We Study Billionaires - The Investor’s Podcast Network TIP263: Commercial Real Estate Investing - w/ Ian Formigle (Business Podcast)
Oct 6, 2019
Ian Formigle, a commercial real estate investment expert and founder of CrowdStreet, shares insights on transforming commercial real estate into a source of passive income. He emphasizes the importance of including commercial real estate in investment portfolios and explores the major risks involved. Ian discusses the factors that drive value in commercial properties versus single-family homes and unveils strategies for leveraging imperfect information to maximize returns. With real-world examples, he highlights the benefits of diversification in today's volatile market.
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Macro Trends in Real Estate
- A growing housing affordability crisis in the U.S. looks set to intensify, with half of all renters spending 30% or more of their income on housing.
- This creates opportunities in refreshing older multifamily housing and developing more affordable options, especially in the senior housing market.
Imperfect Information
- Commercial real estate operates with "imperfect information," similar to insider information in stocks but legal.
- Ian Formigle recounts how CrowdStreet leveraged such information to add value to a San Jose office building deal.
Value Drivers
- Commercial real estate, unlike single-family homes, has a business model based on net operating income (NOI).
- Increasing NOI can generate returns regardless of market fluctuations, offering an advantage over residential properties.