All Forum Posts by: Ryan Schechtman

Hedge funds quietly entering this segment of the market is the most under-appreciated trend in real estate.  The average American doesn’t (yet) know this is happening.  Many investors are still unaware of this development (despite this article being 9 months old).  Even those that are aware mostly don’t (yet) understand how much of a game changer this is. 

Caroline, I wholeheartedly agree with your points.  “We need new construction in a massive wave of small affordable homes.”  So true.

Then again, what’s to stop hedge funds from buying these new builds too?  They have great relationships with the big banks, (plus billions in collateral, obviously) so they get great rates.  They can afford to come in at 20% over and still cash flow, in part due to those exclusive rates.  

It’s a good time to be a big builder (except for the cost of materials).  It’s a good time to already own property.  It’s a good time to be a giant hedge fund.

Here’s the tl;dr version from a friendly bot:

Yeah, great movie.  It seemed they nearly ended the film with a call to action. I.e. "Hey guys, the banks are even bigger than they were & very few substantive changes have been made."  I felt like shouting, "We've got to do something!"  But the rest of the theater responded to the film with a subdued 'meh.'

The Big Short is an excellent book too.  I highly recommend both.

Back to your awesome article, I really like how you highlighted the importance of having mutually aligned interests with your service providers.  It reminds me of the Charlie Munger quote, "I think I've been in the top 5% of my age cohort all my life in understanding the power of incentives, and all my life I've underestimated it. Never a year passes that I don't get some surprise that pushes my limit a little farther."  To know how an individual or institution will act, simply understand their incentives. 

Thanks for this thoughtful and informative post, Nicholas!

Does FINRA remind anyone else of the ratings agencies?