With 24 years and more than 200 deals behind him, full-time passive investor Jeremy Roll explains the single metric that tells him whether to deploy capital or stay on the sidelines, and why most LPs get the timing exactly wrong.

Jeremy Roll has been a full-time passive cash flow investor since 2007 and currently holds positions in more than 60 deals across over a billion dollars in assets. In this conversation he breaks down his framework for reading the real estate cycle: positive leverage spread. If he cannot get 125 to 150 basis points between the cap rate and the interest rate, he considers the market too expensive and waits. He explains why the riskiest value-add business plans get marketed at the worst point in the cycle, tells the story of a fully occupied student housing deal where four unexpected dominoes led to foreclosure, and describes the daily macro reading habit that lets him strip emotion out of his decisions. He also shares his unconventional read on Bitcoin’s four-year cycle and why Warren Buffett’s patience will be vindicated.

Chapters

  • [0:00] Cold open: the mistake most LPs make
  • [0:19] Welcome and introduction
  • [1:26] The 2019 call that aged well
  • [1:58] Why he went to the sidelines in 2017
  • [3:09] Sidelines doesn’t mean not investing
  • [3:56] Paying too much, in stocks and in real estate
  • [5:20] Positive leverage spread explained
  • [5:49] How 2016 flipped deals to negative leverage
  • [7:26] Why low rates don’t guarantee a good deal
  • [7:48] The best time to buy is when people are fearful
  • [8:27] Concentration risk and the S&P 493
  • [9:56] Staying objective: Buffett’s last laugh
  • [10:18] Two to three hours a day on macro data
  • [11:07] The top mistake he sees LPs make
  • [11:45] Why he skipped floating rate bridge loans
  • [13:25] The one metric that gets him off the sidelines
  • [14:22] What actually causes market crashes
  • [15:54] Red light, green light, and the line in the sand
  • [16:53] You can’t be surprised in retrospect
  • [18:38] Why he’s looking forward to bad times
  • [19:07] Removing emotion, and the Bitcoin example
  • [20:39] What a new real estate cycle really means
  • [21:31] Why the business plan you receive is backwards
  • [22:47] The runway analogy for value add timing
  • [24:29] Dominoes: how a stabilized deal goes bad
  • [25:26] The 303 unit student housing story
  • [27:46] How the sponsor made investors whole
  • [28:24] Mark Cuban and the Bitcoin question
  • [29:37] The four year cycle on the chart
  • [31:28] Closing the short and holding four years
  • [33:35] Two books he recommends
  • [34:10] Where to follow his research

Resources

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