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Welcome to the Paul Morris Podcast Radical Wealth Plan and wishing you all a happy new Year. And again thanking my viewers and subscribers because we have crossed the 1 million download mark. And I am super grateful to everyone involved, especially the folks at home listening and enjoying the podcast. And we're going to do a pretty quick episode today talking about something that has hit the news. It is finally something that Democrats and Republicans can agree on, dealing with the issue of institutional homeowners. And that is big institutions, including real estate investment trusts and private equity firms that are buying up single family homes so that they can rent it back to Americans. And how does that really impact the American dream? First of all, let's talk about what is a reit. A REIT is reit. The. These are corporations, large corporations that are traded on stock exchanges like the New York Stock Exchange. The two largest are Invitation Homes and American Homes for Rent. And private equity firms are likewise buying up large swaths of single family homes and again renting them back to the American public. Is that a good thing or is that a bad thing? Is this something that we want government intervention on or not? And also, let me, let me quickly define what a private equity firm is. A private equity firm is not a publicly traded company. It's basically a group of very large investors. You could look at it like a group of a club, an exclusive club of very wealthy families. It also can be pension funds and other institutional investors that pull their money together and they get behind fund managers that are experts at buying parts of companies or whole companies. And in this, this case, they also are buying single family homes. Some of the biggest and most well known are kkr, Apollo Investments, Blackstone, these are sort of the Carlisle Group. These are four of the top private equity firms and they have massive holdings. So just to give you an idea of the size of some of these private equity firms, Blackstone, which is clearly the largest, has over $1 trillion of assets under management. And these assets are, are not publicly traded. So they don't have the same regulations. They have regulations, but not the same regulations as other publicly traded stock companies have. And they don't have the same transparency that is required for a publicly traded company. So let's first look at the size of the issue. Invitation Homes owns roughly about 85,000 homes. And American Homes for Rent owns about 60,000, some say 61, 162,000 homes. Just to give you a frame of reference for that, there are somewhere in the mid 80 million, 85 million single family homes in the United States. So the combined interest of these two particular firms, they have, they have less than basically 1/10 of 1% of the housing stock each. So 85,000, 86,000 homes, 1/10 of 1%, 60, 65,000 homes, obviously slightly less than 1/10 of 1%. Both combined 2/10 of 1% of the American housing stock. Now when you take all of the very large investors together, you go all the way down to folks that own 100 homes or more and all the way through what they consider very large investors that own 1,000 homes or more. But you go all the way down to 100 homes or, and you're still looking at roughly less than 4% of the housing stock nationwide. So in real numbers, what we're looking at is investors that own 100 homes or more control about 2% of the total housing stock. And that's according to CNBC that quoted John Burns research. Even though 100 homes seems like like a large portfolio, it's still not really an institutional portfolio. The institutional portfol, like the American homes for rent that have 62,000, if you take it, if you dial it down to a thousand homes, those are more institutional players. And those institutional players hold less than about a half a percent of the total stock of American houses. So does that really present a problem or is this just political fodder that folks can get, you know, Democrats and Republicans can get behind this? Because does this really disrupt the American dream? Okay, so just when I was getting into the overall amount of housing Stock that, that REITs and private equity firms hold, it sounds, you know, it's sounding very small, especially when you get in the thousand plus being, you know, definitely under 1% of the total housing stock. If you look at certain Sunbelt cities, you see a totally picture like Atlanta, Phoenix, Tampa, Jacksonville, Charlotte is another one. A place like Atlanta is reported that up to 25% or more of all single family homes are owned by the major players. Now that is obviously a massive chunk of the housing stock. And that's where owning a single family home, you're really competing against the big guys in terms of really the American dream. So is the American dream available in some of these Sunbelt cities or are we getting crowded out by these giant investors? And there are lots of reasons for this concentration and really it gets down to return on investment. These big firms are finding a much, much better return on investment on the sun belt homes. And it's for a bunch of different reasons including, you know, lots of job growth, lots of opportunities for young people to, to go and build a family and go to where housing is less expensive. It's also less expensive to build in the Sun Belt. The housing stock is, is newer. Another, another reason is the opportunity. Sort of post crisis financial crisis is, is the ability to buy homes in bulk because these giant buyers are not buying one home at a time. Or if they are, it's very, it's very steep climb to get to a 60,000 home inventory when you're buying one house opposed to the opportunity for bulk buying. What is bulk buying? It's when a bunch of homes are foreclosed on at one time or large portfolios are acquired by one company, aggregating them all into a single reit. So these opportunities are much more plentiful in the Sun Belt. And overall it just gets back to return on investment. The return on investment is there's lots more jobs and population growth. People can afford to, people can afford more money to rent. And overall the housing stock is much less expensive than other places. So all in all, the ROI is what's driving these big institutional players to go into these areas. The reason why this came up is I got a lot of inquiries and people are really asking me, you know, sort of number one, is this a real problem, is this a real thing or is it just, you know, political fodder? And so my answer to that is on a national basis, it's not really a thing. And yet when you look at certain areas, a half a percent nationwide, you know, a half a percent in any particular area, not going to really impact demand or, or supply in any great way. That's going to impact pricing and force out the American dream. When you get into areas that go up to 25%, that is a dramatic difference between a half of 1%. That's 50 times greater concentration than the nationwide concentration. And do I think that is going to impact supply and demand and therefore the ability for families to get into a home and, and first time home buyers? Absolutely it is. At what point, I can't tell you exactly what point that's going to flip, but you know, definitely somewhere in the 10% range is already going to start to have an impact. More than 10% ownership by, by major corporations, it's going to have, is going to start to have a really huge impact. So I do believe that it is an important time for both political parties to look at this. And while of course I favor a free market and you look at, you look at private equity, they're not getting boxed out of, you know, particular industries. There's no one saying, you know, Private equity or, or the stock market holds too much of big Pharma or too much of agriculture, you're not seeing that sort of pushback. When you push into, into real estate, it becomes a very different thing because we really are talking about the American dream and that hits very close to home for Americans. So the bottom line is I really do believe that this is a place where politicians are doing the right thing by stepping in and taking a good hard look at, you know, where, where should we put up the guardrails, where, at what point in time should we allow big corporations to box out the American dream? And I really do think that, you know, even when you get in excess of 5%, the 5% territory and higher really starting to cause some, some serious issues that will have longer term impact than what we're expecting right now otherwise. Free market all the way. But that's where at some point in time you need regulations, there are certain industries that just need to be regulated. You don't want air traffic control for example, to be totally privat because when you're looking at profit only, you know, companies might cut corners in areas of safety. And that's, that's a, that's a good example, pretty non political example of a place where you really do want the faa, federal aviation to step in and make sure that, that, that you know, our, our aircraft are safe flying and we want to protect the American dream. So while I firmly believe in investing in real estate for families, it's a great thing for companies to do, certainly a great thing for individuals to do. When you're getting up to, you know, over 100 homes, it's starting to become more of a really high level professional investor. And I do think once you're in neighborhoods and areas where you're in excess of 5% of institutional investors coming in, it is time to pump the brakes in those particular areas. And lastly, another question that I've got on the subject is to what degree are foreign investors allowed to invest in U.S. homes and in U.S. real estate? Could a foreign, foreign sovereign, for example, could a foreign country large wealth from, from outside the country, including you know, countries that the US is not particularly friendly with. Could they get into these companies, private equity company, could they buy REITs that, that hold tremendous amount of U.S. housing stock? And the answer is there are very, very narrow restrictions on that. The broad answer is yes they can and yes they are. The narrow restrictions are only around military bases where, where it could be potentially sensitive for national security. But there is no ban and no regulation. In terms of keeping Americans wealth in real estate in America and keeping the ownership of real estate with Americans there at this point in time are no guardrails whatsoever. Furthermore, people have asked, you know, to what degree is foreign ownership really an issue? If it is even an issue, to what degree is there foreign ownership of U.S. property? And it's a very, very difficult number to, to pinpoint in terms of home ownership. National association of Realtors estimates that somewhere between 50 and 80,000 homes over the last year have been sold to foreigners, not necessarily foreign corporations. And that is a very, very, very small number of homes relative to the number of sales generated nationally. So foreign buyers really account for very, very little of that. In terms of housing stock, however, huge sovereign funds investing in giant private equity firms, there's. There they are, they are directly and indirectly controlling a lot, a lot more homeownership. Remember again, order of magnitude, the really big firms all together collectively, you know, still own less than one half of 1%. And then, you know, it would be a fraction of that that is held by foreign ownership. But the idea of, you know, foreign nationals controlling rental rates and, and, and making decisions about housing here in the US Is something that, that causes people concern. It doesn't seem like the numbers at this moment in time rise to a level of serious concern, however, again, all you have to do is look at certain concentrated areas and you look at a place like Atlanta where more than 25% of the housing stock is owned by large institutional investors who have funds from. We don't know exactly where this is. This is where, you know, the conspiracy theorists start to gain a little traction because these are, these are large numbers and we don't really have a great way right now of tracking that. So these are important things to be aware of. That's what we're trying to do in the podcast today, is raise awareness. I would love your comments on this, this topic. It's a, it's a controversial one. And what we're looking to do on this podcast is to bring awareness and also to ask questions of our amazing listeners and see what your thoughts are. Is this an area where, you know, government regulation. Stay out of it. Is this an area where, where we need much stronger government regulation? And really, as I always think there's at some point there is, and at some point there isn't. And you know, when is that point? Have we reached that point now? Is it ever a good time to allow foreign nationals to own large swaths of real estate in the United States and in major corporations? For that matter. So looking forward to hearing your input on what is no doubt a very important topic. And I really appreciate everybody tuning in to the Paul Morris podcast Radical Wealth Plan. We hit on a great subject today and looking forward to all of your comments. And thank you again for all of your downloads and for listening. Sam.