Smart Money is Going After New Homes as Builder Desperation Grows

Dave:
New construction is reshaping how deals are getting done and it’s changing where the numbers actually work. It’s sort of crazy, but right now, on average, a newly built home in the US is cheaper than an existing home, making this a uniquely attractive investment. Right now, I’m Dave Meyer and today on the Market I’m joined by Doug Brien to dig into when new builds beat existing homes, how institutional investors are actually behaving and what you can learn from them and how to negotiate with builders to land a great deal on a newly constructed home. This is on the market. Let’s get into it. Doug. Brien, welcome to On the Market. Thanks so much for being here.Thank you. Good to be you Dave.I’m excited to have you on. We’ve been talking a lot about new construction sort of theoretically on the show the last couple of months, but I’m really eager to have you on since you have so much personal experience with this. But before we jump into the topic, maybe you could just introduce yourself to our audience and explain your background in real estate.Yeah. I am currently the CEO of Roofstock. The company that I founded in 2016 was called Mind. We were more focused on property management. Roofstock was more focused on transaction activities. We just merged about a year and a half ago, so really the same company for about the last nine years. Prior to that, I founded a company called Waypoint Homes back in 2008, wrote a book about it called The Big Long If you want to learn more, we bought 17,000 houses between 2008 and 2016 and created a public REIT called Starwood Waypoint. And then prior to that I spent 12 years in the NFL as a place kicker, which interestingly was kind of my foray into real estate. I was trying to make sure that I was being smart, having that great opportunity and wanted to invest the money as wisely as I could and did a bunch of research and ended up figuring out that real estate was by far the most interesting asset class to grow wealth over time, but also have really efficient after tax cashflow.Well, I love that. I know you and I have gotten to know each other a little bit over the last couple of months, and it does seem we share a similar philosophy. I love the name of the book, the Big Long because real estate, despite what’s happened over the last couple years where people were able to make a quick buck, the whole point, right, is just long-term risk adjusted returns staying in the market as long as possible, and you’ve obviously found several different ways to do that over the course of your career. Now you started were one of the key inventors of institutional single family home investing. How has your personal investing or just in your professional career as an executive as well now you’re doing less single family homes or maybe you’ve just broadened your scope to not only focus on that.Yeah, I’d say I’ve broadened, I mean by far the asset class that I invest the most in, even within real estate, our single family homes own them all over the country. That includes some small apartment buildings too. I’ve done some of those. It’s just kind of easier to put capital to work sometimes. Have I been buying a lot the last three years? No, I haven’t because it hasn’t made a lot of sense. But yeah, I would say that I enjoy sitting in the seat that I sit in in terms of both Waypoint Homes mind and roof stock because I get to really understand where the big smart money is thinking about putting their money or actively investing. And so I get to learn a lot about flows of capital. And if you remember back at BP Con we talked about, I just think as an individual investor, it’s important to know where flows of capital are going. It doesn’t mean that you have to necessarily be in front of it, although sometimes that’s a smart thing to do, but it’s just good to know where it’s going and what the smart professional money is seeing in terms of opportunities.I think that’s really wise. Generally, I think people overestimate the competition that comes from institutional investors unless you’re in one of those markets like Charlotte or Phoenix or wherever where they’re super active. But that doesn’t mean you can’t learn something from institutional capital because they probably, I assume have teams of analysts and people who are trying to figure out where the next great opportunity is. So curious to learn what institutions are thinking about and where are they focusing their capital right now?Well, I mentioned that I hadn’t been buying, but the truth is institutions really have not been doing much buying over the last two to three years. Individual investors are, I mean, I think buying 75, 80% plus of all investor purchased
Homes these days, institutions are like 5% or less, and that was very different two and a half, three years ago. And it’s interesting because I get invited to speak at panels for some of the institutions that deploy capital and their LPs. So a lot of these institutional investors are getting investments from various pensions and endowments, so think like teachers and firefighters and policemen, they have pensions and that money has to be invested and some of that likely 10% or so will end up going into real estate. And so we talk to those investors a lot and they’re big fans of the fundamentals of single family housing and the fact that we have a structural shortage in supply by anywhere from three to 5 million homes. I mean, it’s good to invest in asset classes where demand exceeds supply. We have the largest population cohort in US history, the millennials entering their home living stage of life, and a lot of those people tended want to wait to purchase a home. So there’s a lot of rental demand out there and just fundamental principles that make investing and owning single family rentals very attractive. Now, what’s made it highly problematic is most of these institutions use leverage and with the way that interest rates went up and the cost of your debt, in most cases exceeding the unlevered return that you would perceive, it just doesn’t make sense to use financing. And so they’ve really been kind of pencils down, but that’s really changed quite a bit in the last, I’d say three to six months.What has changed? What has spurred them to start thinking about getting back in?Yeah, well, it’s really perception of where interest rates are going. So obviously the Fed recently lowered 25 basis points and some speculate that they’ll do another 25 basis points at the next fed meeting. And so obviously that hasn’t brought down rates enough to make them accretive, but I think that there’s a perception that rates will be coming down. So that’s part of it.
The other part of it is we’re seeing excess supply build up from builders. And so a number of builders have gotten pretty aggressive understanding that retail homeowners are not going to be able to buy all the homes that they currently have on their books. And so some of them, including large public builders, are getting pretty aggressive with selling this excess supply to investors and making it really, really compelling. For example, my company roofstock has a partnership with Lennar, and we’re currently selling homes on our ESSA marketplace where they’re buying down the rates to 4.99%. It is pretty interesting, and I was literally just on ESSA on our marketplace this morning just kind of checking things out and we’re about to get a couple thousand more homes from them. But even literally today there’s 300 homes that are currently listed at north of a five cap, meaning with that 4.99% financing, it is a creative plus. These houses tend to trade 15 to 20% below the asking price.Oh, interesting. Okay, so it’s even better.Yeah, so it’s like what you’ll see on ESSA for these, I mean, they’re brand new homes. There’s a list price, but on average they’re trading between 15 to 20% down from that. And then to make things interesting, we’re also paying two months of rent so that the investor has time to get the home leased and giving three months free of property management and a 12 month subscription to essa. So some interesting deals, and I think part of what retail investors should know is these same homes are being actively looked at literally right now, institutions are running through tapes and there’s a little bit of a race right now because again, like I said, a number of institutional investors see rates going down and they want to deploy more capital and they’re seeing this excess inventory out there, and so they’re aggressively looking at it. So if you are in the market today, you should definitely be at least taking a look at what’s out there on the market.It’s time for a quick break, but when we return more on new construction and investor strategy, stay with us. Welcome back to On the Market. I’m Dave Meyer here with Doug Brien, let’s jump back in. This seems to me to be a very interesting intersection between what institutional investors are doing and what our audience here and on the market could be doing, because a lot of times in the last couple of years you hear them institutions are doing these 300 unit build to rent communities, which is cool, but the average BiggerPockets investor is not going to be pulling that off or even really interested in that. But this individual buying of new construction does seem like a way that our audience can overlap with institutions. I know some of the creators, other personalities here at BiggerPockets who have started buying new construction as well. So Doug, maybe you can tell us a little bit about the market fundamentals and why new construction is appealing right now, both to our audience and to institutions when, to be honest, 10 years ago, I would never have recommended to someone to buy new construction over our existing home, but right now it does seem intriguing and I’m hoping you can tell us a little bit more about what you see in it that makes this sort of a unique opportunity.I mean, I first have to just say it depends what your goals and objectives are, right? You’re always going to do better if you find that really well located, really junky home that you can come in and put 20, 30, 40, 50,000 or more into it, reposition it, raise the rents, you create a lot of value if you buy it and you do all that work. Buying new homes is different. It’s a little more vanilla, it’s a little more cookie cutter. I think one of the interesting dynamics in the market that we’re seeing is just there’s a strong preference from renters. They like
New homes and builders have gotten smart. I mean, some of these are purpose built for rental, and so they work better as rental, meaning in some cases smaller lots, smaller lots work better as rentals. I mean, I’ve looked at new homes in the past, but then they have these giant yards that you have to maintain and it just eats into the return. And so to me, the thing that’s most interesting now is there’s more demand from renters for new homes and there’s excess supply so you can buy them well. And so what you get in a new home is a more predictable return, right? Because what do new homes come with? They typically come with warranties for the first five years. So if any of the major systems of the home break, then they’re covered by warranty and everything is new. And so you often will see new homes running at 70% or higher NOI margins,
Whereas you’re usually more kind of in the low to mid 60 range with an older home just because the cost of maintenance is higher. So you sort of buy into this window of time where you have pretty steady and predictable cashflow streams, and normally with that lower risk you would see a lower return. But it’s interesting because of the discounts you can buy at and the accretive financing, you can actually do quite well again. So looking at ESSA today, I mean there were some properties in Oklahoma, so we’re using that 4.99% is plugged into our calculator, and I’m seeing properties with 7, 8, 9, 10% plus cash on cash returns. Unreal. And that doesn’t include the Q3 months and the discounted property management. So there’s some interesting deals out there. I kind of got actually excited looking at them this morning.I think that’s a really important point for our audience because a lot of times you hear people knock on real estate and say, oh yeah, it looks like you have great cashflow till a system breaks or you have a month of vacancy. And for those who listen to the show frequently, I like to point out that if that is your understanding of cashflow, you’re doing it wrong because you need to be underwriting and understanding and setting aside money for CapEx or setting aside money for vacancy, that is part of being a real estate investor. But what Doug just said I think is really true is that the predictability, even if you’re underwriting well for an existing home, you might’ve thought, Hey, I got seven years left on this roof and actually it’s three years left on this roof, and even though you thought about that and set some money aside, you might have a little bit of a cash crunch. Realistically, when you buy a new build, the cashflow you see on paper is probably what you’re going to get. I think it’s just a little bit more stable, not just on a year to year basis, but even on a month to month basis, which is I think something people struggle with early in their investing career or early in any hold of a property, you get in there and thought, oh, it’s going to be five grand, 10 grand to stabilize this. Actually it’s 17 grand to stabilize this.
You don’t have those question marks with new homes. What you see is sort of what you get because you’re probably outside maybe some minor things that are probably covered by warranty. You’re really not going to have many surprises, which to me as an investor is super appealing. I’m curious, Doug. One of the things I’ve always worried about with new construction, I’m curious if you’ve thought about this at all, is how you compete for tenants. Because if you’re in one of these build to rent communities or new construction communities, everything’s kind of the same. And I am always thinking as an investor, how do I position my single family home or my duplex to attract the right kind of tenant for this type of property when new construction, or at least when you’re in these big sub developments, it seems to me that you’re sort of at the mercy of what everyone else around you is doing, what they’re offering as rents. Does that introduce any risk to this kind of purchase?It does, but with risk, there’s also opportunity. I would say this. I think it’s really important to understand the demand dynamics around build to rent communities. So what’s typically true about build to rent in new homes, they’re built out in the excerpts, they’re built farther away from city centers, and sometimes those areas can be close enough to where the jobs are and where people want to be so that it works. And sometimes they’re so far out that there’s really tough commutes and there’s not as much demand. So I think you really, really want to understand demand. Let’s assume we are buying in a community where there’s strong demand. Then there’s this potential issue that you introduced of like, well, they’re new ohms and they’re all being sold and there’s five or six on the market and there’s exactly the same. And I say, yep, that’s true, but the way you execute the market, again, leasing process becomes really, really important.
So it’s like the vast majority of individual investors manage on their own, and most of them don’t have marketing backgrounds and sales backgrounds and are busy doing other things. I mean, some of the things I’ve seen from the various sites that you syndicate your listings using professional pictures and professional property descriptions. By the way, AI does a great job of writing those very quickly for you. How do you deal with leads that come in? I mean, if you pick up the phone or call someone back within 10 minutes, your chances of converting that person into a lease are significantly higher. So to me, where the opportunity, if I was in that kind of location, I would seriously look at professional marketing and leasing because from what I’ve seen, good companies can out execute bad companies with bad processes and bad setups as well as individual investors who are amateurs at doing this and are busy doing other things and can’t pick up the phone and call someone back within 10 minutes. And that is how you stand out and get the best tenants in your home as quickly as possible.Very well said. And I think one of the flip sides to that too is I would imagine in some of these excerpt kind of areas, the tenure of the average tenant is probably longer. I’ve always bought and sort of specialized in buying properties that I think young professionals will buy just because that’s who I was when I got started, and I sort of understood where young professionals wanted to work the amenities that they were looking for, that was easier for me. But as I’ve matured as an investor, I’m starting to some of these excerpt suburb areas because young professionals, they move every year or two, they’re constantly moving, and you always have this turnover.Is that what you saw? Did you have enough sample size? Because apartments, I mean the generic high level metric is apartments turnover is roughly every 18 months, so people stay on average year and a half for the average single family home, it’s three years or more. Now, if you get into families with kids and schools, you’re probably on the higher end of that average. And maybe in the young professional realm, it’s more like a year and a half or two, two and a half. But for sure that is a thing and it’s a very attractive aspect of single family rental. In fact, it’s interesting Dave, because when we first started Waypoint, so this is like 2008, I mean the banks are giving away homes, no one’s buying them. We see an opportunity, we’re talking to the big multifamily operating companies and investors thinking, well, they’re going to get this.
They did not get it. They looked at houses and said, these things are all spread out. It’s unmanageable. You have no economies of scale, and the cost to maintain and manage these properties is going to be so high. But they were wrong about one thing or nobody knew about this. One thing was that the turnover rate was twice as high with apartments, meaning people stayed twice as long. So yes, even though they are a little bit more expensive to manage because of the scattered disparate nature of where the homes are located, because the turnover is three, four years, you don’t have to go in and spend as much because there’s less frequent turns. And if you look at a p and l, it actually makes a big difference and makes single family rentals in many cases, more financially attractive than multifamily.A hundred percent. I feel like there’s this evolution, real estate investors, when you first get started, you’re really focused on rent growth and what the max rent you can get is. And at least for me over the course of my career, you realize that vacancy is really what kills deals. If you could just reduce your vacancies, you’re probably going to be doing pretty well. And that’s why I still buy single family homes and the asset class as well. It’s just going to have less turnover costs. This is anecdotal, but in my experience, single families, people take a little bit better care of them. They’re usually a little bit older tenants, maybe a little bit more mature than my average tenant. When I was one of them, I was 24 and also damaging my own unit. So I’m not judging, but I think it’s those sort of secondary costs that once you’re in this industry, you understand very well, but when you’re first getting into, you might overlook a little bit and you realize if you could control those costs a little bit more, it really, like you said, when it comes down to the p and l at the end of the year, it really makes a big difference on if you’re fully occupied or you have a month or six weeks or eight weeks of vacancy.
It doesn’t sound like a lot, but it could kill your whole year. And I think this is kind of one of the attractive things about not just the single family asset class, but being in a new property, I would have to imagine would have a little bit higher retention rate than even an existing home single family rental because things break. I have single family homes that are, I’ve renovated, but they’re built in the 1920s. These things have issues and I fix ’em quickly. But I would imagine if you have this sort of flawless experience as a renter in a brand new single family home, you’re probably going to want to stay.Yeah, that’s totally true, Dave. And it’s interesting, going back to your comment earlier about if you’re not buying a new house and you’re renovating it, and I think you’re going to use an example of it really should have taken $17,000 to renovate this house, but that was going to blow up your investment goals for the property. So you do 10,000 into it, which in the beginning looks okay, but as things start to deteriorate, by the way, everything that was wrong with the house when you bought it is more expensive to fix when there’s a person in it.Oh, yeah. AndTo the point you just made, they’re actually likely to leave sooner because so many things are breaking. This is just like a hassle. I’m just going to move to another property that’s not a lemon. So really, I like what you said about you got to build a proforma and it’s like you’re going to have to replace a roof every 25 or 30 years. It’s a reality. And the HVA Cs every eight years, just amortize those costs and expect you’re going to have them at some point and have enough money to maintain your home so that you can keep your residents happy and in place. Heads in beds, heads beds. Yeah, exactly. The most important thing in thisBusiness, not to also just the peace of mind. I think I’ve mentioned it on the show before, but I have this old Victorian property in Denver. It’s a great property. I don’t want to sell it. I want to keep it forever, but I have to replumb the whole thing. Three units right now. It’s such a pain in the butt. It’s incredibly expensive, but juggling the tenants with water shutoffs and vacancies, it’s just a pain in the butt. And I think in a normal time, I would take a lower return for that peace of mind. Personally, I work, so I have the luxury of being able to do that and the need to do that. I don’t have 50 hours a week to manage these things.
But I think right now, as Doug is pointing out that delta between giving up some return is lower. I just feel like the returns are closer together and that’s why it’s so appealing. Let’s take another break, but when we return, we’ll have more insights from Doug. Brien, thanks for staying with us. Let’s continue our conversation with Doug. So Doug, I’m curious if people are sold on this idea and want to look at new construction, there’s probably still some garbage out there, right? I’m sure there’s some places people are overbuilt, there’s not a lot of demand. So how should people go about vetting and underwriting a potential new construction deal?So I am biased, I’m going to admit that upfront. So roof stock owns essa, and we have a decade. I mean Gary and I together, we actually worked at Waypoint. We’ve been doing this for 15 plus years, and we’ve literally taken all the lessons learned in buying and incorporated it into what we call the buy-side platform on essa. And it’s interesting, and I know you’re a huge fan of this, Dave, this is the most data-driven buying system on the market. So we have a product called the rental genome. And so with every, you can search and find these new homes and you can get proprietary data like crime scores and neighborhood scores. It’s funny because a lot of newbie investors will think like, oh, I want to research this zip code, and if this seems like a good zip code, then this must be a good house. And we have this example in San Francisco, and I forget what the exact zip code is, but literally it’s like Pacific Heights and the Tenderloin, which is the tenderloin is literally the worst, most dangerous part of San Francisco. Pacific Heights is the nicest. So if you look at the data and the averages for that zip code, it’s like literally nothing is the average. It’s way below or way above. So my point is you really have to get into the neighborhood, which is zip plus four. It’s way more
Tied to how neighborhoods behave. And so we have crime scores and school scores and all kinds of data that provides context, really unprecedented data, plus all the entire MLS in the system. So you can compare it to other properties. We actually source rental comps and sales comps to help you kind of understand where things are, and then you can toggle with the numbers. And so really I think it’s like you go to the ESSA marketplace and there’s just a treasure trove of data. That’s how you figure out if you’re looking at a home in the right area, and if you feel like it’s priced appropriately,I guess the numbers are the same, right? You need to understand what you’re going to rent for cash, insurance costs, tax costs. Those things are largely the same. And then you’re vetting the neighborhood, of course for potential growth. I guess the one thing I would need to think about to do differently is also potentially vetting supply a little bit more. If I was buying an existing home in Denver, let’s call it, I’m not really that worried about what’s going on with construction trends. It changes a little bit, but if I buy a good home in a good neighborhood, I’d be concerned about that. I think with new construction, I’d want to probably dig into a little bit what is existing home supply and what does the pipeline look like because I don’t want to buy something, maybe it’s a good deal, and then all of a sudden there’s just a flood of more inventory of similar homes a year from now. So first of all, do you agree? And if so, is there a way people can do that?Yeah, I a hundred percent agree with it. And it’s exactly, I’m actually scanning right now. We do not have, this is a relatively new buying system that we just launched. We don’t have it here, but we will. But I mean, honestly, go to chat, GPT, go to ai. I mean the data is out there. You’re absolutely spot on. I would not want to buy a home where there’s excess supply in that area. What’s going to happen is it’s going to put at least temporarily downward pressure on values and rents. Now,
Look, at the end of the day, data creates knowledge, and with knowledge you can make decisions. And sometimes an area is so positive over the next 10 years. Austin would be an example of a market where you just look today and you can be concerned about catching a falling knife, lots of supply and prices and rent pressures, but it’s a great city. And so if you know what you’re getting yourself into and you have long-term goals, it might not be the worst thing in the world, but it’s good to know that the next year or two might be a littleFor sure chopping.And as you look at your sensitivities, when you play with your model, plug in some lower rents. I mean, who cares what the value is if you’re not going to need to sell it for seven to 10 years, but you do care about what the rents are, plug in some low rents and see if you still can at least break even.Totally. Yeah. That is one of the just interesting paradoxes about the market right now is that some of the best markets with the best long-term fundamentals are experiencing the biggest declines. So it really is a matter of your own risk tolerance and strategy. If you’re in it for flipping, you might not want to do that in Austin right now, but if you’re a buy and hold investor, you could buy a great asset in a good location in a city that I’m not an expert in Austin, but I have to imagine it’s going to bounce back when they get through this glut of supply. It’s a superPopular,Fun, cool city, high quality of life. People are probably going to live there. There’s a lot of jobs there. So I think that’s super interesting.I love the Warren Buffet quote, be fearful when others are greedy. Be greedy when others are fearful. So it’s like, look at Austin and some of these other Sunbelt cities that just are experiencing a glut of supply. And it’s like you hear a lot of negative stories and opinions on the market because of this dynamic that exists today. But whenever I see people being really, really excited and positive, I get curious and a little nervous. And when people are exceedingly negative, I get really curious and interested to see is there an opportunity embedded in all this negativity? And a lot of times it is. And so I just think as a real estate investor, this kind of goes back to the flow of money. It’s like where is money flowing and why? Where is it not flowing and why? And just paying attention to it. And look, I mean, money can move fast and depends on your ultimate time horizon, but it’s good to know and it’s a good indicator of maybe when to get into an opportunity because there’s two things, I think we talked about this in Vegas also. There’s two things about a property purchase you can never change.
So it’s really, really important to get it right. Two things, location, you can totally change a house, but it’s not so easy to pick it up and move it. I know there areCases, but it’s so unusual seen and expensive I’veSeen exceedingly expensive. So you got to like the location and the price your model will always use as a basis, the price you paid, plus any renovation cost, so you want to make sure you buy it right. And so entry point does matter.I completely agree. And I think your point about looking when other people are fearful is just true in any market. It doesn’t even matter what asset class you’re in.TheBiggest returns come from an inefficient market. You need to find something that is not humming along some market that is not working perfectly. If every seller has a buyer that’s like an efficient market, you could still make money, but that’s not where the big returns come from. The big returns come from being one step ahead of the efficient market and finding those inefficiencies and capitalizing on them. We’ve talked about this in single family rentals. I think this was really true for early movers on short-term rentals, for example, that was a very inefficient market for a while. People got great returns. Now it’s a more efficient market. The returns have definitely come back down to earth. So I think that’s just a good policy in general, if you want the outsized returns, you’re going to have to take a little risk and try and get out ahead of what everyone else is doing. You’re going to have to have, do your own research, have some conviction about an investing thesis, and have the guts to go out and actually act on it. But that’s where the big returns come from. It’s not from everyone. You could still be an investor, go out, hit singles and doubles for sure, but if you’re looking for the big swings, that’s where they come from.You have to really understand what the risks are. Be specific, what is the risk and how would I mitigate really put yourself in this situation? What would I do? How would I mitigate risk? And it could be because of a banking relationship. You and I are looking at exactly the same property and it looks like a screaming deal. And so we know red alert, there’s risk. If you can’t find the risk, keep looking. If a return is better than what you can find in the market, you have to figure out what the risk is. But some people are just better set up to deal with certain kinds of risk. I mean, you’re super connected in the real estate industry. Maybe you can get construction or maintenance done cheaper than anybody else. Maybe I have a great banking relationship that I could leverage if some kind of lending risk I was taking short-term lending risk or something like that. So understand the risk and decide are you able to mitigate that risk sufficiently? If not, it might be a deal for someone else but not you wait for the one where you feel comfortable taking the risk.So Doug, we’ve talked about underwriting and the opportunity here for people who want to act on this. I think there’s another big piece of this, which is negotiating with the builders. Right now, as you said, they’re offering maybe 4.99. You said you could get it from 10 to 20%. Is negotiating with a builder for new construction any different than negotiating with a seller for an existing home?Potentially. And so where the opportunity is that I’ve seen is who are builders? They’re not one-off sellers of a home. They are professionals and they have lots of homes. And so that means they repeat good buyers. So I would recommend that you have a conversation. So if you’re going and looking at properties with Lennar through ESA and you’re talking to one of their reps, and you might be talking about it or asking questions about a specific property, but you should ask, what communities do you guys have the biggest discounts? The truth is no builder is out openly marketing where their bestDealCommunity is the cheapest community. Like that’s not good for that community. They’re not doing that. But internally they have different prices and they’ll probably tell you. And then if you introduce yourself as a serious investor and you perform, you are very good to work with and you work through the closing process expeditiously and you tell them, look, I want to do this again. In communities like this, they’ll actually show you, you can kind of start to get treatment as if you were a professional investor and they’ll show you deals early, maybe like a day before they show up in ESSA or in some other more public forum. And so if you want to buy a couple of houses, I think that’s a strategy that could help you do better than the average person.It’s so funny you say that. I have a friend who’s just looking at doing this, and he said that they offered him better terms. I forget exactly something about the rate buy down. If he bought two houses, it’s like they’re doing BOGO deals, right? And it’s interesting. It’s really good. They want to move inventory. And so when they see someone who has the capital to buy multiple properties, they’re much more willing to work with you. Not to say that you can’t get a good deal on a single purchase, I think you can, but that, that’s a really good trick right there.And I think it’s, you just highlighted something that’s different about working with a builder or a professional seller than a homeowner. You’re trying to buy someone’s home. This is a totally non-emotional decision, math problem, zero emotions. The homeowner’s like, no way. I paid this. I raised this. I love this house. I would never sell it for less tax. It’s like, no builders. What is the market clearing price? If you hit it, we go. It’s a much more pleasant and streamlined conversation.Yeah, I don’t think the average home sellers thinking about the time value of money or moving inventory in the way that a home seller is,No.Are there any particular concessions that you think builders are more willing to offer or that you would value the most as a potential buyer?Well, it’s interesting. You can just kind of play with the math and it’s like, look, I mean, it is what it is, but if there’s a lever to push on, it’s the rate that it’s bought down to. It’s a lot less expensive for a builder to buy down a rate than it is to lower the price of a house. Now, I think there’s, depending on the community and where you’re getting things, we are seeing, I mean, market data would tell you homes are selling discounted price to list price. But yeah, buying down rates I think is something that a lot of sellers are a little more open to. And again, just play with your p and l. It actually makes a material difference, the rate that you’re paying for your debt relative to the cap rate that you’re buying into in terms of the net cashflow that you can earn. And so that’s a button I would only press on.Well, thank you so much, Doug. Is there anything else you think our audience needs to know about new construction or anything else you’re seeing in the market before we get out of here?Yeah, one other interesting thing that we did not talk about, and this is something that we are currently seeing in the institutional market right now. So if you look at public REITs, these stocks are trading at like 25, 30% discounts to the value underlying value of the real estate. Meaning the real estate is worth more than the stock. So if you sold all the real estate, you could actually provide an attractive return to the investors of the stock.Are they pricing in declines in the value of the real estate? Is that why the stock?Yeah, and just interest rate pressure where interest rates are thought to be going crazy. I mean, there’s different in different companies, but they’re trading with big discounts, so there’s an incentive to sell properties. Plus these big companies, they always kind of want to be recycling capital. And so we are having some pretty interesting conversations with some of the biggest single family rental owners out there. And what they’re looking to start doing is, again, through esa, they want retail eyeballs. And obviously here at BiggerPockets, we have a lot of eyeballs. And so the more retail eyeballs we can put on these sites, the more interesting it is for these guys to sell. They want to sell occupied homes. So these were like professionally bought, professionally renovated homes that have tenants in them. And in the not too distant future, we should start seeing a lot of those. This is off market supply, proprietary supply that we’re going to be able to provide. And it’s really interesting because they’re occupied and it’s a pretty unique opportunity in the sense that these are large professional investors who, if the house needs $17,000, they don’t do 10, they actually tend to do 20 or more because they don’t want to have the ongoing costs. So the bias is to actually over renovate. So those problems that we were talking about about the carrying costs and the maintenance costs of buying older homes would be somewhat mitigated because you’re buying a house from a large institutional investor. And so I know I can let you know when they hit.Please do. Yeah, that’s another really interesting unique opportunity right now, which is why we have this show, is just trying to stay on top of how things are trading, trying to find those market inefficiencies, trying to find opportunities that the casual observer of real estate is not going to know about. That’s the value we’re trying to bring. So thank you so much for being here and sharing your insights with us, Doug.Yeah, it was fun. Dave. Always good to chat with you.And thank you all so much for listening to this episode of On The Market. We’ll see you next time.