Gen Z Is Diving into Real Estate
Thanks to changes in technology and the economy, small investors have become much bigger players in real estate. Of course, housing prices just fell for the first time in 11 years.
Here are today’s highlights:
The banking crisis is likely to have an impact on commercial real estate.
It seems like every business is building its own studio space to create content.
TikTok may get banned, but it’s already broken the standard business model of social media.
Here’s an update on the guy who asked ChatGPT to help him start a business: He thinks he’s going to get rich.
Gen Z is turning to real estate as an escape from the traditional 9-to-5: “A seismic change is underway in real estate: Individual investors now have the ability to purchase and manage properties from thousands of miles away. In the wake of the Great Recession, private-equity firms began scooping up thousands of distressed single-family homes at dirt-cheap prices. They needed technology to efficiently manage all those properties scattered around the country. Now the companies behind these tools are making them available to smaller investors. Companies like Mynd and Roofstock cater to large institutional investors and the smallest buyers, enabling both groups to buy homes remotely and manage them as rentals without ever even stepping through the front door.”
“Soli Cayetano finally had some time on her hands. The soon-to-be college graduate was stuck at home in the spring of 2020 and coasting through Zoom classes. Normally her part-time job leasing out office space kept her busy, but those services weren't exactly in high demand at the time.”
“So after doing a bit of research and dipping into her savings, she flew from her home in the San Francisco Bay Area to Cincinnati to check out her big pandemic purchase: a two-bedroom house for which she paid just under $100,000. She was 22.”
“Cayetano had no plans to move to Ohio. Instead, she did what many real-estate investors do: She touched up the property and threw it on the rental market. After the home sat vacant for a couple of months, she fired her property manager and found a tenant by listing the property on Zillow and paying an investor friend in the area to do showings.”
“Almost three years later, she not only manages that first property from her home in California but has built a mini real-estate empire of 36 units.” READ MORE
Meanwhile, home prices just fell for the first time in 11 years: “The first year-over-year drop in home prices in more than a decade and a dip in mortgage rates snapped a year-long streak of declining monthly home sales, showing the effects of the Federal Reserve’s campaign to raise interest rates. Sales of previously owned homes, which make up most of the housing market, rose 14.5 percent in February from the prior month, but were down 22.6 percent from a year earlier, the National Association of Realtors said Tuesday. Sales had decreased for 12 consecutive months through January.”
“Buyers benefited from a slight improvement in affordability as home prices ticked lower and mortgage rates eased from a 20-year high touched last fall.”
The national median existing-home sale price fell 0.2 percent in February from a year earlier to $363,000, the first year-over-year decline since February 2012. Median prices, which aren’t seasonally adjusted, were down 12.3 percent from a record high in June.” READ MORE
There’s a GoFundMe for the retirement-age couple that owns a star-crossed sandwich shop in Phoenix. As we highlighted on Monday, the viability of the shop is now in doubt because of a nearby homeless encampment. (Thanks to Carey Smith for calling my attention to the fund.)
Here’s the whole story.
And here’s the GoFundMe.
The banking crisis isn’t helping commercial real estate: “The fallout from the recent banking crisis spurred by the collapse of two banks — and concerns about the health of a third — is bubbling up in the market for commercial real estate lending, as borrowers fear that banks will pull back. That could slow down construction activity and increase the likelihood of a recession, analysts and real estate experts said.”
“Midsize and regional banks like Signature and First Republic not only provide the bulk of commercial real estate loans to businesses, they are also part of a far bigger market. Banks typically package the loans they make into complex financial products and sell them to investors, allowing the banks to raise more money to make new loans.”
“Commercial real estate contributed $2.3 trillion to the nation’s economy last year, according to an industry association. And because the industry hasn’t fully rebounded from the blow dealt by the pandemic, analysts worry about a fresh slowdown.”
“‘It is a perfect storm right now,’ said Varuna Bhattacharyya, a real estate lawyer in New York with Bryan Cave Leighton Paisner who mainly represents banks.” READ MORE
Even banks are designing their own studio spaces to create content: “Americans threw themselves into producing photos, videos and podcasts for social media during the homebound portions of the pandemic. Now, as workers return to the office, businesses are turning into content creators. And many are adding in-house production and broadcast facilities to pull it off. Companies are spending hundreds of thousands of dollars to outfit office space with acoustical paneling, lighting rigs and recording equipment, and some are building broadcast studios modeled on the ones news stations use.”
“Firms in a wide variety of industries — even ones not known for being trendy, like banking — are getting in on the act. In the process, some are saving millions of dollars that they would have spent for others to create content for them.”
“Truist, another banking company, went all out on a 5,000-square-foot production and broadcast studio at its headquarters in Charlotte, N.C., created with the assistance of architects at Perkins & Will and some lighting and acoustical consultants.”
“The space has a newscaster-style desk in front of a backdrop made of movable light boxes with LED backlights that can be changed to display photos or the company’s logo, depending on the segment being filmed. There are editing bays for post-production work, a makeup area and a green room. The studio’s staff is part of an in-house creative agency.” READ MORE
TikTok has already broken social media: “TikTok’s 100m-plus users in America fret that their government is preparing to ban the Chinese-owned platform on security fears. Their anguish contrasts with utter glee in Silicon Valley, where home-grown social-media firms would love to be rid of their popular rival. With every grumble from Capitol Hill, the share prices of Meta, Snap, Pinterest and others edge higher. TikTok’s fate hangs in the balance. But what is already clear is that the app has changed social media for good—and in a way that will make life much harder for incumbent social apps. In less than six years TikTok has weaned the world off old-fashioned social-networking and got it addicted to algorithmically selected short-form video. Users love it. The trouble for social apps is that the new model makes less money than the old one, and may always do so.”
“Short-video apps are also hampered by weaker targeting. For audiences, part of the appeal of TikTok and its many imitators is that the user need do no more than watch, and swipe when they get bored. The algorithm uses this to learn what kinds of videos—and therefore ads—they like.”
“But this guesswork is no substitute for the hard personal data harvested by the previous generation of social networks, which persuaded users to fill in a lengthy profile including everything from their education to their marital status.”
“The upshot is that many advertisers still treat short-form video as a place for loosely targeted so-called brand advertising, to raise general awareness of their product, rather than the hyper-personalized (and more valuable) direct-response ads that old-school social networks specialize in.” READ MORE
The Washington Post analyzed what tech companies have been saying in their layoff memos: “We took a look at 48 such missives issued by companies ranging from massive Microsoft to small-scale start-ups, searching for insights into how tech leaders spin their stories and justify their decisions. Whether they use 200 words or 2,000, their memos bear remarkable similarities. They point blame inward but also outward, for instance, alluding to the pressure of larger economic forces. They urge a positive outlook despite momentary clouds. And they rarely actually use the word ‘layoff.’”
“A surprising number of these communications address workers using a corporate pet name, a practice that has roots in the ancient tradition of using one’s surname to indicate one’s profession, according to Ayelet Fishbach, a professor at the University of Chicago’s Booth School of Business. Like Potter or Mason in olden times, terms like Googlers and Vimeans are used today to connect people to their jobs.”
“But emphasizing communal bonds can be jarring in a layoff announcement, Fishbach said. Company leaders are ‘trying to remind people that they are family members — except that some people are no longer part of the family.’”
“In addition to using pet names, some memos urge surviving workers to offer emotional support to their dearly departed colleagues. Salesforce, for example, suggested offering “compassion and love” when the business software giant announced layoffs of 10 percent of its workforce earlier this year. Udemy, an online learning and teaching platform, told employees to hold ‘our departing Udemates … close to our hearts.’”
“In memo after memo, tech leaders project a sense of confidence and optimism about their company’s future. The goal, Fishbach said, is to reassure investors and the public, but also to tamp down fear among remaining workers. Otherwise, they might get ‘the sense that if you didn’t lose your job today, that you are next in line.’” READ MORE
A startup called ReturnQueen will handle those annoying online returns: “The startup, based in New Jersey, is aiming to be the full-service middleman of online returns, streamlining the process for consumers. The company, which launched last June and caters to the Boston area, is app-based: Shoppers download ReturnQueen, link it to their Gmail account, and the program uses encrypted algorithms to scour their inboxes for purchase invoices (and nothing else, they promise), which it sorts by how soon the return deadline is coming up. Customers can then select which products they want to return and schedule a date and time for a ReturnQueen driver to pick it up. No need to repack or print out any return labels.”
“ReturnQueen employs about 25 people in the Boston area, which was one of its first markets. The startup now operates in 19 states and services about 10,000 zip codes — more than 450 in Massachusetts. The app now has 12,000 registered users, and 2,000 of the app installations have been from Boston.”
“The app allows customers to pay $9 per pickup, or opt for a membership for unlimited pickups ($20 a month or $100 a year). It’s not quite free returns, but it probably costs less than keeping something you don’t actually want.”
“‘One sweater that you don’t return, one blender, or whatever it may be, honestly pays for your entire year membership of unlimited returns,’ Katz said.” READ MORE
Here’s an update on the guy who asked ChatGPT to help him start a business: “Jackson Greathouse Fall, a brand designer and writer, took to Twitter last week to share a prompt that he gave the chatbot. ‘You have $100, and your goal is to turn that into as much money as possible in the shortest time possible, without doing anything illegal,’ Greathouse Fall wrote, adding that he would be the ‘human counterpart’ and ‘do everything’ that the chatbot instructed him to do. After a number of subsequent queries, the bot instructed Greathouse Fall to launch a business called Green Gadget Guru, which offers products and tips to help people live more sustainably.”
“Thanks to ChatGPT — along with other AI tools like image-generator DALL-E — Greathouse Fall said that he managed to raise $1,378.84 for his company in just one day, though Insider could not verify that amount.”
“The company is now valued at $25,000, according to a tweet by Greathouse Fall. As of Monday, he said that his business had generated $130 in revenue, though Insider was not able to verify that amount or how it was generated.”
“He also used AI to build a professional-looking website for his business. The site includes mock products like green gadgets and sustainable kitchenware. He said that he is open to manufacturing products or selling existing products for commissions, if the chatbot tells him to.”
"’We're actively exploring partnerships to sell some of those things,’ he told Insider in an email. So far, he's happy with the results. ‘TLDR I'm about to be rich,’ he tweeted.” READ MORE
THE 21 HATS PODCAST
I Can’t Have a Handle on Everything: This week, Jay Goltz and Laura Zander talk about the limits of their own management. Once a business gets past a certain size, no owner can do everything or even be aware of everything. But where do you draw the line? Does the owner need to be conversant with most aspects of management, marketing, and finance to oversee the business? This came up, in part, because Jay told us recently that his framing shops routinely ask customers how they learned of the business and that a recent review indicated that his social media efforts were not having an impact.
But when asked about those efforts, Jay wasn’t entirely sure what they consisted of or if they even existed. Perhaps surprisingly, it also became clear that Jay wasn’t all that interested in learning more. It was working well enough, he’d concluded, and that was all he needed to know. And that’s the starting point for today’s main conversation. Along the way, we also address such questions as: Where’s the line between being a manager and being a therapist? Do owners need to be passionate about their businesses? What does the phrase “people over profits” really mean? And while “the customer is always right” has become a cliche, is it really a good policy?
You can subscribe to the 21 Hats Podcast wherever you get podcasts.
Thanks for reading, everyone. — Loren