Yieldstreet didn't acquire any single-family rentals in 2023—instead it aimed to capitalize on the upswing in the homebuilding sector

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Heading into 2023, Tejas Joshi, the director of single-family residential at Yieldstreet, which owned around 700 single-family rentals at the time, informed me that they were "pretty much on pause across all [homebuying] strategies." That decision was influenced by the realization that the financial returns on each additional home just weren't good enough, when factoring in spiked interest rates, he explained.

When I checked back last April, Yieldstreet still hadn’t bought a single home in 2023. That was still true when I reached out in August.

Last week, I spoke with Joshi to inquire about Yieldstreet’s final 2023 acquisitions (i.e. homes bought) and dispositions (i.e. homes sold) figures, as well as their current investment strategies in the single-family space.

Joshi told ResiClub on Friday that Yieldstreet didn’t buy any single-family homes in 2023, and it sold around 70 single-family rentals. That pulls their single-family rental portfolio to just over 600 homes.

While spiked interest rates have resulted in a pause in homebuying for Yieldstreet, the firm remains interested in investing in the housing market, albeit through different avenues.

Joshi added that: “For Yieldstreet, in particular, our job is not to be naked buyers or sellers of homes, it’s to be thoughtful about where to invest. Where is the sector that will give you the best value of return?”

That makes sense. After all, the name of the firm is Yieldstreet. They're seeking the best yields/returns, and currently, they see potential in the homebuilding sector, which has been bolstered by tight resale inventory.

"There’s not a lot of [real estate] sectors doing that well, but homebuilders are definitely the ones doing fairly well in this market. There continues to be demand for homes, and the only supplier of those homes are homebuilders. We have this thesis internally, where homebuilders will continue to provide this stock of homes, so it makes sense to invest in strategies which are aligned with homebuilders. So for example, we invested in a land banking program for a homebuilder. It means we buy the land, on behalf of the homebuilder and we do the horizontal construction, which means building roads, putting in utilities/electric/cable/all of that. We basically get the land to a spot where the builder can then come in and construct the homes on that land,” Joshi tells ResiClub.

Last year, Yieldstreet did just that (see the map below) and along with a partner acquired land in Raleigh, N.C., and engaged in land banking with a homebuilder. Over the next three years, the homebuilder will construct 182 homes, which will then be sold in the purchasing market (i.e., it's not a build-to-rent deal).

One reason that Yieldstreet was on the sidelines, and not buying single-family rentals, heading into 2023 is they thought U.S. home prices had further to fall given how high mortgage rates had moved up. They moved away from that view last year.

“Supply was down but so was the demand.. that helped [national] home prices stabilize. That support is still there, the demand is not going down,” Joshi tells ResiClub. “As mortgage rates come down, the demand will marginally go up. So we see support for home prices to go up.”

He says that there’s “not much” downside risk anymore, adding “I don’t see any reasons why home prices fall, or a -5% or -10% correction.”

What would get Yieldstreet off the sidelines and buying single-family rentals again? Joshi says if interest rates come down further, at least a full percentage point.

“The financing rates are still very high compared to the rental yields you would get on the homes… That isn’t supportive of buying homes yet. Over the course of the year if the rate cuts actually happen, and financing rates come down, at that point the strategy becomes viable,” Joshi tells ResiClub.

ResiCub PRO members will be getting a series of deep dives on ZIP code level housing data over the next month.

Below is a sampling, showing how inventory right now in Texas compares to pre-pandemic levels. (We excluded Texas ZIP codes without at least 5 active listings).

Click here to view an interactive/zoomable version of the map below

Generally speaking, housing markets where inventory (i.e. active listings) has returned to pre-pandemic levels have experienced weaker home price growth over the past year. Conversely, housing markets where inventory remains far below pre-pandemic levels have, generally speaking, experienced stronger home price growth over the past year.

The map above suggests that some pockets of Texas might continue to see price softness in 2024.