Tom Barrack of Colony Capital on what’s really happening in US real estate from an investor’s perspective. The clearest, most cogent look at the state of commercial, multifamily and single family markets today and where the opportunities are. The first five and a half minutes is about Europe and the bottom line there is don’t but after that it is all gold. If Tom wanted to be one of those real estate ‘gurus’ he could package this video with a big notebook and some advertising and sell it for $10,000- and it would be better than any of the other stuff out there. And you get it for free. I’ve watched three times and get an extra little nugget each time.
The big takeaway for me is that (temporarily at least) sanity has returned to real estate investments. Tom says it’s singles and doubles, not the time to take big swings for the fence. Long term holds that produce current cash flow, not 100+% levered quick turn appreciation plays. Blocking and tackling. Find a property that is generating current cash flow based on a real, fully reserved P&L in a good long term market that has some room for improvement. Even as a big private equity guy he’s targeting 7-8% returns.
Speaking of private equity there is a good discussion of what it means now that the big players are in the single family market. Tom’s plan is to turn it into another institutional asset class like multifamily or office. For the doubters he offers apartments that back in the eighties no on thought could be an asset class because they were all owned in ones and twos by small investors. Now there are more than 80 apartment REITs worldwide. What this means is that small investors are going to have to up their game to continue to attract and retain the good tenants. Plus you will have to work harder and dig deeper to find good properties that the big players don’t know about. The upside is that if you do a good job and put together a couple dozen nice properties or more you will have a new exit; selling the whole portfolio in a single deal to one of the big players.
BTW the interviewer is Jason Kelley who wrote “The New Tycoons: Inside the Trillion Dollar Private Equity Industry That Owns Everything” ( http://amzn.to/RAECwO on Amazon).
Tom also fires a shot over the bow of single family real estate agents; he doesn’t think your business model is sustainable. No details or plans but knowing him (Tom has been a virtual mentor of mine since the eighties when he made a fortune buying apartments and commercial from the RTC for pennies on the dollar) he’s planning to disrupt your industry. His MO is to find inefficient industries, markets or businesses and streamline them. With yours in his sights the best defense is to become the best of the best, offering your customers a buying or selling experience that they can get nowhere else. Who knows, you may end up working for Tom himself.