514: BiggerNews, October: How Small Landlords Can Beat the Hedge Funds

Oct 5, 2021

Ryan Dezember, a Wall Street Journal reporter, shares his expertise on the real estate market and the challenges small landlords face against institutional investors. He discusses how economic shifts, particularly after 2007 and during the pandemic, have empowered hedge funds and private equity in the housing sector. Their strategies often outpace small investors, but Ryan and co-host Dave Meyer provide actionable tips for small landlords to navigate these competitive waters, highlighting the value of local knowledge and personalized service.

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INSIGHT

Wall Street's Housing Market Entry

Wall Street's entry into the housing market post-2007 was driven by low home prices and the potential for scaling.
Technological advancements, like the iPhone and cloud computing, facilitated their large-scale purchases.

ANECDOTE

Hedge Funds as Market Stabilizers

Hedge funds acted as a tourniquet during the housing crash by buying homes when prices were dropping, restoring confidence for other buyers.
This, in turn, incrementally increased housing prices.

INSIGHT

Investment Motivations

Institutional investors are primarily driven by favorable price-to-rent ratios, not emotions, leading them to focus on specific markets like Phoenix.
They target markets with strong cash flow to repay their debts, similar to individual investors seeking financial freedom.

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Once the housing market started to slide in 2007, smart investors began buying, and waiting, for rock-bottom prices to kick in. Investors were buying homes in some of the best markets for dimes on the dollar, and have seen massive profits whether keeping them as buy-and-hold rentals, BRRRR deals, or flips. While small investors started buying a couple of houses a year, institutional investors were doing far, far more.

Private equity funds, along with REITs and hedge funds knew that foreclosed homes were a steal, and their economies of scale made it even easier to turn these financially mismanaged properties into appreciation and cash flow kings. As institutional investors began fixing up these homes, listing them for rent, and later selling them, the entire market moved in an upward direction. Now, first-time homebuyers are competing with these economic powerhouses to lock down their first primary residence or rental property.

A man who has been covering this topic for years is The Wall Street Journal's, Ryan Dezember. Ryan has a keen understanding of what influences the housing market as a whole, why institutional investors are making the moves they are, and what this means for small mom-and-pop landlords. Dave Meyer also joins David Greene on this episode to discuss the ways small landlords can beat Wall Street at their own game.

In This Episode We Cover:

Why home prices dropped to the lowest point in 2011

How the pandemic gave institutional investors more buying power

Who are the “wall street buyers” that are buying thousands of single-family homes?

Why you should “find the tenant” before finding your next property

The “carbon monoxide” of investing that most investors aren't paying attention to

How institutional investors use economies of scale to rapidly rehab homes

What small investors can do to beat institutional investors at the closing table

And So Much More!

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