Bridger PenningtonFund Launch & Investment Expert

Secret Game Of Real Estate | Bridger Pennington

4 Dec 2023 · 1 min

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In this monologue, the speaker explains why individual real‑estate investors often lose bids to large institutional players. He argues that big buyers can afford higher purchase prices because they have cheaper cost of capital, lower per‑unit renovation expenses, and can profit from selling massive portfolios of single‑family homes even with modest margins. By purchasing hundreds of homes and selling the entire pool for a modest premium, they operate under a fundamentally different investment model than the typical flipper who focuses on one or two properties. The speaker highlights that these structural advantages allow institutional investors to “play a bigger game,” making deals that appear unprofitable to small investors but are viable for them.

Chapters

Has anybody in the last 2 years gone to a deal, bid on a deal, and someone outbid you and you said, they're going to lose money on that deal. They bid too high. I've done this before. I can't believe they bid that much. They're going to lose their shorts on that deal. A lot of us have done this before. What if they're not playing the same game me and you are playing? What if they're buying, they're buying up hundreds and hundreds of single-family homes? They can pay a little bit more because their cost of capital is cheaper than mine and yours. Their average cost to renovate a home is cheaper than me and you. They're not playing the same game we are. So it does pencil on their pro forma. Huh, interesting. Additionally, they're buying a pool of $100 million of single-family houses, and they're going to sell it for $130 or $135 million. They don't even care because they're going to sell a pool. They're playing a totally different game than we're playing when we're just trying to flip 1 or 2 houses. Is this kind of making sense? Any like ahas? Maybe they are making money on that deal. They're just playing a different game than me and you are playing. They're playing a much bigger game.