The new housing play: Helping priced-out renters become long-distance landlords
Leland Char is a 28-year-old product manager for a large San Francisco-based tech company. He loves the Bay Area’s “very authentic Asian food and new American cuisine, smart well-educated people, the multiple job opportunities, the friends that I’ve made, and fantastic hiking.”
What Char hates is the house prices, and the fact that even with a dual income, he and his fiancée can scarcely afford to buy a home in their community, let alone have in-laws join them as they put down roots.
So he settled on a solution that’s unorthodox, but which suits him: he bought eight houses in Texas.
He’ll continue to rent his own home in San Francisco, and has leased out the far less expensive properties in Texas, expecting to reap a better return than he could from stocks or bonds, while also building up equity.
Char, who built extensive spreadsheet models with all kinds of scenarios to test assumptions, doesn’t see a contradiction in becoming a “first-time homeowner” of a property he may never set foot in. Like a good tech worker, he found a way to make his investments online, using a fintech startup called Roofstock.
Wow!
Pulsenomics LLC Founder and Managing Member
6 年Interesting piece, Andrea, thank you for sharing. I'm an advocate for innovations that bring more transaction efficiency, price transparency, and liquidity to the housing market, but I find one part of this story troubling: Mr. Char expects to "reap a better return [on 8 houses--all of them in Texas] than he could from stocks or bonds."? ok... but: in light of the young couple's financial situation ("even with a dual income, he and his fiancée can scarcely afford to buy a home in their community") , I question the wisdom of going all-in with such an out-sized, highly-leveraged and non-diversified bet on rental housing (Mr. Char advocates concentrating rental housing bets in a single town. He says that his "motivation is simply to educate"). His extensive spreadsheet models, professed "differentiated and advantaged perspective" and "financial skills set built from years in Tech Private Equity and structured thinking from my time at McKinsey & Company" all seem to ignore the importance of portfolio diversification, particularly for young people eager to build and sustain wealth.