October 24, 2017

JF1148: Which Markets Have The Best Rental Yields? With Dennis Cisterna

With a background in just about every area of real estate, Dennis can tell you just about anything you want to know. Currently the Chief Revenue Officer for Investability, he can provide you with everything you need as a SFR investor. They run many reports, one of which can tell you where the best rental markets are. If you enjoyed today’s episode remember to subscribe in iTunes and leave us a review!


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Dennis Cisterna Real Estate Background:

  • Chief Revenue Officer of Investability Real Estate, Inc., an online marketplace for single-family residential property investors
  • Hosts a weekly podcast, The Real Investor, to help real estate investors become more efficient and empowered in the residential investing space
  • Has over 16 years experience and leads all revenue-related functions, including sales, marketing and strategic planning.
  • Based in Denver, Colorado
  • Say hi to him at https://www.investability.com/
  • Best Ever Book: The First 100 Days

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Joe Fairless: Best Ever listeners, welcome to the best real estate investing advice ever show. I’m Joe Fairless, and this is the world’s longest-running daily real estate investing podcast. We only talk about the best advice ever, we don’t get into any fluff.

With us today,  Dennis Cisterna. How are you doing, Dennis?

Dennis Cisterna: Doing great, Joe. Thanks for having me.

Joe Fairless: My pleasure, nice to have you on the show. A little bit about Dennis – he is the Chief Revenue Officer of Investability Real Estate. You can go see his company’s website at Investability.com, a link is in the show notes page. He also hosts a weekly podcast, The Real Estate Investor to help real estate investors become more efficient and empowered in the residential investing space, which lo and behold ties into Investability’s platform, which is an online marketplace for single-family residential property investors. Based in Denver, Colorado. With that being said, Dennis, do you wanna give the Best Ever listeners a little bit more about your background and your current focus?

Dennis Cisterna: Yeah, I’m happy to. I have been in the real estate investment sector for my entire career, which is almost 18 years now, and I have held a variety of positions, starting out as a housing market analyst, I’ve been a homebuilder, a land developer, an acquisitions guy, an investment banker, a lender, and now running this comprehensive platform for real estate investors, focused on the single-family in the residential investment space.

I have done it all and seen it all, and been in up markets and down markets, and I think we’re in a very unique spot in real estate’s history right now, where I think there’s a tremendous amount of opportunity right now to invest in a lot of markets, and I think the long-term outlook for real estate investing as an asset class when it comes to these residential properties is better than it’s ever been.

Joe Fairless: Why do you say that?

Dennis Cisterna: Well, you have a confluence of different factors going on that are both economic and demographic where we have an economy that’s been in a resurgent form for 6+ years where we’ve added back all the jobs we lost during the recession plus some. We have a nation that continues to grow from a population perspective, and yet we’re not adding houses to keep up with that demand; there’s a big inventory shortfall, which in and of itself would be a good opportunity for investors, since somebody always needs a place to live… But when you factor a lot of these other market constraints like a lack of available financing for a large percentage or the market, the fact that people aren’t saving as much money as they need to because they’re spending more money on housing – all this leads towards a longer-term rentership for this country more so than ownership.

Joe Fairless: Your background – holy cow! You mentioned like seven different roles that you’ve had… You certainly have a lot of different reference points throughout your career you can pull up in your mind and say “Okay, based on my experience as a homebuilder, this is an approach that I learned”, and as an investment banker, as a lender… I was trying to write down all of them, so say those again, will you? Because I was writing them down but I couldn’t type fast enough. I’ve got homebuilder, investment banker and lender.

Dennis Cisterna: Housing market analyst, land developer… I’ve also, probably like a lot of listeners in your audience, done a lot of direct investing myself, flipping properties and having rental properties as well.

Joe Fairless: Okay, let’s talk a little bit about what your company does now, and then we’ll back into some of these other jobs that you’ve done and how that applies to what you’re doing now.

Dennis Cisterna: Sure, absolutely. Investability is part of a larger publicly-traded company called Altisource Portfolio Solutions. Altisource is a large, vertically-integrated real estate service provider. They acquired Investability and our sister company called RentRange, which is a data analytics company, to be able to expand our presence in the real estate investment sector, and to be able to offer a lot of those services that they already had in house to this growing class of investors.

Investability not only leverages our existing data suite of products and our existing real estate brokerage, but it also takes advantage of a larger suite of services as part of Altisource. So whether you’re looking for your initial market research and analysis, or you’re looking to buy your first home or sell your investment property, or anything in between, we are a comprehensive service provider. So data company, brokerage, general contractor, property manager, title company, insurance company… We do it all.

Joe Fairless: And what is your specific role?

Dennis Cisterna: The Chief Revenue Officer – I run all of our sales, our marketing, our strategic planning, and I focus more on serving our larger institutional clients, guys that own 500+ houses and are continuing to expand their portfolios, where a lot of our solutions are geared towards smaller investors as well.

Joe Fairless: Okay, so an ideal smaller investor — how do you define smaller investor first off, and your ideal smaller investor is looking to do what with you?

Dennis Cisterna: A smaller investor is someone that owns between three and ten properties and is looking to either grow their portfolio or become more efficient at the properties they do own. When it comes to smaller investors, what most folks do with us is they purchase our RentRange reports which gives you an estimate of what your property should be renting for using our proprietary modeling and algorithm. So think of  a rentals estimate on steroids, where there’s more data in it, it’s used by rating agencies and Wall-Street investors to make decisions about what their properties should rent for or what the properties that are secured by securitization should rent for… And it makes sure that you’re maximizing your rental value, not under-charging through your properties.

Other folks will come to us for something as simple as just testing out if they have the proper property insurance for their investment property. Other smaller investors will come to us looking to either expand their portfolio or maybe trim the fat away from it and trim down what they hold.

Joe Fairless: How much does a RentRange report cost?

Dennis Cisterna: $14, and the more you buy of them, the cheaper it is. I think it’s pretty reasonable. If I can figure out a way to let your listeners understand how they can essentially charge an extra $25/month, it’s certainly worth that $14 for that report.

Joe Fairless: That’s a no-brainer, yeah. Now let’s talk about your different types of experience, because that truly is unique, or at least it’s not as typical. Why aren’t you still building homes, if you said earlier we’re not adding enough homes to keep up demand? It sounds like a pretty good business to be in.

Dennis Cisterna: It is, but it’s a tough business to be in. The reason I’m not building homes is because basically the entire home-building market imploded in 2007-2008, and myself along with about 93% of my colleagues that were employed by large private and public builders were laid off. That market didn’t even come back into any kind of real production until probably about two years ago, and even then they were still building at a fraction of what they should. And it’s not the builders’ fault necessarily, because part of the problem here is that there needs to be land that is available to them at a reasonable price, and then they need to build a reasonable house, and a lot of the publicly-traded homebuilders got absolutely destroyed prior to the recession, because they took on too large of land positions, kept building bigger and bigger houses when there was no real organic demand for it… It was just kind of MacMansion theory of building a bigger house on a smaller lot, and that was a way for a homebuilder to maximize their revenue, but obviously at the end of the day those properties need to move off their balance sheet and into a homeowner’s hand, and that became harder and harder to come by.

Now you have builders building at a much slower pace. In fact, we’re building the same number of single-family homes this year as we did when John F. Kennedy was in office, and at that time the population of the U.S. was only 200 million, not 340 million.

Joe Fairless: Wow, where are you getting this data from?

Dennis Cisterna: That information is available at the Census Bureau; a lot of it is tracked through the Department Of Housing And Urban Development.

Joe Fairless: Got it. So you just go to census.gov?

Dennis Cisterna: That’s right. I think they have a housing tab that you can look under that will give you a ton of that information.

Joe Fairless: It shows how many permits are being pulled… Cool. I have done that, and it’s definitely a good resource, especially if you’re looking for a particular submarket to see what type of competition you’ll have.

Dennis, based on your experience in real estate and wearing a lot of different hats, what is your best real estate investing advice ever?

Dennis Cisterna: Well, I learned this piece of advice from Bob Toll, who is the founder and former CEO of Toll Brothers, which is one of the largest luxury homebuilders in the country… He told me “No matter what you’re looking at, any kind of real estate, you can’t fall in love with it, because then you are prone to make bad investment decisions.” That is something I’ve stood by my entire life. No matter how attractive something might look, you have to have the ability to be able to say no if everything doesn’t line up the way you need it to, and that’s something that I think a lot of amateur investors have a problem with – really showing that restraint when necessary.

Joe Fairless: As an investor yourself – you said you do direct investing – what’s the last deal that you did?

Dennis Cisterna: The last deal that I did – I bought a piece of an 80-unit portfolio of single-family properties in Indiana. It was a portfolio that a relative of mine owns, and they needed to liquidate a portion of that to bring some cash out, so I was able to step in something that was already fully occupied, had a nice amount of cashflow, and for me, because my day job is running Investability, I don’t have as much free time as I would like, to be able to do as much directed investing and really being more of an activist investor than I have been in the past. So it was a good opportunity for me to get in there, get into the market, and still remain relatively hands off.

Joe Fairless: So you work for a company that you all provide these RentRange reports (among many other things), so you have access to a lot of data… What are some markets that you’re seeing right now that would be good markets to invest in for, say, the next five years?

Dennis Cisterna: Great question. I think if you’re looking for a longer-term investment, like you mentioned, somewhere in the 5+ year category, you should be focusing on markets where the economy is growing, but you’re also gonna wanna look for good in place rental yields today, so that eliminates some of the markets that have rebounded very strongly… For example, I don’t see as much opportunity in Phoenix or Southern California as I did a few years ago because the prices have been outstripping the rent growth by a pretty significant margin.

I’m seeing very attractive yields in a number of markets in the Midwest, in the South and South-East, in the North-East. A couple of those that come to mind are Cleveland, Cincinnati, Indianapolis, Dallas, Orlando, Tampa, Atlanta, Buffalo, Pittsburgh – all those markets are above the national average for yields. They typically are declining in terms of their vacancy and all of those markets are adding jobs right now, which is really the most important thing.

A lot of people are so used to investing in their own backyard, they don’t really understand what drives the housing market, and what really drives the housing market is having an economy and a population that’s growing.

Joe Fairless: You mentioned the rental yields – where can a Best Ever listener find that data?

Dennis Cisterna: That data is not as easy to find; that’s actually something we sell within our RentRange reports. It’s not something that’s tracked by someone like the National Association Of Realtors, which is a good source of free data, but unfortunately they don’t track that. But anytime you’re purchasing a RentRange report we give you a larger snapshot of what’s going on in that market as well, including what the top-performing zip codes are in terms of their yield and whatever market you happen to purchase the property report in.

There are other resources out there where you can find general information about what’s happening on a market level. We do a ton of press releases that highlight that data at a market level or what the highest-performing ones are. If you type in “RentRange” and click on the News in Google, you’ll get a lot of free and good information on that. Same can be said with RealtyTrac, if you’re familiar with that website.

Joe Fairless: Good stuff, thank you for that, and some good action items for us. Are you ready for the Best Ever Lightning Round?

Dennis Cisterna: Absolutely.

Joe Fairless: Alright. First, a quick word from our Best Ever partners.

Break: [00:14:23].14] to [00:15:24].14]

Joe Fairless: Best ever book you’ve read?

Dennis Cisterna: Best ever book I read… I would go with The First 100 Days, which is a book about the first 100 days of FDR in office and exactly how he really revolutionized his presidency in those first 3 months.

Joe Fairless: Best ever deal you’ve done that you haven’t mentioned?

Dennis Cisterna: The best ever deal that I’ve done was actually as an investment banker… I was able to recapitalize a giant masterplan community in California, where I was literally able to save my client close to 10 million dollars in a single deal, and I also made a very pretty penny on that myself.

Joe Fairless: What’s a mistake you’ve made on a transaction?

Dennis Cisterna: I’ve made lots of mistakes on transactions, I think any seasoned investor will tell you that… But certainly one of the first mistakes I made when I did my very first investment property was… One of my brothers and a partner – we went in there, we paid the right price for the property, but we really underestimated how long it would take us to finish the construction. Where we thought we’d be in and out of the property in 60 days, once we got in under the drywall, we realized this was closer to a six-month process, and when you have your own capital at risk, getting that capital back as fast as possible is key, so that was a bit of an unfortunate mistake… But we learn from those mistakes, and now I’m a lot more diligent about how long things will take.

Joe Fairless: Well, it’s better that you had your own capital than a hard money loan where the interest rate kept ticking up and up and up.

Dennis Cisterna: I couldn’t find a hard money lender in 2008 that wanted to give me any money; it was lean times.

Joe Fairless: What’s the best ever way you like to give back?

Dennis Cisterna: I like to give back by supporting local charities as much as possible, whether it’s local schools or other endeavors like that. Anytime someone asks me to chip it, I’m in, whether it’s something as simple as giving a donation or volunteering for an event. I like it. I’m not tied to a particular type of philanthropic cause; I think there’s tons of good causes, and because of that I always try to keep myself open to whatever opportunities are presented to me.

Joe Fairless: How can the Best Ever listeners get in touch with you and/or learn more about Investability?

Dennis Cisterna: The easiest way is Investability.com. We’ve got a ton of great content on there, a good idea of the scope of services we provide, and all of our contact information is available there as well… So Investability.com, certainly the easiest way to learn more about what we’re doing and how we might be able to help your listeners.

Joe Fairless: Dennis, thank you for being on the show, and with your background and the different types of jobs and tasks and responsibilities that you had in the industry, it’s important to listen to someone with your eclectic experience. As you mentioned, you said the long-term outlook for real estate has never been better, or it’s better than it has ever been, and you listed reasons why, and I was writing those down… One is the economy is in resurgent form. Two is the population continues to grow. Three is that we’re not adding enough houses to keep up demand. Four is the lack of financing that is available for more — and you didn’t mention this, so I might take it to a next level, and correct me if I’m wrong… I don’t wanna speak for you and put words in your mouth, but especially for people who don’t have as good of credit, it’s tougher for them to get financing right now because of what 2008 did. Would you agree with that?

Dennis Cisterna: In parts of society, yes. What’s actually really interesting is there’s a lot of really good programs for first-time homebuyers that most people just aren’t familiar with. Through FHA – they have some tremendous first-time homebuyer programs. A part of the problem is those don’t really jive with where people wanna live right now; it’s a challenge if having the right product for the right people in the right market. But what you’re really seeing is the total erosion of financing available for the middle class.

Joe Fairless: Thank you for that. And then lastly, I think you mentioned this – you said people not saving as much money as they need to.

Dennis Cisterna: That really comes down to rising costs because of three things – not necessarily because people aren’t trying to save more money, but even though inflation has been relatively slow across most of the major parts that make up the consumer price index, when you look at what impacts people’s life the most today and why they can’t save money, it really comes down to three things. They’re having to spend more on housing than they ever had, even if they’re renting. They’re having to spend more for healthcare, and they’re having to spend more for education. Those three things combined have dramatically altered the average person’s ability to save money for that down payment for their first home.

Joe Fairless: Well, I think a lot of real estate investors, Best Ever listeners who are listening to this, are like “Heck yeah… Let’s keep going, baby!”, so thanks for the shot in the arm. I appreciate you spending some time with us. I hope you have a best ever day, and we’ll talk to you soon.

Dennis Cisterna: Thanks so much, Joe. I appreciate it.

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