We spoke with Plotify’s CEO about how the company offers flexibility and control through its professionally-managed single-family investment properties.
When discussing real estate, people often divide investments into two categories: active, like multifamily apartment buildings and other rental properties, and passive, like Delaware Statutory Trusts, REITs, and Triple-Net Lease arrangements. Active investments allow investors greater control of whom to rent to and when to sell, but require involvement in a variety of day-to-day issues, while passive investments can provide professional management or stability in tenants, but lack the ability to take advantage of changes in the market.
Plotify offers a new kind of investment vehicle known as a Plot. Investors purchase plots, LLCs that own a single property. Plotify works exclusively with single-family rental properties, acting as asset manager for the Plot, providing a dedicated property manager, tenant, insurance, optional financing, accounting, and other services.
By investing in Plots, investors can take advantage of Plotify’s resources and expertise without giving up control of important decisions like when and how to sell. For investors looking to enter into the world of 1031 exchange properties, Plotify can offer access to the type of single-family properties often missing from passive-minded portfolios.
Anish Malhotra is the founder and CEO of Plotify, bringing over 25 years of personal and professional real estate investment expertise. In his career, he played pivotal roles at Bloomberg and Cantor Fitzgerald, where he developed a product that raised $7 billion for US REITs. Anish’s strategic vision has been crucial in establishing Plotify as a premier real estate investment platform.
We spoke with Malhotra about what makes Plotify different, the advantages of single-family rental properties, and providing investors with the information they need to make the best investing decisions.
Plotify focuses on single-family rental properties. Why did you decide on this type of real estate as the company’s focus?
Malhotra: Unlike commercial real estate, single-family rental properties offer investors unique advantages to benefit from demographic trends, market dynamics, and investment flexibility. Single-family rentals can be wholly-owned by a single investor, providing an investor with control on when to sell their investment without waiting for fund liquidity or a sponsor to make a decision.
Many markets have also experienced strong home price and rental growth, driven by changing preferences of renters who seek larger spaces with lower maintenance responsibilities than owning their own home. At the same time, the United States faces a large-scale supply shortage – with an estimated 3 million undersupplied homes – against increasing rental demand and limited building.
Building a single-family rental portfolio across markets offers geographic and asset-level diversification compared to commercial properties, allowing investors to spread risk across multiple markets and home types.
With Plotify, investors purchase “Plots,” individual companies that own individual properties. What are the advantages to this type of structure?
Malhotra: There are several benefits to owning a Plot. Everything is tied to the LLC, including the property, title, property management contract, insurance, mortgage, etc. This makes them easily transferable without having to go through a traditional closing process. By simply transferring the ownership of the entity, everything else moves with it.
The website states that Plots are designed for each to have a single investor, not a fractional-ownership model. Is fractional ownership something you would consider adding in the future? What about investors who own multiple plots – is there an advantage to keeping them as separate entities rather than a single company?
Malhotra: While fractional ownership has the benefit of allowing for a lower entry point, it also has several downsides. There is no control of asset management decisions such as tenants, renovations, or financing. When an investor doesn’t have direct control of ownership, liquidity is in the hands of someone else, typically a general partner.
The benefit of keeping Plots as separate entities is liquidity and flexibility. Plotify works with clients to build a portfolio of Plots to achieve diversification, while maintaining the ability to actively manage the business and exit plan for each Plot. We are active managers and make adjustments based on clients’ needs and changing market conditions. Keeping Plots as single entities allows investors to easily adjust their portfolios by selling in one market and acquiring in another via 1031.
When it comes time to sell, what options do investors have? How might a 1031 exchange strategy align with Plotify? Do you expect hold times for Plotify investors to be similar to those in the general market, or can the Plotify marketplace encourage greater transaction volume?
Malhotra: Investors have two options when it comes time to sell. They can either sell on our marketplace to existing members or go through a traditional sales process by leveraging our network of existing realtors/brokers, property managers, or institutional acquisition platforms. Our investors tend to be long-term holders of Plots due to their wealth generation and preservation characteristics. However, hold periods are determined by each investor individually.
In times of short-term appreciation, we have been able to increase transaction volume by facilitating refinancing options for Plots, allowing members to use newly-released equity into another Plot purchase, effectively expanding their SFR portfolio. Additionally, we are constantly looking for new market opportunities, and clients may sell in one market and then acquire via 1031 in another based on preferences or changing market conditions.
Who do you see as the ideal Plotify investor? Do Plotify’s services like professional property management, mobile access, monthly reports, and tax accounting make this an easier way for those new to real estate investing to feel comfortable entering the market?
Malhotra: Our ideal client profile is someone with enough disposable income to invest in the asset class but who lacks the time and/or experience to execute on their own. Our value proposition is around transparency, allowing our investors to select markets that Plotify has analyzed and vetted, and properties that fit their investment goals while we handle all of the heavy lifting. We spend a significant amount of time educating our clients so they feel comfortable when it comes time to invest.
We also provide a high degree of transparency during the investment lifecycle through our monthly reporting and investor dashboards on our app and website in addition to regular meetings with clients to review their portfolios. We have also garnered interest from family offices that want to access the asset class but prefer a more direct approach, which allows more control and reduced fees vs investing in a fund.
Plotify has a strong reliance on market data. How do you view current market realities based on the data you’ve seen? Are interest rates something you’re watching closely? What markets do you view as undervalued currently?
Malhotra: Plotify leverages macroeconomic and market data to inform our clients’ investment strategies and publish Insights on a regular basis. We use this data, along with proprietary data on home sales, rental listings, demographic changes, employment, U-Haul moving data, etc. to inform our underwriting and projections for Plot performance. We find markets – from Huntsville within the Southeast to Pittsburgh within the Northeast – undervalued with strong rental income and future home price growth projections.
At the same time, Team Plotify closely monitors interest rates as our Plots include no-application, non-recourse financing solutions with both interest-only and amortizing loans. While interest rates are elevated, they remain close to their 30-year averages. Within many markets, there remains significant pent-up demand for homes and a significant supply of existing inventory locked in with low rates, with many potential buyers waiting for interest rates to decrease for new home purchases. A decrease in interest rates could place upward pressure on home prices within many markets.
To learn more about Plotify, visit their website. To learn more about how a 1031 exchange can allow property owners (including those who own Plots) to defer taxes on the sale of business or investment property, read our 1031 Exchange Guide.
