My favorite scene from the original “Wall Street” movie was when Bud Fox (Charlie Sheen) is in the boiler room, frenzied activity all around him from brokers pitching penny stocks to puny investors, and his phone rings. It’s Gordon Gekko (Michael Douglas), who says just a few words, and then Bud hangs up the phone with a dazed look on his face. His pal in the next cubicle looks at him and says, “The Elephant.”
The elephant is the monster client—the life-changing client. In the case of the movie, the elephant was a crook who compelled his broker to commit felonies, so that’s where my analogy diverges from the movie. There are good elephants, too, and a whole herd of them is coming our way.
Specifically, a herd of private equity firms, hedge funds and REITs are stampeding in our direction. I have been in contact with several of these elephants and have found a refreshing combination of enthusiasm for the housing market and humility regarding their need to understand it. These folks are smart. They know what they don’t know. In years past, when they hungered to take positions in the housing market, they did it their way by inventing “instruments” that enabled them to “trade” in housing. These are the mortgage-backed-derivative-credit-default-swap-poker-chips that brought down our financial system a few years ago. Many of the elephants have come to the realization that they no longer want to trade in housing poker chips, but they want to actually own the asset of American housing.
They see the foreclosure crisis. They see homeownership rates coming down and rental household creation going through the roof. They see rental rates being pushed up by this increased demand. They see, in short, a huge opportunity, but they know what they don’t know, and they don’t know residential real estate.
So they are looking for people who do, and are having a tough time finding them. Sure, our industry knows how to list and sell homes, but can we represent housing as an asset class? Not really. Not when less than 2% of residential agents can crank out an accurate cash flow statement or define the term Cap Rate. The elephants are coming, but we are not ready for them.
My company, OwnAmerica, is fixing that. Our mission is to build a national network of professional real estate investment specialists, and we are moving our timetable up in a big way.
We made the decision just recently to slash the price of our Investment Certification Program (OICP) from $349 (which hundreds of agents willingly paid since our launch just a few months ago) to $149. This is a loss leader price, but we need to be ready for the elephants when they arrive, which I expect to be in the first half of 2012.
Imagine this: institutional investors, driven by their thirst for opportunity and encouragement from the federal government, want to acquire hundreds of thousands of homes and condos to be converted into rentals. Imagine buy-orders for thousands of homes at a time. Think of this as the other side of the REO coin, only this time the client is aspirational, not distressed. This time they need to put a tenant in place and hire a property manager for the long-term, and eventually will give a sell-order.
If you look back and (a) wish you got in on REOs before the rush, or (b) did, and made a fortune in the last few years, I am sounding the next opportunity alarm. The elephants are coming. This is your wake up call. Go to work.
Greg Rand is CEO of OwnAmerica.com.
For more information, visit www.ownamerica.com.
