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Trends Watch: Residential Real Estate

Sep 10, 2020

EisnerAmper’s Trends Watch is a weekly entry to our Alternative Investments Intelligence blog, featuring the views and insights of executives from alternative investment firms. If you’re interested in being featured, please contact Elana Margulies-Snyderman.  

This week, Elana talks with Chris Jones, Principal and Co-Founder, Aloha Capital.

What is your outlook for alternatives?

Speaking from Aloha’s perspective as a private lender to real estate investors on residential properties, our outlook is cautiously optimistic and overall positive, despite the current pandemic.  As a fund manager, we would echo the same sentiment.

If you look at U.S. residential real estate through various recessions going back 60-70 years, you can substantiate that it has been one of the most stable asset classes.  The Great Recession is the exception.

Currently, in a number of housing markets around the country, there is a supply-and-demand imbalance with a shortage in affordable housing and generally an overdevelopment in luxury housing.  As a lender to real estate investors, we are helping cure this issue and improve America’s aging housing stock. There are fewer competitors focused on this, versus in the hedge fund and managed futures industries.

What are the greatest opportunities you see and why?

We see the greatest opportunities in residential housing. The non-bank, secured lending approach is Aloha’s core value proposition.  Home renovators accounted for 7% of real estate sales, year-over-year, through the early part of 2020. This is both a meaningful percentage yet not an outsized number, so there is still ample room for growth.

When real estate investors go into the markets and revamp homes, they improve neighborhoods and make the properties appealing to a wider array of buyers or renters. There are many U.S. residential real estate markets which are benefiting from this business model.  

What about the biggest challenges you face?

COVID-19 has caused things to get off-track macro economically, which could have some trickle down effects in real estate, along with other U.S. business sectors. We don’t know exactly how this will play out yet.  Of course, the equity markets have already had a sizable correction with a quick turnaround.

The U.S. government stimulus is a major factor in this recovery and shoring up the ailing job market.   These various unknowns mean we have less visibility, but based on what we’re seeing and producing right now, we again are cautiously optimistic.

What keeps you up at night?

The political and social unrest that is occurring in our country right now.  It will clearly take some time to work through the reckoning of these significant social and economic issues that have deserved attention for a long time in our society.

Also, it’s alarming that America’s standing globally has taken a big hit in the recent past.  If we don’t effectively address our cultural concerns, problems such as the wealth gap, reduced globalization and social unrest could affect the economic landscape in unforeseen ways.

The views and opinions expressed above are of the interviewee only, and do not/are not intended to reflect the views of EisnerAmper.

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Elana Margulies-Snyderman

Elana Margulies-Snyderman is an investment industry reporter and writer who develops articles, opinion pieces and original research designed to help illuminate the most challenging issues confronting fund managers and executives.

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