At the Juncture of Real Estate and Technology

  I remember when I first started in real estate, people talk about value-add deals all the time. It all sounds really cool but I was clueless. Well, not exactly, I know you can buy fixer-upper, renovate it and flip for profit. But I wasn’t sure how it works in the apartment business. I spent a couple of months going through value-add deals on TheRealDeal (going back two to three years). The analysis got easier once I passed the 50th deal and when I hit the 100th deal, I think I figured it out! By the way, that’s another topic I can hardly find any good articles on the web. Maybe it’s too simple, no one bothers to write it up. Here is what I came up with and hope it can help someone having the same question like I did. In a nutshell, you find a building with units that can be renovated to achieve higher rents and/or enlarged using available air rights to generate additional income. Once renovation or enlargement completes and units are leased up, you will refinance the b...

Self-driving vehicles are coming sooner than you think.  Imagine you can just hop on the car, enter an address on your phone and the car will take care of the rest.  Well, that might become true very soon.  Tesla has offered electric vehicles with semi-autonomous Autopilot feature for a few years now.   Waymo opened its ridesharing program Waymo One using autonomous cars to the general public in Phoenix last October.  Driverless cars from Nuro are already on the road as delivery vehicles in the Bay area starting last December.  As it gradually turns into an inevitable reality to our life, I cannot stop thinking what all these mean to the real estate industry.    My thoughts took me back to the first class of Commercial Real Estate taught by Professor David Geltner at MIT.  The classic real estate theory about urban areas is mainly based on the Monocentric City model.  The model explains that any real estate value is the sum of three c...

  As vaccines continue to roll out across the country, a few friends (some overseas) want to get ahead of the recovery and invest in the US real estate. They are reluctant to own real properties due to “hassles” associated with property management. So they ask if it makes sense to invest in REIT stocks on the public market. It’s a tough question, because it is not a simple Yes or No question and there aren't any right or wrong answers, plus it depends a lot on the investor's 1) risk appetite, 2) expectation on the returns, and 3) investment horizons. I just want to share some of my thought process on real estate investment through the public or private market. Typically any real estate investment has two return components: income and capital appreciation. Total Return = Income + Capital Appreciation In the public market, the income component is the dividend and the capital appreciation component is the stock price increase. In private deals, the income is the net operating inco...

The real estate industry is grappled with the question, what will be the new norm post Covid?  When will workers return to their offices in the dense urban centers?  How would street retail survive and evolve? Are big cities like NYC or SF dead?  The urbanization trend of human beings has been ongoing for the last 500 years.  By 2050, its estimated that roughly 2/3 of the global population will live in the cities.  It's hard to imagine that this exponential trend will cease and disappear.  The vaccine is being rolled out and people will soon remember the fun, the culture and the ideas that permeates in the cities.  With the normalcy in sight, I hope  the trend will resume from its temporary pause, just as it did many times in history. But there will be a "new" norm, and it will be driven by technology.  Technology has been a driving force that transforms the world in a way that's unseen in human's history.  We saw how Amaz...

   I recently read a study done by Nancy Packes Signature Marketing Services on data showing New Yorkers leaving the city based on USPS change address requests (from March to October) and its impact on apartment rents in the city.  You can find the study here . There are three interesting findings from the research I found very insightful, which might help answer when rents in NYC will rise again.   The 1st insightful finding helps answer the question: how many people left the city?  Below is a summary table I put together based on the study.  It shows that temporary address change requests with an address outside of NYC are roughly 97,361.  These requests are mostly from affluent New Yorkers with a second home somewhere else.  They typically own in the city and are less likely trying to sell under the pandemic conditions.  It’s very likely that they will return once the coronavirus gets under control.   The other number that ...