REvolve Real Estate Blog

What makes us skeptical of real estate developers?

Posted by P. Bartash on Jun 28, 2018 6:28:59 PM

Boston Streets-2

Our past several blogs were focused on the who/what/why/how of crowdfunding for real estate development. We’re taking a short break from regular programming to look at a pattern we’ve seen recently in headlines, on message boards, and in almost every conversation with our family, friends, and neighbors about the recent wave of real estate development in Boston. In general, there are three common topics from our discussions with people who are not currently investing in real estate:

  1. Inconsistent opinions about the pros and cons of real estate development
  2. Anecdotes about “the deal that got away.” *This one is a careful mix of frustration and regret, where there was an “opportunity” to invest in real estate back in the day and win big but several factors got in the way (ie. not enough money at the time, too risky, not sure how to make it work, other life priorities took precedence, etc.)
  3. Interest/excitement at the idea that there are new regulations and technologies that are breaking down the barriers to real estate investment and that have the potential to positively influence the relationship between development and the communities where development often takes place
The Truth

The entire world of investment, which includes real estate development, theoretically sits upon a foundation of unbreakable trust – between developers, investors, communities, municipalities, and the people who are subject to the buildings (and socioeconomic impacts) that are the outcome of the real estate investment process. No matter where you fit into this complex puzzle, there is one thing everyone wants – to be included. Wealthy investors want in on the action, working-class families want to be a physical and financial part of the City’s future, and politicians want to foster growth while carving out a place in Boston’s storied history of strong leaders. Ultimately, most people don’t want to be overlooked when it comes to decisions that may affect their community.

The Big Gap

According to most folks “in” the industry, things couldn’t be better! These individuals are concerned about rising rates and surging costs, but also strong believers in the underlying fundamentals that make Boston an attractive market for real estate investment. The City, including its administrative leaders and committees as well as the Executive Office of Housing and Development and Boston Planning and Development Agency (BPDA), are on the same page and seemingly in support of development. The BPDA has a streamlined review and approval process which has turned the corner on a long-held belief that it is incredibly difficult to develop in Boston, which has helped the City attract hundreds of millions of investment dollars. Amazon is seriously considering Boston as the future location of HQ2, rents are up, sale prices are higher than ever, and returns often beat the S&P 500 Index benchmark (11.96% in 2016) and the MSCI All Country World Index (8.48%), which are commonly used to compare the relative performance of an investment. As word of these factors spreads through national channels, outside players are returning to the Boston market (in some cases, for the first time in 20+ years), which further exaggerates competition for land (a major driver of market appreciation). There is intense demand for luxury residences and experiences fueled by an influx of educated, wealthy young people and well-capitalized empty-nesters selling off their suburban homes and relocating into the City. Boston’s unique mix of colleges, technology companies, healthcare centers, financial services, museums, events, and opportunities are essentially irresistible.

On the opposite side of the table, middle-class and poor residents are deeply concerned about the impact of rising housing costs, low school rankings, and forces of gentrification steadily encroaching on their neighborhoods and, ultimately, their way of life as inhabitants of a City whose leaders often refer to it as diverse cultural melting pot. These individuals see the development process as rigged, with developers and officials working behind closed doors to strike deals that line the pockets of the wealthy elite and force many longtime residents to uproot and flee to the suburbs. They watch politicians step in front of cameras calling for answers to the affordable housing crisis and then look out the window to see giant billboards with offers to pay cash for the ugliest homes in any corner of the City. Sure, it would be nice to sell the family home of 30+ years and pocket the gains but work is here and the question remains: is there an affordable housing market anywhere less than 30 miles (or a 90-minute commute) to Downtown Boston? Even for those who attend the community meetings and voice their concerns, the majority of these folks are shut out of the real estate investment world and slowly being shut out of the City they call home.    

This societal division is what we refer to as “The Big Gap.” It’s a unique combination of history, opportunity, demand and displacement that has quickly led to mixed feelings about the broader impacts of development (and the motives of developers themselves). From our point of view, neither side is wrong - the City is experiencing a period of intense growth and it is putting a lot of pressure on residents. That said, we also believe the major concerns cited above are symptoms of a deeper root cause: a lack of meaningful access to the Boston real estate investment market for most of its mid- and long-term residents.

The Ties that Bind

Participation. Transparency. Honesty. When we first started sharing our vision with people who sit on the opposite side of the table, skepticism shifted to curiosity and transformed into genuine excitement at the idea that they too might be able to profit from Boston’s overwhelming growth. We formed REvolve Partners with the goal of building ties that could disrupt the traditional patterns surrounding real estate development by providing access to everyone, regardless of class, education, age, or experience. With crowdfunding for real estate investment, we are finally able to openly offer the opportunity to see through our eyes as we look to revitalize the distressed and forgotten pieces of our City – both its buildings and its people.

With REvolve, ANYONE can invest as little as $500 that our team will then invest in residential real estate opportunities in the City of Boston. This means that the recent college grad can take some of that graduation money and invest rather than dumping it all in a low-yield interest bearing savings account. For those with a dedicated savings who want to invest but are not yet able to meet the high minimums of most private development companies, this is a chance to get started. If you had a chance to invest in real estate but missed the window and can no longer afford to take on high-risk investments, this is the chance to mitigate your risk by reducing the amount of money it takes to begin investing in real estate. Our team manages the entire rehab and development process, from acquisition through sell-out/lease-up, and investors are rewarded through cash distributions generated from rental cash-flows or profit sharing. This structure is carefully designed to work for investors of all types – from those who want to sit back, relax, and collect to those who want to learn the inner works of real estate investment and development without risking their entire life’s savings. As a publicly regulated company, all our activities are on display and fully disclosed to our investors. Be sure to check out our team, philosophy, and approach and don’t hesitate to reach out (either by scheduling a call with one of our leaders or by email) if you want to know more.

If our hunch is correct, and access is the issue, then hopefully REvolve Partners is the beginning of an inclusive real estate investing environment that will help ease The Big Gap that threatens the City we too call home.

 

Topics: Crowdfunding for real estate development, real estate developers, real estate investment, Amazon, amazon hq2, S&P 500 Index, MSCI All Country World Index, Boston market, market appreciation, luxury residences, gentrification, impact of rising housing costs, affordable housing crisis, The Big Gap, Access to the Boston real estate investment market, The Ties That Bind, Participation, Transparency, Honesty, Profit, Crowdfunding for real estate investment, Access to everyone, Low-yield interest bearing savings account, high-risk investments, "real estate investing"

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