subsides, but there’s a shortage of inventory in terms of hous - es. That means there’s a good chance that there will be more demand for single-family homes, but it is unlikely construction of new homes will keep pace. “You’re seeing people moving from some of the largest cities in America to these suburban and ex-urban areas, searching for more space, no shared amenities or hall- ways and less expensive living,” Bea- sley said. “All of these things bode well for the sector of single-family rental homes to perform well.” Meanwhile big, institutional inves- tors are going to have to reconsider putting money into office buildings if more people are going to be working from home. The same reconsider - ation will go toward investing in real estate like hotels, restaurants, and retail stores. “You check through all of these traditional asset classes in real es- tate and there are significant risks to them either during or post-COVID because there could be some struc- tural changes in the way people behave,” Beasley said. “Everybody needs a place to live. And even with apartments, we are seeing a num - ber of people moving out of multi- family into single-family because they want a little more privacy and to just be with their family and avoid the contact. “All of those trends point to a demand for rental homes—both from an ownership standpoint and from a renter’s view because you’re going to have more people who are renting and want a home in their area. It’s a perfect storm lining up, and over the next number of years these rental homes will continue to attract more interest.” •
metry of information—it was difficult to understand what was going on in the markets and buyers had an advantage because sellers didn’t have the benefit of comparison informa- tion and data. The information is not perfect, but it’s much more improved, which has led to tighter and more efficient pric- ing. The improvements have attracted more venture capital investments to the real estate industry—that and the fact that real estate is the world’s largest asset class. “I think it’s a combination of the market size, the fact that it hasn’t been penetrated really, fees have been generally pretty high and there’s a lot of inefficiencies in the processes for real estate closings and transac- tions broadly,” Beasley said. “When you look at all of those things togeth- er—big market, lots of inefficiencies and fees—it’s a perfect storm for ven- ture capital investment into a sector.” AWORDTOTHEWISE If you needed advice about real estate, you might have to talk to a few different people depending on what aspect you wanted to discuss—invest- ing, running a company, or industry insights. Or you could talk to some- one like Beasley who has garnered expertise in all of these subsets of the industry, and more. For example, when it comes to investing, Beasley always advises people to know their investment horizon because it’s going to inform the types of properties they may want to invest in. For example, if you want to own something for a year or two, you’d look at something different than you would if you wanted to hold on to something for 20 years.
Investors should also have a grasp on their risk tolerance and understand that they have to gener - ally accept more risk to get a higher return. Purchasing a high yielding rental property for example could lead to more volatility of cashflow— there could be some vacancy periods and wide valuation swings, but also disproportionate returns. “Like with any other investment, I would say investing in rental homes or any other investment, there’s a correlation between risk and return,” Beasley said. “You need to know what your tolerance is for that.” Speaking of rental properties, Beasley advises not to put all of your proverbial investment eggs in one basket. Owning a primary residence and having a rental property or two in the same area isn’t advised because then everything is correlated. “A lot of people on Roofstock can achieve diversification,” he said. “Maybe they sell one or two of those properties near where they live. I think to the extent you can achieve some diversification in your real estate portfolio, using a platform like Roofstock, or however you do it is generally positive.” Finally, Beasley remains bullish on the sector of single-family rental homes—especially in the COVID-19 pandemic. There are likely to be more structural renters as the pandemic
22 | think realty magazine :: august 2020
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