May RIA Roundup: Institutional Investors, Build-to-Rent, & Economic Facts vs. Fiction
The RIA Roundup is a monthly real estate newsletter with the latest stories, data, and insights curated especially for rental property investors.
In this issue:
Lead Story: Institutional Investors
Portfolio Updates
In Other News…
Final Thoughts: Facts vs. Fiction
Lead Story: Institutional Investors
You’ve probably heard a story about hedge funds and institutional investors that goes something like this: realizing that housing (particularly single family homes) is a finite resource that provides solid returns, deep-pocketed companies are vacuuming up all the housing inventory, and then evicting tenants and jacking up rents. In doing so, they’re making it impossible for regular folks to compete, leaving first-time homebuyers out in the cold and artificially inflating home prices.
In other words, they’re distorting the housing market, pillaging it for profits, and in the process they’re screwing both renters and homeowners.
The weird part about this story is how many people believe it when so little of it is true.
In my latest article on the blog this month, I use facts & data (what else is there?) to evaluate these claims, and see if they hold up to scrutiny. I also dive into why this story is now believed as widely as it is, in spite of the facts to the contrary, and whose interests that serves. (Spoiler alert: not yours.)
Also on the blog this month:
A new “Coaching Case Study”: I had a discussion with Ian, a graduate of my coaching program, who now owns 10 properties in the Memphis market and is looking to scale to 20.
A new “Property Spotlight”: This time, I shine the light on Property #2, which I purchased way back in January 2019. I review the house, the deal, and all the numbers — including the annual performance of the property in the five years since my purchase.
Portfolio Updates
April was a solid month in my portfolio, as detailed in my April Portfolio Report (very similar results to March, in fact.) Positive cash flow was just over $9,000 for the month.
Even paying for a (relatively small) turn at Property #23 in April, I still nearly hit my pro forma cash flow target. This was thanks mostly to the retention of the security deposit at that same property, which was larger than normal (two months of rent).
I remain slightly behind my cash flow targets for the year, and I’m still facing two upcoming turns this summer from tenants who submitted their notice-to-vacate in advance. Here are my updated figures for the first three months of 2024:
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In Other News…
Real Estate & Business, Domestic News
Some people are happy to rent…forever. Think homeownership is a goal that is universally shared? Not by everyone. This article profiles people who choose to rent, and have no plans to own their primary residence. (I’m in the same boat, so they should have called me.)
Build-to-rent is growing fast. One of the fastest-growing trends in real estate investing is build-to-rent, in which new homes (or even entire neighborhoods) are built with the intent to be managed as rentals. The number of such homes being completed this year will likely exceed 40,000, up from 8,000 in 2020.
Fed leaves interest rates unchanged. At their most recent meeting, the Fed said “no cuts yet”. Expectations for rate cuts have been pushed back to later this year, since the Fed is not satisfied with current inflation rates of 3%, and really REALLY wants to see them at 2% before providing any relief to borrowers.
The Dow reaches 40,000 for the first time. The stock index surpassed the 40,000 threshold for the first time in mid-May, but it has dropped back since.
Justice Department brings suit against LiveNation/Ticketmaster. The Justice Department brought an antitrust suit against Live Nation, the parent company of Ticketmaster.
Trump on trial. You’ve been watching, I’m sure.
International News, Science & Technology
String of record global temperatures reaches 11 months. April was the hottest April ever recorded, which is the 11th straight month that has been true. Some moderation is expected later in the year as the El Nino climate patter is expected to fade and transition to La Nina. But the inexorable increase of global temperatures will continue, since global greenhouse gam emissions continue to rise.
Iran’s President dies in helicopter crash. The country’s foreign minister was also killed in the crash, which occurred in a mountainous region in densely foggy conditions.
Brazil inundated by floodwaters. The worst flooding in 80 years battered the southern Brazil region of Rio Grande do Sul.
Our nearest star throws a fit. The Sun burped out a number of large flares and CMEs (coronal mass ejections) in Earth’s general direction, causing a large “solar storm”. Luckily, we’re well protected by the Earth’s magnetic field, which deflects the incoming particles toward the poles and results in the multi-colored sky show we know as auroras. The auroras are typically only visible in high latitudes, but during the storm they were visible in mid-latitudes to billions of humas. Unlike your ex, the Sun’s temperamental fits are easy to predict: there is a “solar maximum” every 11 years when this kind of solar activity is most intense.
Arts & Culture, Sports, and All the Rest
Methodists strike down ban on gay clergy. The United Methodist Church will now allow gay clergy to be ordained, following an overwhelming vote of their top legislators.
Mystik Dan wins 150th Kentucky Derby by a nose. Over 150,000 people gathered at Churchill Downs outside of Louisville to watch some horses run for two minutes (and also to drink mint juleps and show off their hats). Mystik Dan won by a nose over two other horses in an unusually close 3-way finish.
Madonna can still draw a crowd. A free outdoor concert on Copacabana Beach in Rio de Janeiro drew an estimated 1.6 million fans, making it (once again) the hottest spot north of Havana.
Sriracha shortage looms. If you put hot sauce on everything, take note: Huy Fong Foods, maker of a popular sriracha sauce, has halted production until the fall due to issues with its crop of red jalapeno peppers. The same issue occurred a few years ago, which caused a run on existing grocery supplies of the sauce.
Final Thoughts: Facts vs. Fiction
A recent Harris poll found that a large swath of Americans believe things about the economy that just ain’t so. Check this out:
56% believe the economy is in a recession. (It isn’t. The last recession was in 2020, and GDP growth has been strong since then — in fact, the strongest in the developed world. Job and wage growth, though not technical measures of recessions, have also been consistently strong.)
49% believe the stock market is down for the year. (It isn’t. It’s up about 12% this year, on top of 26% gains last year.)
49% think unemployment is at record highs. (It isn’t. Unemployment is below 4%, which is a near-record LOW.)
Some have called this a “vibesession”, in which national economic improvements aren’t felt by all individuals. In other words, “the overall economy may be good and getting better, but not for ME.” But there’s a big problem with this explanatory framework: when you ask people how their finances are doing PERSONALLY, they’re actually quite upbeat. Another Harris poll found that 63% of Americans rate their personal financial situation as “good” or “very good”, and 66% think that 2024 will be better than 2023. People are pretty happy with their work, too — job satisfaction is being measured at historic highs.
So most people feel pretty good about our personal economic situation and their jobs, but half of us think the overall economy, the stock market, and job growth is in the tank, when it isn’t — in fact, the exact OPPOSITE is true.
What’s going on here? Why do so many people believe so many things about the economy that are so wrong?
And it’s not just the economy. There are a number of other important issues on which most Americans have their facts wrong — for example, crime. Most people (as many as 75% in some surveys) think crime is a serious national problem that’s getting worse. This is completely wrong: both violent crime and property crime have plunged in the last few decades, and have also dropped sharply in 2023 and so far in 2024. The truth is that crime has never been LESS of a problem in modern history than it is right now.
As a New Yorker, another one of my favorite misconceptions is about the “decline” of New York City. Whenever I meet a non-New Yorker, they express deep concern about the fact that I live here: “Oh wow, how ARE things there? I hear it’s really bad now…is it OK? Isn’t everyone leaving?” It’s remarkable how widespread this conception is, and how utterly laughable it is to a New Yorker. The city is as safe as it has ever been, and NYPD stats prove it; it is a financial and economic juggernaut; it added nearly a million new residents between 2010 and 2020, and is continuing to grow; and (as ever) it is a major global hub for arts, culture, food, music, sports, and nearly everything else. (It’s also increasingly clean and beautiful — yes, really! I mean, I’m not eating off the sidewalks, but I promise it’s quite lovely in many places.)
Again — what’s going on here? Why are there such deep misconceptions about the economy? Crime? The state of our cities? There are more examples, of course.
In the lead story this month, I highlighted the misconceptions many people have about the influence of institutional investors on the overall market for single family homes. Here also, many people believe something that just isn’t true. I suggested the root cause is that it’s in someone’s best interest for us to believe the lie — specifically, it’s in the best interest of elected officials (at the federal, state, and local level) to scapegoat institutional investors and blame them for the structural problems in our housing market that are making homes increasingly unaffordable. So those politicians use their platforms and media megaphones to distort the truth, and cause many of us to believe that “hedge funds buying up homes” is a much bigger problem than it actually is.
Similarly, we form our beliefs (about the broader economy, about crime, about cities) from the media and information we consume. So it’s worth asking this question: whose interests does it serve for us to believe that the economy is tanking when it’s actually humming, that crime is way up when it’s actually way down, and that cities are dying when they’re actually thriving?
If you’re wondering if partisan politics plays a role here, trust your instincts. Partisan bias has recently been shown to hinder our ability to identify a statement of fact from an opinion. Which seems like a big problem. Because, you know, facts are facts. We need to agree on facts in order to form a coherent, shared understanding of what’s true about the world. And it’s pretty clear that right-leaning politicians would love you to believe that the economy is awful, crime is out of control, and cities are hellholes — and that the fault for all those things rests squarely with the Biden administration.
On this blog, I always aim to go deep on facts, data, and analysis. To the extent I have a “brand”, that’s it. This is very much on purpose: I’m consciously pushing back against so many other content creators (in real estate and otherwise) whose claims are unsupported, who argue by anecdote, or who are downright misleading, all in the service of clicks and dollars. The world seems increasingly filled with this fluff, so I aim to put something very different out into the digital world: the real facts, the real numbers, the real data about rental property investing.
But this approach should extend beyond our investing. We should also aim to have our facts straight about other things. So let’s be clear: the economy is very strong and we’ve recovered from the pandemic economic shocks (including inflation) better than any of our peer countries; crime across the country is way down, and is as low as it has ever been in modern history; and our cities are thriving, growing, and becoming more appealing all the time.
If you hear anything different — at work, from a friend or acquaintance, from someone you meet at a party — you should immediately ask yourself: whose interests are being served by people believing this lie?
And then, of course, you should set the record straight.
Happy investing,
Eric
About the Author
Hi, I’m Eric! I used cash-flowing rental properties to leave my corporate career at age 39. I started Rental Income Advisors in 2020 to help other people achieve their own goals through real estate investing.
My blog focuses on learning & education for new investors, and I make numerous tools & resources available for free, including my industry-leading Rental Property Analyzer.
I also now serve as a coach to dozens of private clients starting their own journeys investing in rental properties, and have helped my clients buy millions of dollars (and counting) in real estate. To chat with me about coaching, schedule a free initial consultation.
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