billion, by the end of 2020.

So in this video, to pick up where we left off last summer, we’ll break down what is shaping up to be private equity real estate’s new favorite asset class, why institutional investors are so bullish on this property type, and what I see as the biggest opportunities in the single family home space right now.

Research and articles referenced in this video:

[BreakIntoCRE]

Do you see single family rentals as an asset class that's here to stay for the long-term?

[jordiortega]

Justin, every one of your videos blows my mind, week after week. Your channel is a great complement to what i’ve learned in the Real Estate Investment course as part of my MBA. There’s so much exploitative garbage on the web about the topic of real estate that your professional insights and advice stand out and are greatly appreciated. Thank you and keep it up!

[industrialize]

Great explanation of why SFH are so attractive right now. I think a big obstacle of investing in this space is that it is so management intensive. Not only are the tenants often demanding of immediate attention, it also takes a lot of individual units to scale. If the average house is $300, 000, it would take 10x in management compared to a single $3M commercial property. That said, you got to go where the demand is!

[henriettecamara]

I love your videos very helpful. Thank you

[nachumbeer]

@Justin What's your take on rent-to-own models in current environment?

[gregmaddux]

Does your CRE Academy monthly course start on the first of every month or the day you get the course? Like would the month go from 2/9 to 3/9 or does it only go from the first to the first? Thanks.

[georgeyazbeck]

Invitation homes did this years ago.. is it a resurgence ?

[Dglinski]

Man I really don’t get it. I’m trying to sell off our entire part of our portfolio of single family homes because we unfortunately bought at the height of 06’ and we’ve kept these shitty rentals for so long waiting for values to come back up. And now the big boys are doing the opposite? I mean just last month we sold an investment company one our 5bed/2.5bath for 280k and rented for $1450/mo which was the top of the market. Maybe I’m misunderstanding and the big companies are just constructing new communities built for just renting but info like this sometimes really has me doubting what I’ve learned and what I’m trying to achieve.

Regardless thank you for the perspective.

[老玩童]

Hey Break into CRE! Would you mind making a video on the MRED's programs offered by various schools?

[franciscososagarza]

Thanks for all your helpful videos. I am wondering, do you have IG? For daily helpful tips there? Thank you :)

[lebronsinclair]

Although you're right. I hate this trend. Urbanization stalling is just blip to because of "The Pannie." Disconnected developments like these proposed single family rentals only drive up cost of living for perspective tenants. (transportation, health facilities, education, etc) Once they learn this demand will wane.

Housing needs to be in conjunction with mass transit for longterm stability. It leads to more thoughtfully planned growth in all asset classes that truly benefit the user and still give return to investor and developers. It's unfortunate that we commoditized single family homes. The fraudulence of the last downturn and government essentially handing over single family housing to few company, think Steve Mnuchin and Tom Barrack, has basically killed the America Dream going forward as they've been holding these houses in to perpetuity. Essentially creating the business plan we see playing out today. Look up the book Homewreckers to see how we've been failed.

I see a strong counter to this coming into the future. It's wasteful and will create slums in the exburbs in area that should be preserved. With that being said yes, a lot of this is being built in the Southeast in the exburbs. Far away from amenities. So what that the average white collar worker can work from home and live anywhere. I honestly don't see this as sustainable. It's more of point time push for to place cheap money that shouldn't be there in the first place. Since the government continues to keep interest rate low. END RANT

[jyoung]

Justin, let’s connect sometime. I’ll reach out to you on LinkedIn.

[themaxeymanful]

Stop talking about it lol. Keep it a secret