Here's Zillow Founder's Only Real Estate Investment — He Finds The Sector 'Unapproachable And Complex'

Serial entrepreneur Spencer Rascoff is best known as the co-founder and former CEO of the online real estate marketplace Zillow. He also co-founded Pacaso, a platform that aims to make owning a second home more accessible by offering a shared ownership model.

Given his role in creating these platforms, one might think that Rascoff must be a big real estate investor. But that's not really the case.

In a recent fireside chat, Arrived Co-Founder and CEO Ryan Frazier asked Rascoff whether he has invested in real estate.

"Not for any income," Rascoff said. "I own a couple of homes for my own use, and I own a Pacaso, but no, I have not done any proper real estate investing."

The obstacle that's preventing the accomplished businessman from becoming a real estate mogul is the same one that hinders many everyday investors from building a real estate portfolio.

"The reason for that is what allows Arrived to exist, which is I always found it unapproachable and complex. I didn't know where to start. It seemed really expensive. I didn't really know how to do it. I didn't want to deal with the operational elements of it," Rascoff said.

Arrived is an online investment platform that addresses the issue. It allows people to easily invest in real estate by purchasing shares of rental properties for as little as $100. It also manages everything from finding tenants to handling repairs. And Rascoff is using it to tap into the segment.

"So I am an Arrived customer. I have an account," he said. "I own shares in a couple of different Arrived homes, but other than that I have never been a real estate investor."

Why Real Estate Investing Can Be ‘Unapproachable And Complex'

If you want to collect rental income the traditional way, you'd have to put together a hefty down payment, get a mortgage and buy a property.

Then you would need to screen potential tenants, prepare lease agreements and ensure that rent is paid on time. Chasing late payments and dealing with delinquent tenants is never fun.

At the same time, landlords are responsible for the maintenance and upkeep of their properties, which can require frequent repairs and updates.

Landlords are also on the hook for securing proper insurance coverage for their properties and paying property taxes, which can require ongoing attention.

All of this can make the supposedly passive income a lot less passive.

Collect Rental Income Without Becoming A Landlord

Despite being expensive to purchase and maintain, residential real estate remains a popular option for investors. One of the reasons is that it is a well-known hedge against inflation.

As the price of raw materials and labor goes up, constructing new properties becomes more expensive. And that contributes to the appreciation of existing property values.

The supply and demand dynamics in housing also deserve attention according to Frazier.

"I think there's just such low supply both in homes to buy but also homes to rent," he said.

"And with more people working from home, they're looking for larger spaces and we've certainly seen, you know, the rental demand has been really strong, probably also because of higher interest rates, the cost of buying goes up … there's just so much need for more housing."

Simply put, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can't afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.

These days, you don't have to become a landlord to invest in real estate. You can invest in real estate investment trusts (REITs) that specialize in residential properties. And if you don't want the volatility associated with publicly traded REITs, there are also platforms — like the one Zillow Co-Founder Rascoff is using — that enable retail investors to invest directly in rental properties through the private market.

Check out:

• Investing in real estate just got a whole lot simpler. With as little as $100, average investors are becoming landlords thanks to this Jeff Bezos-backed startup.
• Elon Musk has reportedly bought 6,000 acres of land just outside of Austin. Here’s how to invest in the city’s growth before he floods it with new tech workers.