Cove Investments Blog

Thoughts on Rising Yields

Given the dramatic move we’ve seen in interest rates in recent weeks, I thought it was important to revisit some of my own assumptions around how my chosen strategy, value-add multifamily real estate, might be affected. There’s no better way for me to organize my thoughts than through writing and sharing, so here goes. There’s no denying that we’ve seen a massive move in global bond yields recently. Having troughed at 0.5% in August, the benchmark 10 yr US Treasury yield finally broke above 1.5% this week before settling just below that level. What’s the problem?  A 1.5% 10yr yield

Read More »

Comparing Stock Investing to Real Estate

Investing in private equity real estate and publicly traded stocks are similar. How do I know? I’ve invested in more than 2,000 apartment units following a 25+ year professional career in institutional equities (stocks).   It turns out, the valuation framework, tools, and basic skills required to analyze businesses apply to stocks and real estate. Experience with accounting, spreadsheets, strategy, and finance certainly come in handy. This shouldn’t be surprising when we consider first principles. What is any equity investment worth? The present value of the future cash flows of a business, net of any obligations due (debt). That’s true for

Read More »

Boom Time For Home Prices

In the early days of the pandemic, pundits broadly agreed that everybody would flee the cities in favor of suburban single-family homes. Preferences aside, that never seemed to be a realistic outcome. In August, I wrote a blog post, Risks to Class B/C Multifamily Investing, on this topic, arguing as follows: Supply constraints make an apartment exodus impossible in practice – we can’t push a button and automatically have millions of new homes – it also ignores the issue of affordability when demand exceeds supply. Millions of apartment residents would probably move to a home today, either to rent or to buy, if

Read More »

Population Growth and Home Price Appreciation

Freddie Mac recently published an excellent report called US Population Growth: Where is Housing Demand Strongest? Similar reports underscore the growth in sunbelt states and highlight the MSAs that are growing fastest. The report highlights that US population growth is slowing. Therefore, real estate investors must focus more carefully on the composition of growth drivers (net migration vs. natural increases) and mobility trends within the US. The theme of migration from the north to the south is as powerful as ever, but it’s useful to remember that it’s happening within the context of a declining rate of domestic net migration. Even within

Read More »