Silicon Investor - Investing in Real Estate - Creative Opportunities

[RichardBens14] Tbh, I’m an experienced RE investor. I love real estate so much. Actually, my fr...

RichardBens14 — 8/2/2022 4:40:14 AM

Tbh, I’m an experienced RE investor. I love real estate so much. Actually, my friend first showed me the perspective that RE really has. Btw, she’s an attorney. Here’s the page ucmjdefense.com. And she still helps with ruling my assets. Tbh, I guess that the best piece of advice she’s ever given to me was that you should never hurry. And I think it’s really reasonable. Take your time to think over everything. Anyway, let’s keep the topic updated.

[aloha020202] cooL!

aloha020202 — 8/2/2022 4:25:54 AM

[John Vosilla] RE cycles last 17-18 years need patience.... Not the time to make a killing prot...

John Vosilla — 7/29/2022 6:35:46 PM

RE cycles last 17-18 years need patience.... Not the time to make a killing protect what you already have. Dead board ahead of the next housing crash nationwide probably 2024 nationally.

Mortgage forbearance via Cares Act rolling over many years non payment keeping at least 2.5M homes off the market. Was easy in the rising pandemic market tap the equity. Perhaps this is our subprime crisis this cycle?

Biden 2021-24 mirrors GWB 2005-08 just look at the flat yield curve, late cycle spike in home prices, rise in commodity prices, charts of homebuilders..

Seeing some isolated exhurban markets with tons of new construction outside San Antonio and Boise well above six months inventory already also boom fast growing areas like St George, UT.

In the southeast could only find the southern burbs of Raleigh over 6 months. In Florida hard to find any over 4 months YET..

Mostly buying, remodeling and selling these days. Cashed out all the rentals. Still limited supply where I work move in nice remodeled homes priced right sell quickly even now.

Drop in ten year under 2.7% bodes well for decline under 5% 30 year rates soon. What happens when fed starts selling MBS's on it's balance sheet later this year quantitative tightening? I hear $2.7T much of it purchased last year to help inflate the housing market even more.

[alysteed] Hi! My wife and I have been looking to buy a house for a few years (we lived in ...

alysteed — 7/12/2022 7:36:55 AM

Hi! My wife and I have been looking to buy a house for a few years (we lived in a rented and small). I have a well-running business, so I thought of the possibility of buying the house at once, not through the mortgage. And, finally, this year, we’ve managed to gather a huge sum (my wife also works and has no kids yet). Thanks to swpdxlaw.com, we have done all legitimate documents right and had no problems with that aspect. No problems with vacancy too. The only problem was refurbishing a house, because we found some things damaged, and some designs were just not so pretty. Now everything’s fine, and we are waiting for our first baby. What’s your experience, guys?

[Michael555] [deleted] - LinkFarming

Michael555 — 4/18/2022 12:57:45 PM

[John Vosilla] When will this end what are the signs we are close? Looking for a flat to inver...

John Vosilla — 2/9/2022 7:00:36 PM

When will this end what are the signs we are close?

Looking for a flat to inverted yield curve probably higher than 2% and under 4% if look at long term trends since early 1980's peak.

12+ month bear market from the top in the large homebuilders. Looking at Lennar and DR Horton first.

at least six months inventory of existing home supply on the market.

PITI fixed rate homes priced below the local market median price versus equivalent rent no longer favorable in most housing markets.

Total mortgage debt to GDP approaches 2007 highs. Growing rapidly of late $200B a quarter new construction, cash out refi's and need to take on more and more debt with rising prices. This after being flat for a decade post financial crisis.

My Opinion we are getting closer but still at least 12-18 months away.. Oil up 28 days in the row big problem as was the huge spike prices and rents first half of 2021. Too much stress in part alleviate by more and more debt cars, houses eat + mortgage forbearance since COVID and 23% of income people get comes directly from the government more than double what it was 20 years ago. Is a mess no way out longer term. The more the government meddles everywhere the worst the backside of all this somehow, someday.

[John Vosilla] U.S. Housing Costs Surge, With No End In Sight Locked out of the supply-constr...

John Vosilla — 2/9/2022 6:41:22 PM

U.S. Housing Costs Surge, With No End In Sight

Locked out of the supply-constrained home-buying market, more households are crowding the rental market, driving up rents and stressing housing support programs.

The U.S. housing market shifted into overdrive during the pandemic, with more than 6 million homes selling in 2021 despite skyrocketing prices in many cities. From Miami (18.8% year-over-year increase) and Denver (18.6%) to San Diego (22.4%) and Phoenix (30.2%), it’s a national phenomenon. The median selling price for a home in November, $416,900, was nearly 25% more than it was in February 2020.

In the early weeks of 2022, there’s no sign that cutthroat biddingand rising prices won’t continue. The total inventory of homes on the market dipped below 300,000 nationwide in early January — less than half of the inventory available before the pandemic.

bloomberg.com

[John Vosilla] New home supply is on the way. There are more new homes and apartments under ...

John Vosilla — 2/9/2022 6:32:38 PM

New home supply is on the way.

There are more new homes and apartments under construction now than at any time in the last 45 years.

This includes everything from permitted homes that have not yet been started to homes whose completions have been delayed by months.

8:00 AM · Jan 29, 2022· Hootsuite Inc.

twitter.com

[WoodEric0] $MSPC - MetroSpaces - It might be surprising to discover that the price of Metro...

WoodEric0 — 12/17/2021 12:17:09 PM

$MSPC - MetroSpaces - It might be surprising to discover that the price of MetroSpaces, A Cutting-Edge Real Estate Tech Company, isn’t as high as you’d expect it to be right now – which means now is a great time to get in on the ground up and hold stocks while this promising company grows.

ritzherald.com

[John Vosilla] There are over 8 million renters not current in rent. On a household basis ove...

John Vosilla — 8/30/2021 11:15:21 PM

There are over 8 million renters not current in rent.

On a household basis over 3 million households are late.

twitter.com

[John Vosilla] THE POST-COVID URBAN REVIVAL: WHAT’S NEXT FOR BIG CITIES? Today, more than fou...

John Vosilla — 8/9/2021 4:43:47 PM

THE POST-COVID URBAN REVIVAL: WHAT’S NEXT FOR BIG CITIES?

Today, more than four out of five people in the United States live in cities and urban areas. Over the country’s long history of urbanization, cities like New York, San Francisco and Chicago swelled not only in population, but also in their prominence as American cultural icons. That cachet helped these metropolises thrive even when economic conditions were challenging elsewhere, providing landlords and other commercial real estate stakeholders with a level of stability and security smaller cities couldn’t match.

In recent years, though, these storied cities started falling victim to their own success. Unebbing demand for limited residential and commercial space led to skyrocketing costs, and near-constant expansions and enhancements to government services necessitated new fees and higher taxes. At the same time, the emergence of remote working meant that people didn’t have to move to these uber-expensive cities to work for the companies that called them home. New technology, combined with cost of living and quality of life concerns, chipped away at that old preeminence, and businesses and individuals started choosing Atlanta over New York, Denver over Chicago and Austin over San Francisco. A Brookings Institution study found that population growth in the country’s largest urban areas dropped by almost half through the 2010s.

The COVID-19 pandemic amplified some of the disadvantages of living and working in densely populated cities and accelerated that migration. An October 2020 survey by freelancing platform Upwork found that as many as 23 million U.S. workers planned to move due to work from home flexibility, a near-term migration rate four times the usual level. Twenty percent of those planning to move were based in major U.S. cities. In San Francisco alone, 89,000 households have left the city, according to Public Comment in an analysis for USPS, and new office lease activity fell 71% in 2020 compared to the prior year, from 7.7 million to 2.2 million sq ft, according to Cushman & Wakefield. In New York City, January 2021 leasing volume was down 47% year-on-year, according to Colliers. The pandemic also boosted adoption of e-commerce, putting additional pressure on bricks-and-mortar retailers. Recent surveys have found that several years of e-commerce adoption has been compressed into a matter of months as a result of the pandemic.

The impact of this exodus goes beyond just quieter streets and emptier buses. The ensuing loss of tax revenue couldn’t come at a worse time for major cities already struggling with the enormous cost of combating COVID-19. A December 2020 survey of 901 city governments by the National League of Cities found that almost 70% had seen a negative financial impact from the pandemic, with respondents reporting a 21% drop in revenue and a 17% increase in expenditures, on average. And while many individuals and businesses can relocate, landlords and other commercial real estate organizations don’t have that option—their fortunes are inextricably linked to the recovery wherever their properties are located. These commercial real estate stakeholders are facing unprecedented vacancy rates and an uncertain path to recovery as the pandemic retreats.

ConclusionThe actions of tech-industry behemoths reflect a fundamental truth: New York City and the Bay Area will recover as the effects of the pandemic wane and will continue to be dynamic engines of American culture, innovation and finance. Case in point: While New York City experienced a year-on-year decrease in overall real estate market activity over the course of 2020, it was also home to 20 of the biggest lease deals of 2020, totaling 6 million square feet.

“Neither devastating fires when cities were made of wood, nor the cholera of Dickens’s London, nor the urban bombardments of World War II, nor the postwar fears of nuclear holocaust, nor even the shock of 9/11 fundamentally altered the pull to urbanize,” said Alex Krieger, architect and urban designer. “Neither will COVID-19 over the long term.”

In the meantime, landlords are in dire straits and need to shore up their finances to ensure survival. Beyond that, landlords will need to have a fundamental understanding of how their property sector changed due to COVID-19 and offer more flexibility in space usage, lease agreement terms and other areas to attract and retain tenants. Technology can help facilitate the process and drive efficiency.

While there are some steps commercial real estate stakeholders can and should take to make it through the current crisis and be better prepared for the next one, the fortunes of landlords and big cities are inextricably linked. COVID-19 accelerated migratory trends and showed without a doubt that big cities can’t rest on their laurels. Not only are they in competition with other big cities like Dallas and Miami, but with secondary cities like Austin and Charlotte that are getting another look due to the pitfalls of living in a big urban city during a pandemic. All parties can
benefit from getting involved in activities that benefit their shared interests, such as lobbying state and federal governments for aid and collaborating on improvements that will make their city more desirable.

Big cities are in the midst of a prolonged lull in demand from new residents and businesses, which will continue to have a deep and broad impact on everything from rents to government services. How long that downturn lasts will depend on the actions government entities, economic development agencies and even business owners themselves take—or don’t take—in the coming months and years

read more

bdo.com

[elmatador] The Amazon Paradox "The more business move to online the more the value of brick...

elmatador — 5/11/2021 2:56:03 AM

The Amazon Paradox
"The more business move to online the more the value of brick and mortar"

Which Brick and mortar becomes more valuable?
The datacenter.

The IT, cloud infrastructure that supports everything that carried out online, is housed inside a datacenter.

If you were an Asset Management Company -that used to manage shopping malls- you would be thinking harder on leveraging what you know to move into managing these brick and mortar assets that support on line business.

Not only that, you could propose build to suit.

Note that now big datacenters users' large enterprises and hyperscale businesses have "outgrown their existing colocation portfolio and are seeking economies of scale by simply building their own facility."

One of the most important but less-discussed aspects of a built-to-suit data center is the flexibility tenants have with how to run it. Assuming they’re working with a full-service data center developer and operator with the staff and expertise to handle any or every aspect of managing daily operations, tenants can choose to operate the facility themselves or hand it off to the operator so they can focus on their core competencies and other aspects of their business.

ELMAT: The Asset Management Company become a business like today's tower companies that owns and/or manage the infrastructure of mobile operators. Ex: Castle Crown, America Towers Corp. or SBA Communications Corp.

For tenants that opt to hand off operations of their data center, it’s important that they work with a developer/operator that will function as a true extension of their team.

That means working with a partner that will use the tenant’s internal processes and tools, communicates and collaborates using the same systems, and will follow their capital approval and legal processes as though they were part of the tenant’s business.

eweek.com

You see the investors would be chasing tenants to their datacenters, training people and concentrating on their business while assured that the nitty gritty is being taken care off.

[John Vosilla] Repricing of our large city center residential towers hints at a massive shakeou...

John Vosilla — 3/21/2021 11:32:00 AM

Repricing of our large city center residential towers hints at a massive shakeout ahead?

Value of Beekman Tower cut by 45% in new appraisal178-unit luxury residential complex mainly leased to corporate tenants

By Kevin Sun

The luxury Beekman Tower in Midtown East is now worth nearly half its $146 million valuation from 2018. (Beekman Tower)

Eight months since its owner sought pandemic-related loan relief, the landmark Beekman Tower has exited special servicing after securing a payment deferral. But the value of the corporate housing-centric property has taken a big hit.

The 178-unit complex in Midtown East is now appraised at $79.9 million. That’s down 45 percent from the $146 million it was valued at in 2018. The new appraisal is from Collier’s.

therealdeal.com

[John Vosilla] Sorry, I haven't done new rentals for five years. Prices went way up been sell...

John Vosilla — 3/21/2021 11:24:14 AM

Sorry, I haven't done new rentals for five years. Prices went way up been selling them all as tenants leave. Now buying foreclosures doing extensive rehabs and selling in strong market. Get a lot of satisfaction buying the neglected eyesore on the block and turning it into the best looking redone home. Win, win as payments lower than rent and the buyers get a great redone almost like a new home..

[Madharry] Do you use a particular service. I read about what company that recently signed ...

Madharry — 3/16/2021 6:05:49 PM

Do you use a particular service. I read about what company that recently signed a contract with a large realtor group in colorado but cant remember its name .I also remember I think some litigation because renters who were denied a lease found out it was because the credit check confused them with someone else.

[John Vosilla] I suspect that many renters who are not doing that well financially will simply ...

John Vosilla — 3/16/2021 12:50:55 PM

I suspect that many renters who are not doing that well financially will simply leave and find another rental sticking the landlord with the back rent owed. Sad to say I dont think people are particularly honest or moral.

I agree with this. From my experience is like a different world from the tenant pool of 20 years ago when most had high morals, honesty and integrity... That most can somehow play the victim or oppressed when anything goes wrong these days doesn't help. Today really have to screen, screen and do more screening before giving anyone the keys..

[John Vosilla] Nice move since September... I don't watch the stock much anymore but the shift ...

John Vosilla — 3/16/2021 12:44:37 PM

Nice move since September... I don't watch the stock much anymore but the shift of population, wealth and capital to Florida due to COVID and related fallout the blue states seems to be real.. The traffic all over unbearable and imagine will get even worse when things really open up.

WSJ just had an article stating a slightly different view that just as many people are leaving as are coming here.. Media can spin anything...lol

wsj.com

[John Vosilla] Yes prices have reset higher in much of the country due to ZIRP the past year se...

John Vosilla — 3/16/2021 12:33:18 PM

Yes prices have reset higher in much of the country due to ZIRP the past year seeing upwards of 15-25% appreciation which creates even more problems when rates normalize.

I am thinking extend and pretend especially with mortgages on residential so sideways to down for years to come..NYC so much inventory plus drop in population and revenues a wild card. Looking at quick numbers say 15M not paying rent or mortgage times $1500 month is peanuts to avoid another 2008 crisis for now. Whoever is in power won't let that happen again I imagine. Also most every smart person I know who has been around the block thinks a big downturn is inevitable next year.. You know what happens when everybody is thinking the same think..

Looking at months of inventory, fixed mortgage rates, yield curve, homebuilder charts and regional banking ETF's charts for clues looking out 12 months. Nothing signals a downturn YET.

Commercial RE another story. Can't see how we avoid another 1989-93 severe cramdown in asset prices and debt repositioning certain assets to highest and best current use IMHO

Thanks for all your input. Strange times

[Madharry] thanks for the informative comments. I have purchased several mreits but decide...

Madharry — 3/15/2021 11:15:00 AM

thanks for the informative comments. I have purchased several mreits but decided to avoid those with nyc office exposure. I suspect that many renters who are not doing that well financially will simply leave and find another rental sticking the landlord with the back rent owed. Sad to say I dont think people are particularly honest or moral. I wonder what remedies landlord have to go after such tennants for back rent.

is there anything in the covid bill to compensate landlords for renters who dont pay their rent?
In my subdivision in Arizona there have been recent sales of similar houses to mine that went for at least 30% more than I paid 4 years ago. But I think its still cheap compared to other metropolitan areas.

[The Barracuda™] St Joe anyone? Florida land company finance.yahoo.com

The Barracuda™ — 2/25/2021 9:09:20 AM

[renovator] By rights, I should change my SI moniker, as I am a former renovator, I switched...

renovator — 2/7/2021 6:39:35 PM

By rights, I should change my SI moniker, as I am a former renovator, I switched careers 14 years ago, to property claims adjuster. The bulk of my claims are in the NYC tri-state area except whenever I go out for an extended storm event.

I can confirm that landlords, small and large, are getting killed in the area. I have had numerous claims in large full floor office spaces where I was the only one in 3200-4000 sq ft surveying damage. The building managers tell me they are technically at close to full occupancy but that very little use is being made of the spaces and even less rent is being paid. As commercial leases end they are not being renewed and there is now a vast overflow of available commercial sub-let space in NYC. However, that is not exactly the case in the suburbs. I just had a claim the other day in a close-in suburban city with a landlord who owns many small retail buildings, some on commercial avenues and others small strip mall locations. He said they have been very successful re-leasing quickly after business blow up since Covid. Restaurants being the exception, but his firm has been reworking those spaces for straight retail or light office professional space.

On the other hand, even in the suburbs, the small residential rental claims I have are a very different story. I have had lots of claims where there is significant deferred maintenance and extensive back rent. Nobody knows when these will be subject to evictions, but it appears absolute that there will be a brutal slash and burn event whenever the protections cease. If that gets pushed out too far there will be a ton of small landlord foreclosures.

An unfortunate part of my work lately is the number of folks who have cut way back on policies or have let them lapse.

To John's point about a bubble--I have been seriously looking to leave NYC anyway, and particularly lately. I have thoroughly researched several markets within 1-1 1/2 hours of NYC, as my work is much more profitable here, in spite of traffic, parking, and every other NYC annoyance--bike lanes! Residential property in North Jersey, Rockland and Orange counties in NY has been extremely active and up a solid 25% across the board in the past year. Very quick market. I have lots of family up around Rochester, NY, where I grew up, and occasionally look that market over and it is similar with lower price points, but extremely active. My niece, a very well paid RN, has been shut out of several properties the first day of the listing by over-ask offers there.

To make matters worse, my wife hails from Austin, TX, and we have considered making that move several times over the years, put off by the serious cut-back in income we foresaw. That city has been on a wild run and standard ranch homes I considered in South Austin 10 years ago went from $200's then to $300's couple of years back and are now pushing $400's. The crappy ones are now close to $300k. Sheesh!

I see smaller, but still significant, changes in markets like Wilmington NC, where I got to know it well after Hurricane Florence in 2018 and note a significant rise in prices since then.

[John Vosilla] Pandemic Wipes Out Landlord’s Living After taxes, utilities, repairs, and tens o...

John Vosilla — 2/7/2021 5:33:28 PM

Pandemic Wipes Out Landlord’s Living
After taxes, utilities, repairs, and tens of thousands of dollars lost through unpaid rent amid the Covid-19 pandemic, landlord Galina Zalman said she made a total of $2,552 in 2020 — sending her to a food pantry as she struggles to keep three local rental properties afloat.

Zalman, who is 72 years old, and her husband Andrey live on the ground floor of a two-family house that they own at 33 Hazel St. in Newhallville.

In a housing market increasingly dominated by mega-landlords and their associated property management companies, the two Russian-born Brooklyn transplants are a rare breed: Owner-occupants and small-time landlords whose sole source of income is local real estate.

During an interview outside of her Newhallville home, Zalman told the Independent that 2020 made being a small-time rental property owner in New Haven nearly impossible.

Several of her tenants simply stopped paying rent as the Covid-19 pandemic took its economic toll, she said. One tenant who was behind on rent passed away. Another who was behind on rent is now in jail. A few of her remaining tenants have not paid in full or at all in months.

newhavenindependent.org

[John Vosilla] WA scrambles to avoid mass evictions as moratorium nears end Tenants and landlo...

John Vosilla — 2/7/2021 5:30:31 PM

WA scrambles to avoid mass evictions as moratorium nears end

Tenants and landlords both favor more rent assistance, but some want lawmakers to go further.

For every month since evictions were banned in Washington last March, tenants in the state accrued somewhere around $100 million in owed rent. By that estimate — which comes from the state Department of Commerce — renters here could now be over $1 billion in debt, a sum that grows each week.

Even as that number swells, the end to the state’s eviction moratorium is coming into view. After Gov. Jay Inslee extended the moratorium multiple times, most lawmakers, lobbyists and advocates expect March 31 will mark its true end — at least at the state level. Then the question of what will happen to renters without the moratorium’s blunt relief will go from hypothetical to very much real.

Arianna Laureano knows the weight of that burden well. Had it not been for the protections from state and local governments, she’s sure that she and her roommate would have lost their apartment in Seattle’s University District. Laureano has been homeless before and the fear of losing her stable place to sleep was a “catastrophic feeling.”

“I see what’s coming because I’ve lived it,” Laureano said. “I’m terrified for every single Washington renter.”

crosscut.com

[John Vosilla] Are we trapped in another housing bubble? A rapid rise in home prices has some e...

John Vosilla — 2/7/2021 4:55:29 PM

Are we trapped in another housing bubble? A rapid rise in home prices has some experts worried

Home prices are rising coast to coast and are outstripping wages and rents. Some say it's another housing bubble. But it's nothing like the mid 2000s.
In the midst of a raging COVID-19 pandemic, with millions of Americans still out of work and facing the possibility of eviction and foreclosure, the United States is experiencing a real estate boom the likes of which it hasn't seen in 15 years.

Home prices are rising practically everywhere. From Augusta, Maine, to Phoenix and from Sarasota, Florida, to Aberdeen, Washington, prices are up by double digits.

Driven by historically low interest rates that make borrowing cheap and waves of people fleeing densely populated cities because of COVID-19, home buying has become as competitive as it was during the boom years of the mid-2000s.

usatoday.com

[renovator] Here is some insight from the clouds above nyc: theinstitutionalriskanalyst.com

renovator — 5/11/2020 12:29:19 PM

[John Vosilla] The Washington Post. “Millennials’ share of the U.S. housing market: small and ...

John Vosilla — 1/21/2020 8:39:38 PM

The Washington Post. “Millennials’ share of the U.S. housing market: small and shrinking. Because homeownership is the chief builder of wealth, the trend is ‘bad news for the economy overall.’ In 1990, baby boomers, whose median age was 35, owned nearly one-third of American real estate by value. In 2019, the millennial generation, with a median age of 31, owned just 4 percent. They’re not likely to reach 30 percent of the housing market — or even the 20 percent attained by the smaller Generation X at the same point in their lives.”

“Because homeownership is the chief builder of wealth for middle class families, if this trend continues ‘we’re looking at a generation that will have lower lifetime wealth,’ said Jenny Schuetz, a housing policy expert at the Brookings Institution. In many of America’s most desirable cities, the median price of a home is well beyond the reach of a typical salary. For the past several decades, developers in major metro areas like New York City have built a glut of luxury condos while ignoring the needs of the middle class.”

housingbubble.blog

[John Vosilla] Tightening market that neighborhood. I calculated about 5 months inventory. P...

John Vosilla — 1/21/2020 8:38:32 PM

Tightening market that neighborhood. I calculated about 5 months inventory. Pending's about 1/3 of all listings..

[renovator] Current example of the pressure for yield on the RE market. This is a property ...

renovator — 1/18/2020 3:45:26 PM

Current example of the pressure for yield on the RE market.
This is a property I was just at for a claim--severe vandalism for pipe value--

zillow.com

The broker and I were talking about the market and he noted that this multifamily was about to close for a bit over $700,000 in cash and that he had received 63 offers upon listing it. Keep in mind that it will need no less than $150-200k in gut renovation before being rentable for an estimated $5,000-$5,500 monthly rent roll. All in all the buyer should yield around 6-7% on the investment without consideration for depreciation or appreciation.

This sort of property is very hot around the NYC metro region these days.

[John Vosilla] Thanks for explaining. Imagine the cost overruns will be substantial. Perhaps al...

John Vosilla — 1/6/2020 11:27:20 AM

Thanks for explaining. Imagine the cost overruns will be substantial. Perhaps also building department is so overwhelmed these days with all the new construction going on? I know I'm doing a simple garage conversion to living space taking way too long.. Always issues pop up..delay, delay, delay

[renovator] No, I think they just ran into a lot more issues than initially expected. I hand...

renovator — 1/4/2020 12:38:41 PM

No, I think they just ran into a lot more issues than initially expected. I handled a couple of claims earlier in the reconstruction process.

My wife worked in that building for several years as a legal secretary for Kaye Scholer LLP before a major downsizing purge when they reorganized a lot of low producing partners out and shipped a lot of back office work to Florida. That firm is now Arnold & Porter and has relocated to the West side.

Meanwhile at 425 Park the building rebuild was complicated by new/old height allowance rules--very arcane in NYC--which dictated that when they demo'ed the existing building the lower 18 floors had to stay in order to allow all the new floors above to be added. However, the existing superstructure would not accommodate the load from the new added floors so there was a 5 floor deep excavation and installation of new interior superstructure sistered to the existing and then all the way up for the new floors. In addition, I suspect they had some approval issues with the three fin arrangement on top, which I think was not part of the original approved design.

[John Vosilla] Came across 425 Park Avenue under construction the other day when I was in the c...

John Vosilla — 1/3/2020 7:39:58 PM

Came across 425 Park Avenue under construction the other day when I was in the city.. Large signs out front still say 'Anticipated Completion Fall 2018'. Looks more like late 2020 if lucky... Did they stop construction when things looked a bit more dicey there 12-18 months ago??

newyorkyimby.com

[John Vosilla] I thought was going to be way overbuilt three years ago all that new constructio...

John Vosilla — 12/23/2019 6:41:18 PM

I thought was going to be way overbuilt three years ago all that new construction especially downtown Brooklyn and LI City?

Money from mainland China has dried up? Offset by money coming in from Hong Kong?

I'm looking realtor.com and seeing about 10 months of existing inventory in mid Manhattan right now with 11 months lower Manhattan. That is down substantially from 2018 when we had well over year of inventory..

Been following 432 Park Ave for a long time. The ultra high end crash didn't really materialize. See resales from 2015 somewhat lower but these billionaires can take the 10-20%% hit...LOL
realtor.com

[renovator] The high rise condo building continues at full speed in NYC. Along Broadway and...

renovator — 12/18/2019 8:38:55 AM

The high rise condo building continues at full speed in NYC. Along Broadway and the adjacent blocks there are 5 sites racing each other to completion from West 96th to 91st Street. Each at least 100 units. I travel all over the metro area for claims and really see it up close. A 200 unit building at a former warehouse in College Point, hipsters in Brownsville and Bushwick.
None of it is seems even close to affordable.

[John Vosilla] Home-Builder Optimism Hits a 20-Year High. One Bull Says Buy Lennar, Beazer, and...

John Vosilla — 12/16/2019 6:12:32 PM

Home-Builder Optimism Hits a 20-Year High. One Bull Says Buy Lennar, Beazer, and 2 Other Stocks

Home builders haven’t been this optimistic in two decades.

“The current reading of 76 is about as good as it gets,” said Ward McCarthy, chief financial economist at Jefferies.

barrons.com

Watching this closely along with yield curve and oil prices. Home builders stocks lead by 2 years MOL downturn in economy. All looking rosy for now. Seeing lots of new construction especially starter homes, job creation continues job market very tight along with very low rates fueling demand, 97-98% LTV financing especially FHA getting millenials into these starter and mid market priced homes FINALLY (for better or for worse longer term?). More and more we will be sensitive to a backup in longer term rates. Perhaps 10 year treasury back above 3% for an extended period of time will do it?

[John Vosilla] Signs of a housing top forming?? Home Builder Stocks: $312 Million for This? A...

John Vosilla — 12/2/2019 3:47:15 PM

Signs of a housing top forming??

Home Builder Stocks: $312 Million for This?

A Daily Reckoning White Paper Report
by Mike Shedlock, Whiskey & Gunpowder

THE TOLL BROTHERS, Meritage Homes, and Simon Property Group Joint Venture announced the purchase of a 5,485-acre land parcel in Phoenix’s Northwest Valley for $312 million. It is the largest real estate transaction in Arizona history:

“The Maricopa County property, which DaimlerChrysler currently utilizes as a vehicle endurance testing and development facility, is bound by 183rd Avenue on the east, 211th Avenue on the west, Dove Valley on the south, and Joy Ranch Road on the north. DaimlerChrysler will continue to lease the property for the next few years, in order to plan and accommodate for the orderly transition of its testing operations.

“Toll Brothers and Meritage Homes each plan to build a significant number of homes on the site. Simon Property Group Inc. has the option to purchase a substantial portion of the commercial property. Other parcels may be sold to third parties. Initial plans call for a mixed-use master planned community, which will include approximately 4,840 acres of single-family homes and attached homes. Approximately 645 acres of commercial and retail development will include schools, community amenities, and open space. Initial homes sales are tentatively scheduled to begin in 2009. According to the approved General Plan, the site allows between 15,000-31,000 homes.

“Robert I. Toll, chairman and chief executive officer of Toll Brothers Inc., stated: ‘We are thrilled to have been chosen by DaimlerChrysler and to have teamed up with two excellent partners to develop this fabulous piece of real estate. The northwest area of Phoenix has experienced unprecedented popularity, and this particular parcel is a highly coveted site.'”

$312 million for 5,485 acres of desert with a testing track on it. That amounts to $56,882 per acre of flat desert.

Enquiring Mish bloggers might be wondering exactly where Phoenix’s magnificent Northwest Valley is. Through the wonder of Google satellite imagery, I am pleased to show everyone the following pictures of just what that consortium of buyers got for their $312 million.

It seems to be about 35-40 miles from Phoenix. The attraction? A commute from there to downtown during rush hour might be close to an hour each way, and where will gas prices be in a couple of years anyway?

There it is. I boxed it in. The premier spot to test-drive your new Camaro, provided, of course, Toll Brothers decides to keep that test track up and running. If not, what’s the attraction?

Home Builder Stocks: Homebuilders Buried in Land

With that in mind, I note with interest this Street.com article entitled “Homebuilders Buried in Land.” Enquiring Mish readers might want to know more, so let’s take a look at that too:

“Ed Wachenheim, a long-term value investor, agrees with the general view that homebuilder stocks are cheap right now. But the money manager, who was once a major owner of the sector, has sold off most of his positions because he’s worried about the huge amount of land on builders’ books.

“‘My fear is that many of the companies took on too large land positions at too high prices. And that means that should the industry turn down that there is risk that there will be some impairment of land values,’ says Wachenheim, who runs Greenhaven Associates, a Purchase, N.Y.-based firm that manages $3.7 billion of capital, mostly for wealthy individuals.

“It’s difficult to determine if Wachenheim’s concerns are justified and builders have been too aggressive in taking on new land. Builders report the dollar value of their total land holdings in quarterly filings, but nothing is usually said about the prices paid for individual parcels.

“There also is no geographic breakdown to determine whether a builder like Pulte Homes, for example, has too much exposure to a frothy market like Las Vegas. All the public knows is that Pulte’s total inventory of owned land was $5.3 billion for the quarter ending Sept. 30, up from $4.49 billion a year earlier. That amounts to 170,000 home lots, or roughly three years of supply, the company says.

“But what if that’s too much land to be holding in a slowing housing market…

“The issue is of particular note since builders have spent the bulk of their earnings over the past few years buying land for future building. Although most builders have at least 50% of their lots controlled through options, a large amount of purchased land continues to be placed on balance sheets. As a result, the sector in general has seen negative cash flows for some time now.

“‘I have never seen a group, in 20 years of analysis, post negative cash flow from earnings for four of the last five years and prosper as a stock group without having to pay the piper,’ says Jim Poyner, an analyst for Palladian Research, an independent New York research house. Poyner thinks land impairments could begin popping up over the next year if builders start slashing prices on new homes for sale.

“Robert Curran, a Fitch Ratings analyst who covers the builders, says it’s premature to worry about land impairments now, but grants that the issue could arise in the future.

“‘There isn’t anyone who really stands out as being overloaded on raw land on the balance sheet that is just sitting there,’ Curran says. It would take an economic recession or a really problematic regional housing market for there to be large land impairments, he adds. ‘If home prices come down, it doesn’t mean you will write down land assets.'”

Home Builder Stocks: Another Telepathic Question

On that note, I just received another telepathic question. It’s been awhile since we have had one of those.

Here it is: “But Mish, what about those fabulous P/Es?”

Those P/Es are a mirage. The homebuilders have negative cash flow and keep sinking every penny of their earnings into land, land, and more land at increasingly absurd prices, as the article above addressed and that $312 million transaction proved.

Here is the homebuilder picture:

* Homebuilders have negative cash flows
* Homebuilders put the bulk of their profits into buying more land at absurd prices
* Homebuilders are totally ignoring the yield curve
* Homebuilders are discounting the odds of a recession.

That, of course, does not mean that homebuilders will sink anytime soon. They may or may not. There has been one hell of a short squeeze lately, and everyone seems to be playing the trend of 2003 right now. No one seems to see falling sales, rising inventories, sinking refis, and discounts by the homebuilders.

Just two weeks ago, I was told by a real estate broker friend of mine that Atlanta was impervious to a slowdown and there would be no recession coming our way. I note with interest this ad by Centrex.

$60,000 off? Everything is fine in Atlanta?

Everyone seems to think their area is impervious to a slowdown, because of demographics, warm weather, an ocean, or whatever. That seems to be the key to this mania.

Well, I have news for you. An “Interest Rate Squeeze” does not care where you live. Prices matter, as do prevailing rents. Home prices do not always go up. Please click on that link and see what I am talking about. I suspect Toll Brothers and Meritage Homes will find out in due time just how silly that purchase in Phoenix was. By then, it will be too late. It is the overpayment for land that bankrupts homebuilders every cycle. This cycle will be no different.

Regards,
Mike “Mish” Shedlock

https://dailyreckoning.com/home-builder-stocks/

[Black Blade] RICH UNCLES NOW LARGEST CROWD FUND REIT (MERGER) ..................................

Black Blade — 9/20/2019 8:57:00 PM

RICH UNCLES NOW LARGEST CROWD FUND REIT (MERGER) .................................................................................................................

BLACK BLADE: I threw a few bones into Rich Uncles (and Fundrise)

Real Estate Crowd Funding Pioneer Announces Transformational Transaction RW Holdings NNN REIT, Inc. to Merge with Rich Uncles Real Estate Investment Trust I and Acquire its External Advisor

News provided by

Rich Uncles Sep 20, 2019, 06:05 ET

COSTA MESA, Calif., Sept. 20, 2019 /PRNewswire/ -- RW Holdings NNN REIT, Inc. ("NNN REIT") and Rich Uncles Real Estate Investment Trust I ("REIT I") announced today that they have entered into a definitive merger agreement pursuant to which NNN REIT would acquire REIT I. Concurrently, NNN REIT announced it has entered into a contribution agreement with BrixInvest, LLC ("LLC"), the external manager and sponsor of both REITs, whereby LLC would contribute substantially all of its assets to NNN REIT's Operating Partnership ("NNN OP"). The two all-stock transactions will create the largest real estate crowdfunded equity REIT with over $450 million in real estate assets under management and the first FinTech real estate crowdfunding platform to be wholly owned by its own investors.

This transformational transaction establishes NNN REIT as a best-in-class public, non-listed real estate investment trust (REIT) where investors benefit from internal management, a board of directors with substantial public company real estate experience, the elimination of all external advisory fees and a direct-to-investor business model that cuts out the high-commission middlemen.

"Today over 10,000 individual investors should be congratulated. Were it not for these intrepid spirits uniting under the belief that investing in high quality real estate is available to everyone in a better and more cost-effective way, the private REIT industry never would have emerged from the dark ages," stated Aaron Halfacre, NNN REIT's CEO. Mr. Halfacre added, "Since joining the company a year ago, I have worked tirelessly to bring about a vision of a shareholder-owned structure for the non-listed real estate industry, a structure that we believe can dominate the industry in the years to come just like John Bogle's vision for Vanguard revolutionized the mutual fund industry."

Following the transactions, the Company is expected to be the first and only known continuously offered, public non-listed equity REIT that offers the diversification benefits of private real estate investment with the best-in-class corporate governance features of publicly listed REITs. In an industry known for REIT sponsors that profit by collecting large fees from their managed REITs and a FinTech industry dominated by institutional venture capitalists with nearly exclusive access to investments, the Company intends to offer investors an alternative that will enable them to put even more of their investment dollars to work by paying no advisory or management fees to external managers and having direct ownership of one of the most successful FinTech real estate crowdfunding platforms.

"Over 14 years ago I had the simple notion that the investment world would be a better place if individual investors, of all walks of life and at every stage of their journey toward financial freedom, could invest in high-quality, institutional-grade real estate without the cost, burden and complexity historically embedded in the heavily intermediated real estate investment industry," commented Ray Wirta, founder and Chairman of NNN REIT. Mr. Wirta further stated, "Through tremendous effort, trial and learning, we are now seeing that simple notion become a powerful path forward for investors."

Following the successful merger with REIT I, the combined company will have an improved portfolio that is poised for growth. Owning 45 income-producing properties in 14 states, with approximately 2.2 million square feet, the combined company portfolio will be 100% occupied, with approximately 67% of the combined company's net rents, on a pro forma basis, coming from properties leased to tenants and/or guarantors with investment grade or equivalent ratings. The combined company portfolio will have a balanced diversification consisting of 19 retail, 14 office, and 12 industrial properties, and no tenant will represent more than 8.1% of the net rents of the combined company, on a pro forma basis, with the top five tenants comprising a collective 32% of the net rents.

"The independent directors of NNN REIT believe that following a lengthy and thorough evaluation process, the transaction will result in a stronger company that is even better positioned to meet the needs of our existing investors and to attract potential future investors," stated Curtis McWilliams, Chair of the Special Committee of Independent Directors of NNN REIT. Mr. McWilliams added, "Based on the committee's collective years of public company real estate experience, we believe that NNN REIT has become a company like no other."

As part of its goal to establish best-in-class corporate governance and raise the standards within the industry, NNN REIT has assembled a slate of directors for its board, comprising its six current directors and an additional director nominee for election to the board, that exemplifies the highest standards of independence, acumen and integrity. Unprecedented for a public non-listed REIT, these individuals have the unique distinction of currently and/or previously serving in such titles as Chairman, Chief Executive Officer, President, Chief Financial Officer and Chief Investment Officer for over 12 public and private real estate companies (including 8 publicly listed REITs) that were responsible for nearly $200 billion in real estate assets, in total, during their respective tenures.

Transaction Terms

In exchange for each share of REIT I common stock, REIT I stockholders will receive 1.000 share of NNN REIT common stock, which is equivalent to $10.16 per REIT I share based on NNN REIT's most recent estimated net asset value per share of $10.16.

In exchange for each LLC unit, LLC unitholders will receive 1.000 Class M Unit in NNN OP, which are ultimately convertible into a minimum of 5.000 shares and, contingent upon the successful achievement of specific milestones, a maximum of 9.000 shares of NNN REIT common stock following the fourth anniversary of the transaction close. Following the fourth year, the converted units will be entitled to dividend distributions and voting rights. Based on NNN REIT's most recent estimated net asset value per share of $10.16, the minimum conversion ratio of 5.000 shares of NNN REIT common stock is equivalent to $50.80 per LLC unit.

Following the closing of the transactions, NNN REIT, REIT I, and LLC stockholders are expected to own approximately 58%, 29%, and 13% of the combined company, respectively.

The transactions are expected to close in late December 2019 or early January 2020, subject to the satisfaction of certain closing conditions, including the approval of the merger by NNN REIT and REIT I stockholders and approval of the contribution by LLC unitholders. The merger and contribution transactions are expected to close concurrently but are not conditioned on the consummation of each other. There can be no assurance that the transactions will be consummated.

In connection with the pending transactions, all of the registered REIT offerings managed by the LLC have been temporarily suspended and, following approval by the respective REITs' board of directors, will be reopened at a later date.

SEC Update

"The merger with REIT I and the acquisition of LLC are, without doubt, important events in NNN REIT's history. Equally important is the status of the SEC investigation of our advisor that was opened in early 2017 and fully disclosed by us in our 10-Q filed on May 15, 2017. I am pleased to announce that over the last several months we have been working hard with the SEC Staff to resolve the investigation and that the LLC has now proposed a settlement of the investigation to the SEC, that subject to SEC approval, could be announced very soon. As we have disclosed in more detail in today's 8-K filing, a key element offered by the LLC in the settlement was to provide even greater protection to our investors while staying true to our goal of making real estate investing less expensive. We believe the settlement provides us the opportunity to commit to using securities offering and distribution best practices to implement the guidance of both the SEC and FINRA. We look forward to sharing additional details about our advisor's settlement once it is approved by the SEC as well as updates on the progress of today's announced transactions," concluded Aaron Halfacre.

Advisors

The NNN REIT special committee, comprised of the four independent directors, was advised by UBS Investment Bank as exclusive financial advisor and Morris, Manning & Martin, LLP as its legal advisor. The REIT I special committee, consisting entirely of independent directors, was advised by SunTrust Robinson Humphrey, Inc. and Cushman & Wakefield, Inc. as its financial advisors and Corporate Law Solutions, P.C. as its legal advisor. LLC was advised by Nelson Mullins Riley & Scarborough LLP as its legal advisor.

About Rich Uncles Real Estate Investment Trust I

Rich Uncles Real Estate Investment Trust I is an unincorporated public, non-listed real estate investment trust and was formed primarily to invest in single-tenant income-producing properties principally located in California and that are leased to creditworthy tenants under long-term net leases. As of June 30, 2019, the REIT's real estate investment portfolio consisted of 20 properties in three states, including 10 retail, six industrial, and four office properties with approximately 607,000 square feet of aggregate leasable space.

About RW Holdings NNN REIT, Inc.

RW Holdings NNN REIT, Inc. is an incorporated public, non-listed real estate investment trust and was formed to primarily invest, directly or indirectly through investments in real estate owning entities, in single-tenant income-producing properties located in the United States, which are leased to creditworthy tenants under long-term net leases. As of June 30, 2019, the REIT's real estate investment portfolio consisted of 24 operating properties, a 72.7% tenant-in-common interest in an office property and one parcel of land in 13 states, including 10 office, nine retail, and five industrial properties with approximately 1,537,000 square feet of aggregate leasable space.

About BrixInvest, LLC

BrixInvest, LLC (f/k/a Rich Uncles, LLC) is an advisor and sponsor of three public, non-listed real estate investment trusts: Rich Uncles Real Estate Investment Trust I, RW Holdings NNN REIT, Inc., and BRIX REIT, Inc.

ADDITIONAL INFORMATION ABOUT THE MERGER

In connection with the proposed merger, NNN REIT will prepare and file with the SEC a registration statement on Form S-4 containing a Joint Proxy Statement and Prospectus jointly prepared by NNN REIT and REIT I, and other related documents. The Joint Proxy Statement and Prospectus will contain important information about the merger and related matters. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT AND PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS THERETO) AND OTHER RELEVANT DOCUMENTS FILED BY NNN REIT AND REIT I WITH THE SEC CAREFULLY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT NNN REIT, REIT I AND THE MERGER. Investors and stockholders of NNN REIT and REIT I may obtain free copies of the registration statement, the Joint Proxy Statement and Prospectus and other relevant documents filed by NNN REIT and REIT I with the SEC (if and when they become available) through the website maintained by the SEC at www.sec.gov. Copies of the documents filed by NNN REIT and REIT I with the SEC are also available free of charge on NNN REIT's and REIT I's website at www.RichUncles.com.

This communication shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.

PARTICIPANTS IN SOLICITATION RELATING TO THE MERGER

NNN REIT, REIT I and their respective directors, trust managers and executive officers may have direct or indirect interests in the merger due to securities holdings, indemnification agreements and employment terms, and may be deemed to be participants in the solicitation of proxies from NNN REIT's stockholders and REIT I's shareholders in respect of the merger. Information regarding NNN REIT's directors and executive officers can be found in NNN REIT's most recent Annual Report on Form 10-K filed with the SEC on March 29, 2019. Information regarding REIT I's trust managers and executive officers can be found in REIT I's most recent Annual Report on Form 10-K filed with the SEC on March 27, 2019. Additional information regarding the interests of such potential participants will be included in the Joint Proxy Statement and Prospectus and other relevant documents filed with the SEC in connection with the merger if and when they become available. These documents are available free of charge on the SEC's website and from NNN REIT or REIT I, as applicable, using the sources indicated above.

Forward-Looking Statements

This press release contains statements that constitute "forward-looking statements," as such term is defined in Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and such statements are intended to be covered by the safe harbor provided by the same. These statements are based on management's current expectations and beliefs and are subject to a number of trends and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements; NNN REIT and REIT I can give no assurance that their expectations will be attained. Factors that could cause actual results to differ materially from the expectations of NNN REIT or REIT I include, but are not limited to, the risk that the merger will not be consummated within the expected time period or at all; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the inability of NNN REIT or REIT I to obtain stockholder approval of the merger or the failure to satisfy the other conditions to completion of the merger; NNN REIT's inability to consummate the transaction with LLC; risks related to disruption of management's attention from the ongoing business operations due to the merger and/or the transaction with LLC; the possibility that the SEC will not approve the settlement of the SEC investigation on the terms recommended by the staff of the SEC or at all; availability of suitable investment opportunities; changes in interest rates; the availability and terms of financing; general economic conditions; market conditions; legislative and regulatory changes that could adversely affect the business of NNN REIT or REIT I; and other factors, including those set forth in the Risk Factors section of NNN REIT's and REIT I's most recent Annual Report on Form 10-K for the year ended December 31, 2018, as updated by NNN REIT's and REIT I's subsequent Quarterly Reports on Form 10-Q for the periods ended March 31, 2019 and June 30, 2019 filed with the SEC, and other reports filed by NNN REIT and REIT I with the SEC, copies of which are available on the SEC's website, www.sec.gov. Each of NNN REIT and REIT I undertake no obligation to update these statements for revisions or changes after the date of this release, except as required by law.

Contacts
Jennifer Barber
Chief of Staff
(949) 537-2421
jbarber@richuncles.com

SOURCE Rich Uncles

Related Links www.richuncles.com

[John Vosilla] I constantly get bombarded texts, emails, robophone calls, flyers, brochures and...

John Vosilla — 9/18/2019 1:36:27 PM

I constantly get bombarded texts, emails, robophone calls, flyers, brochures and letters trying to buy my properties.. Some individuals, some are corporate. Some are local some are across the country.. I noticed it really took off in 2017.. Not sure how much influenced by technology, changing economy or rising prices..

[Black Blade] Interesting Letter From Fundrise to Fundrise Investors: ...........................

Black Blade — 9/16/2019 10:31:52 PM

Interesting Letter From Fundrise to Fundrise Investors:
..............................................................................................................................................................

Dear Black Blade,

At Fundrise, our goal is to provide you with superior performance by combining our low cost, efficient technology platform with high quality real estate investments.

However, it is important to remember that performance comes with some trade–offs, namely liquidity. And, while our aim under normal market conditions is to provide liquidity for investors through our redemption program, we believe it’s critical for all our investors to understand not only how, but also why that liquidity is unlikely to be available during a sudden downturn.

So I am sharing with you an article that we send to every investor on the platform titled “What you should expect from us during the next financial crisis”.

Ultimately, Fundrise investments are meant for investors who have a long–term outlook and are able to manage potential periods of tight liquidity without having to redeem. And though a financial crisis isn’t pleasant to think about — with the right preparation and understanding, it can reveal its own unexpected opportunities to come out ahead.

We ask that you please take a moment to read the note and as always provide us with any feedback you may have.

Best Regards,

Ben Miller
Co-Founder & CEO
investments@fundrise.com

BLACK BLADE: As I expected but many don't realize that FUNDRISE is an equity REIT with funds capped for bundled real estate projects (Stablized, Renovations and New Construction). Still holding and investing.

[Glenn Petersen] How buying and selling a home could soon be as simple as trading stocks Artific...

Glenn Petersen — 9/11/2019 1:15:33 PM

How buying and selling a home could soon be as simple as trading stocks

Artificial intelligence in housing could completely change the way we buy, sell and live

By Andrea Riquier
MarketWatch
Published: Sept 11, 2019 10:30 a.m. ET

Illustration by Glenn Harvey
iBuying was just the beginning. Get ready for machine learning to remake real estate altogether.
_____________________

On a recent weeknight, Dahlia and Adam Brown came home to a spacious Colonial on a quiet cul-de-sac in Marietta, Georgia. The Browns both work demanding jobs and have two young sons. They bought the house in June using Knock, a company that’s trying to revolutionize the real estate industry with a “home trade-in platform” making it easier to buy and sell at once. That solution was ideal for the Browns, who are just as busy as most couples, but are more introverted, making the idea of prospective buyers tramping through their private space seem excruciating.

Across town, Martha Seay was overseeing movers in a rambling brown ranch-style house nestled among tall hickory trees. The day before, she had closed on the sale of the house, where she and her husband had raised their family, to Zillow, the massive real estate company. The next day she would leave for Florida’s Gulf Coast, where they had just bought a retirement home.

Seay had wanted to move for years, but the idea of selling was daunting: “I said, maybe next year, maybe next year, maybe next year, because I didn’t want to go through all the crap you have to go through.” Selling to a company took just a few clicks and one visit from an appraiser, and Seay was delighted. “I cannot tell you how much the stress was relieved,” she said.

The Browns and Seay are the consumer faces of the disruption that’s currently roiling residential real estate. As different models — home trade-in companies, “iBuyers,” partnerships between new upstarts and old stalwarts — clamor for attention, lots of attention is focused on trying to determine what’s here to stay and what’s just an awkward rough draft: the Pets.com of the housing market.

But these families are also part of a massive industrial revolution. Information technology has remade old processes as different as ordering dinner delivery, hailing a cab and trading stocks. Now it’s coming for an industry so last-century that much of the paperwork is still done on paper, where customers are often steered among professionals scratching each other on the backs, and where there’s enormous incentive for incumbents to keep making it hard for customers to do it themselves.

The stakes are big: $74 billion of real-estate agent commissions were paid out in 2018, and investors have poured billions into all kinds of disruptors. Early adopters like the Browns and Seay give us a glimpse of what the future real estate market could look like. But just as online retail has hurt the bricks-and-mortar retail industry, and tech-enabled social networks have changed not just high school reunions but may be influencing the political process, data-fied real estate could upend our lives in many ways, some we can’t even comprehend yet.

“There’s over 100 million active users on Zillow Z, +0.70% and Trulia every month but only six million people buy and sell houses every year,” said Charles Folsom, Knock’s director of customer service. “Even if they’re just window shopping, there’s clearly a desire there. If you can empower the American Dream and enable mobility at the same time, that’s the best of both worlds.”

Zillow, a company that keeps an uneasy truce with real-estate agents even as it increasingly tries to automate the work they’ve done for decades, may have even bigger ambitions.

Krishna Rao, Zillow’s head of analytics for its Offers division, likens the current evolution in real estate to the democratization of stock trading a few decades ago. Not only is it possible to look up the value of any stock instantly today, he noted, but “there’s a kind of perpetual bid-ask spread on every stock, right? I think we’re a long way away from that in the real estate space, but how do we take incremental steps toward it?”

Zillow sees the listing price as a ‘machine learning’ exercise

In 2018, Zillow took what had been a small pilot program and announced it was going whole hog into iBuying, the practice of buying homes directly from consumers. (The term iBuying is also sometimes called “instant offers”; Zillow’s program is Zillow Offers.)

Rao, a macroeconomist by training, had joined the company in 2013 after a stint at the Federal Reserve Bank of New York in the thick of the financial crisis. At Zillow, he helped analyze and make useful the enormous quantities of data the company captures for the Zestimate and other kinds of forecasts and reports.

In the second quarter of 2019, Zillow bought more than 1,500 homes and sold nearly 800, and says it aims to transact 10 times that amount. Rao’s group is in charge of thinking about how it should all work: What should the company pay for a home? How much will it sell for — and what should it be listed for? How quickly will it sell? What upgrades are necessary and which contractors should be dispatched to do the work?

More to the point, when your “inventory” is dozens of houses scattered around a sprawling metro area, with the constant threat of mold, floods, power outages, unmown lawns, downed tree limbs, etc., who’s keeping an eye on the goods? (Rao told MarketWatch that Zillow is currently recruiting high-level logistics people from the likes of Amazon AMZN, +0.53% and “classic industrial companies” like General Electric GE, +1.40% to make this transition.)

The promises — and the peril — of this new endeavor are weighty. Zillow’s stock ZG, +0.86% tanked after its last earnings release, in which management revealed that a small sliver of the homes it had purchased were being held longer than they had accounted for.

Analyst Brad Safalow, who has a short position on Zillow shares, betting on a decline, wrote: “Even a 10% hit to the company’s inventory could cut Zillow’s overall gross profits from its Homes division by 25%! The margin for error in this business is razor thin, and we think investors continue to underestimate the difficulty of this ambitious endeavor.”

But Zillow bulls, and management, point to what Rao calls its “competitive advantage.”

Lots of companies have housing-market data about supply — that is, listings of homes for sale. Zillow’s secret sauce is information about demand, gleaned from 180 million unique website visitors each month. “That is, seeing who’s searching in this neighborhood and are they also searching in that other neighborhood or are they really just pinned down in this area. What is the demand for three bedrooms like relative to four bedrooms?” and so on, Rao said.

What does that mean in real life? Zillow sees the listing price as a “machine learning” exercise, he said.

“That machine can look at what the relative demand is for homes like this, relative supply, how that’s trended, and take these gobs of data and crunch it down into a particular listing price. Over time, as that home is listed, we then get more and more granular information — how well is the home showing? Are we seeing lots of tours, lots of offers? And use that to refine our strategy.”

“How do we solve the problem of consumers’ pain”

In a shared office in Buckhead, a well-heeled Atlanta suburb, the Knock team is working on the same questions. Two of Knock’s co-founders also started Trulia, a Zillow competitor that the bigger company eventually bought. Both companies launched as the housing bubble was peaking. Zillow quickly became known for the “Zestimate,” a modern marvel of housing clickbait that made the value of a home, previously something an owner considered only infrequently, a near-real-time interactive experience. (The Zestimate preceded Zillow’s listings, while Trulia started by offering online listings and later developed its own home value estimate tool.)

“At Trulia they unlocked the database of listings and now they’re unlocking the other side — how do we actually solve the problem of the transaction,” said Stephen Freudenberg, Knock’s first employee and a former real-estate agent. “Most of these other companies are solving for the agent’s pain, not the consumers’ pain.”

Knock does that by helping customers buy a new home — usually a larger one to accommodate a growing family — then sells the old one once they’re settled, and out of the property that needs to be staged and shown. They charge a fee equivalent to 3% of the value of the home they helped their clients buy, and 3% of the cost of the house that gets sold, as well as a small surcharge to cover the costs they front their buyer clients, such as initial insurance and escrow payments.

It’s a personalized model, almost like a concierge service. Yet Knock seems to spend nearly as much time and energy on data analytics, specifically about price, as Zillow does. The company recruited its lead data scientist, Rafaan Anvari, from the Central Intelligence Agency.

Anvari spent months shadowing Freudenberg, asking a constant stream of questions about how and why Realtors do what they do to create an automated valuation model for homes that understands even better than a seasoned real estate agent how to gauge pluses, like access to a golf course, against minuses, like proximity to a busy road.

Their back-and-forth went on for months, and some of the futility of getting a machine to learn how to think like a veteran neighborhood salesperson are captured in their internal chats, as seen below.

Their automated valuation model is now named “Borg,” after the drone-like cybernetic beings that tried to “assimilate” humanity on “Star Trek.”

The Knock team doesn’t just think Borg will make them more competitive. They think it will solve a lot of what’s wrong in today’s housing market.

“Ask five different agents what your house is worth and you’ll get five completely different answers,” Freudenberg said.

Internally, Knock team members call the existing real-estate ecosystem a “gypsy market” because it’s so antiquated and opaque. “Everyone’s haggling but they don’t know what they’re haggling over,” Freudenberg said. “They’re just making up obscure numbers.”

He offers an example: A family might spend $100,000 remodeling a kitchen but add only $50,000 to the cost of the listing because properties in the surrounding area, which are comparable listings, might not have such fancy kitchens. “So they’re stuck with what the neighborhood sold for, but if we’re actually looking at the data then everyone could theoretically get a better deal.”

Borg plugs information including room sizes, home style, outdoor space and more into an algorithm to derive a home’s value. Meanwhile, Zillow is trying to get even more granular, by teaching its machines about internal fixtures and features. The company described that evolution in a July press release about the Zestimate: “The image-recognition model can classify patterns in the pixels of photographs and correlate them to home value. For example, while the human eye sees tile or granite countertops, the Zestimate identifies two different pixel patterns.”

It’s worth noting that the vast majority of data-science resources in real estate seem to be focusing on home valuation as the endgame, as least for now.

Rao suggests that may be “because it’s a very narrow, well-defined problem, so it’s kind of easy to show progress to investors. We think of the strategy of Zillow Offers not just as a crisper valuation, but kind of an end-to-end experience that can seamlessly integrate the mortgage piece of it, the title, the escrow, and the buying and selling. It’s a big challenge doing all those things at the same time.”

Still, revolution has to start somewhere. The industry’s focus on automating valuations means that very soon, the Federal Reserve is likely to finalize a regulation that says appraisals will no longer be required on most property sales up to $400,000.

For Dahlia Brown, the Knock customer in Marietta, having an algorithm at the heart of the real estate market may help counter some human bias by limiting “some of the historical practices that maybe have kept certain people from homeownership,” she said. “This process actually seems as fair and equitable as it could be.”

Dahlia Brown and her family in from of their Marietta home.Still, it goes without saying that the real estate industry and the capital markets and venture capitalists that fund them aren’t developing better data tools to create a more equitable playing field for families moving into their forever homes.

Jeremy Sicklick is CEO of HouseCanary, a platform that’s raised over $60 million from investors to help it aggregate what he calls “millions of data elements” to come up with accurate home price valuations, forecasts of where those prices are going, and rental valuations for those properties.

With HouseCanary, investors, like those who buy single-family homes to rent out, can see a property status change, like a price change or a default, in near real-time, Sicklick said. “We’re helping them identify real estate opportunities within five minutes,” he said. “We’re getting into a world of programmatic trading in real estate with large institutional investors that we help enable.”

With so many concerns about institutional investors like Blackstone BX, +0.30% snatching up homes to rent out, keeping low- and moderate-income Americans locked out of homeownership, is that a good thing?

“I actually think it’s a great thing,” Sicklick said. “What I think it does is it adds liquidity into the market. The iBuyers and the large institutional investors create a very liquid floor price for someone looking to sell and drive a faster transaction.”

There has to be a better way

For now, that model is as imminent as, say, driverless cars. Knock, Zillow and other upstarts are still plying their trade in a mostly 20th-century housing market. The Brown family, for example, contacted Knock, got pre-approved for a mortgage, had their house assessed, and started touring new homes within a week. But they hadn’t even moved out when their agent urged them to hurry to get the property prepped for sale, to take advantage of the waning spring selling season.

The Browns are happy with the outcome and say that having the process rush by so quickly — start to finish in two months — lessened the stress of having to do precisely what they dreaded in the first place: let strangers poke around their home. But it’s still worth noting that traditional cycles of demand and habits are trumping the potential that new models offer, at least for now.

The question remains: how much of what comes next comes down to algorithms, and how much to process? For now, the onslaught of machine learning in the housing market continues unabated. As Knock’s data team might say, resistance is futile.

marketwatch.com

[John Vosilla] Ok stay in touch. Everybody keep an eye on things share information. On recessi...

John Vosilla — 8/4/2019 6:09:13 PM

Ok stay in touch. Everybody keep an eye on things share information. On recession watch later in cycle but I don't see to many cracks in RE YET unless mortgage rates creep back up. Many of the negative issues certain segments to point to have been with us for a long time and are well known.

[John Vosilla] Interesting prices are high basically no single family left under $200k. Lots o...

John Vosilla — 8/4/2019 6:02:00 PM

Interesting prices are high basically no single family left under $200k. Lots of nice new or almost new 3/2/2 homes high $200's range.

Dan lives in the area long time SI poster Member 2830866

[Black Blade] It's an experiment to see how it goes (Crowd Funding). ..........................

Black Blade — 7/24/2019 8:32:25 AM

It's an experiment to see how it goes (Crowd Funding).

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I do also own rural land in western Wyoming as well that could be developed. As for "defensive" investments I also hold physical bullion - precious metals. At this point just looking for passive income investments and RE has been good to me over the years.

[E_K_S] The TESLA and Google facilities (I think Google has a sever farm there) have the...

E_K_S — 7/23/2019 11:21:20 PM

The TESLA and Google facilities (I think Google has a sever farm there) have their own economic zones too. It's quite interesting on the benefits that provides. There was even something about no tax on bitcoin transactions. hmm wonder why that was in the economic trade zone document?

You can search Google and read the document. It was a surprise to me but I think it was one of those give aways to get them to build that battery facility. Who know what else was provided but now very business friendly. Remember no State Income tax either.

The one huge problem is it gets really hot and not many trees (high desert). I have been looking at property South West in Gardenville and Carson City. More infrastructure, many parks and many more trees. Some of the best schools too in Gardnerville. It reminds me of the smaller communities in the 1950's in CA .

The area is on my watch list. I own some property in S. Lake Tahoe (in NV) so only about a 45min drive. Would like to pick up some rentals and/or apartment building in the nice neighborhoods around Gardnerville.

The key to anything in real estate is know your location/neighborhood.

EKS

[John Vosilla] Best of luck with those crowdfunding investments.. Admire your positive spirit. ...

John Vosilla — 7/23/2019 10:37:29 PM

Best of luck with those crowdfunding investments.. Admire your positive spirit. How much leverage do they usually put on these properties to achieve high IRR's since cap rates are quite low these days?? We aren't at the end of this RE cycle but time to be more defensive with the easy money made a decade ago. Would be most cautious with areas that are most overbuilt this cycle such as Class A apartments.. Amazon effect on segments of retail plus bloated inventory levels high end single family most everywhere in the country often well over 1 year of inventory are signs of caution to me. But like you say be conservative have the tenants pay off your mortgage quickly then you have total control. Sounds like you have already controlled your future congratulations..

[John Vosilla] That the industrial center lies within a federally-designated opportunity zone d...

John Vosilla — 7/23/2019 9:59:07 PM

That the industrial center lies within a federally-designated opportunity zone didn't hurt. Plus Cali is so expensive to do business in these days..

[Black Blade] CROWDFUNDING REAL ESTATE ..........................................................

Black Blade — 7/23/2019 7:00:53 PM

CROWDFUNDING REAL ESTATE
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First off I own two homes, two cabins and two rental properties outright. I also am paying for two more rental properties and hope to have those free and clear in the next few years (but why not let the renters pay the mortgages and build me equity right?). Currently I just don't find any decent deals and certainly no screaming bargains in residential real estate (single homes or multi-family properties).

After weighing the pros and cons of Crowd Funded eREITs I decided to enter the Crowd Funding sector starting with investments into FUNDRISE and RICH UNCLES. I researched REALTY MOGUL and REALTY SHARES but the expenses are higher and I don't see any real advantages to those over FUNDRISE and RICH UNCLES. I chose the Balanced Plus in FUNDRISE and a Starter position in RICH UNCLES (mostly Student Housing). I tend to prefer the Residential REITs for asset protection in down markets but the Retail REITs (Triple Net Properties) have their own advantages. So the Crowd Funding eREITs look like a good fit.

So I will see how this "experiment" goes over the next couple years as I run into my retirement years ...

- BLACK BLADE

[Black Blade] This question arose in May and since then I am invested in FUNDRISE and been add...

Black Blade — 7/19/2019 2:08:46 PM

This question arose in May and since then I am invested in FUNDRISE and been adding a little more here and there. I looked at other similar investments and considered Realty Mogal, Realty Shares, Groundfloor, Rich Uncles, etc. but Fundrise looked the best for the non-accredited investor. I still may revisit Realty Mogul and maybe even throw some spare change at Rich Uncles (only need a fiver to open an account).

That said, I invest more into physical rentals myself and more with liquid REITs like APTS and BRG since FUNDRISE is simply a "long term" investment and somewhat illiquid that generally trades quarterly and fees for sales before 5 years can incur up to 3% penalty (which makes sense since this is designed to be focused on specific properties and construction projects). With REITS you can jump in and out at will no problem whereas with an eREIT like FUNDRISE you are a part owner in a pool of owners. Another con with the eREITs like FUNDRISE is that you can use them as collateral like a physical property to leverage up for additional real estate acquisitions. On their own they can be great for the long haul.

PRO

1. Generally stable long term real estate investment where you select your style: growth (appreciation), income and growth (rent and appreciation) or income (rents)

2. Invests in diversified selection of real property (mostly residential and some commercial) and construction loans secured by underlying asset
3. Low commissions and fees (around 1%)
4. Managers do the due diligence, maintenance, background checks

CON

1. Penalty for early withdrawal
2. Can't be used as collateral
3. you get a 1099 at tax time so distributions are treated as income so no tax write offs for Maintenance and fees.

[SAM] Experience with Fundrise or similar RE investments Hi, I am kind of new to this...

SAM — 7/19/2019 11:31:54 AM

Experience with Fundrise or similar RE investments

Hi,
I am kind of new to this board. I have not invested in any private Real Estate as I don't have time to manage the property & tenants myself. My RE investments are thru a bunch of REITs, RE mutual funds & RE income funds.

Recently came across Fundrise that pools lot of small investors' money and invests in some RE private limited partnerships. Has anybody on this thread invested thru them. If so, what's your experience?
Secondly are there any outfits like Fundrise where a small investor can invest say $50K or so and not worry about the day to day managenment.

Thanks for your help.
_SAM

[SAM] Experience with Fundrise or similar RE investments Hi, I am kind of new to this...

SAM — 7/19/2019 11:26:57 AM

[E_K_S] Fernley to get 4,300-acre industrial park after 2nd biggest land sale in Nevada ...

E_K_S — 7/18/2019 9:15:26 AM

Fernley to get 4,300-acre industrial park after 2nd biggest land sale in Nevada history Huge new commercial development near Reno NV just announced July 2019 . . many companies from CA moving North/East to NV

The rebranded industrial park will be called the Victory Logistics District. Mark IV Capital shared its plans for the 4,300 acre commercial and industrial park just 30 minutes east of Reno-Sparks during a Tuesday event held by the Economic Development Authority of Western Nevada. EDAWN estimates that more than 10,000 direct and indirect jobs will be created as a result of potential development stemming from the industrial park.

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The new commercial development was to lead to over 10K new single family homes built near the development.

EKS