085: Finding Great Rental Markets with Dennis Cisterna

On this episode of the InvestFourMore Podcast I interview Dennis Cisterna who is the chief revenue officer of Investability. Dennis also helped found two of the largest rental property lending companies in the country, has flipped houses, owns rentals, has built new houses, and has a history in investment banking. Dennis knows a lot about real estate, and we talk about many subjects on this show. We go over what he thinks about the current housing market, and if there will be another crash. We talk about hedge funds and how their investment into single family rentals has worked out so far. We discuss how to find new markets for rental properties using Investability and much more.

How did Dennis get his start in real estate?

Dennis was thinking about going to law school, and working in the political arena when he saw many of the large donations came from people in real estate. He noticed a lot of people in the real estate industry made a lot of money! Dennis shifted his focus to real estate and got an internship that was allowed him to be a housing market analyst. He then went on to build new houses, flip houses, start lending companies, buy his own investments, and work at a real estate technology company: Investability.

Why does Dennis love real estate so much?

Dennis loves the money you can make with real estate, as well as all the different aspects and jobs you can have in the industry. One thing he really enjoys about real estate is you are dealing with a tangible asset. When you buy a house you have a real asset, not a piece of paper or an electronic receipt like you have with stocks and bonds. Dennis built a lot of houses in Southern California and he can go back and see what he created. He also loves meeting new people, and real estate is a people oriented business.

What does Dennis think about the housing market?

Dennis is quick to point out that the entire housing market is not on fire, just a few parts of the country. There are many parts of the country with stable prices or even prices that are still declining. You cannot view the housing market on a national level, you must view it locally to predict what may or may not happen. Dennis thinks some markets like the Miami condo market are starting to slow down, while other markets show no signs of stopping.

One very interesting fact is the U.S. is currently building homes at the same pace it did in 1961 (200 million people in the US in 1961 versus 340 million people in the US now). There are not enough houses being built to meet current demand in many markets. The low supply of homes has cause many markets to increase in value tremendously. I asked Dennis if he thinks we will see a market crash anytime soon and he does not think so. He feels the market dynamics are much different now than they were before the last crash. Lending guidelines are tougher, and there are fewer homes for sale. He also thinks that eventually affordability will come into play causing prices to stabilize, especially if interest rates rise.

How are the hedge funds doing with their single family investments?

After the housing crisis many hedge funds bought thousands of single family rental properties as investments. There have been numerous articles about the success of these investments, and some people think the hedge funds are in trouble with their investments. Dennis has a lot of inside knowledge about the hedge funds investments thanks to his background. He says that the properties are actually performing better than the hedge funds anticipated they would. The vacancies are lower, the returns are higher on the rents, and prices have increased more than they ever thought they would. He sees no reason why the hedge funds would start selling off their properties, and many new hedge funds are starting to invest in single family rentals.

How does Investability help investors find new markets to buy rental properties in?

I looked at many markets when trying to decide where to buy rental properties. I bought my first properties local in Colorado, but the market prices rose too much to make rentals a good investment here. I used Investability a lot when researching new paces to invest. I liked the Florida market, and although I never ended up buying out-of-state rentals, I still like that market a lot. Dennis talks about what markets he likes for rentals and how Investability can help find those markets.

Investability is like Zillow because it has homes listed for sale, but the site also includes numbers for rental properties. Investability includes the rent yield, cash flow, potential rent amounts, expenses and more on most properties for sale in the U.S. They also have their own exclusive listings that are not for sale anywhere else.

You can check out Investability here.

How do you invest in out-of-state rentals?

Finding a great market to invest in is just one part of buying out-of-state rentals. When I buy properties I want to make sure I am getting a great deal, have a great property management company, and have great contractors to fix up the houses.