Every building has exactly one buyer

Picture a stabilized building. Fully leased, credit tenant, nothing wrong with it. It produces seven percent on the price the market will pay for it.

Now picture two people who want to own it.

The first runs money that has to clear twelve percent. A fund with a hurdle, a family office with an internal rate they promised themselves, an operator whose whole model is built on a number. This person cannot buy the building. Not because they lack the money, and not because anyone refused them. They cannot buy it at any price the seller would ever accept, because the only price that produces twelve percent for them is a price the seller can get from somebody else without trying.

The second is content with four and a half percent. Insurance money, pension money, a family that cares more about not losing it than about compounding it. This person also does not buy the building. They are outbid, every time, by someone whose required return sits closer to what the building actually produces.

So a building with a seven percent yield is not for sale to the market. It is for sale to a narrow band of people whose required return happens to land near seven percent. Everyone above that band is priced out. Everyone below it is outbid. The building has one price, therefore it has one buyer profile, therefore in any meaningful sense it has exactly one buyer.

Multiply that by every building in the world.

The industry knows this. It just calls it something else.

If you work in this business you are reading the above and thinking: yes, obviously, that is why we have core, core plus, value add and opportunistic. Everyone knows different capital buys different risk.

That is exactly my point, and it is why the thing is invisible. We gave the symptom a taxonomy and then treated the taxonomy as a fact of nature. Those four buckets are not four kinds of building. Most of the time they are one kind of building, seen by four kinds of money, three of which are not allowed to touch it.

Look at what the industry does when it actually wants to solve this, and you will find that it already knows how. On the debt side we partition a single income stream all the time. Senior, mezzanine, preferred. Different investors, different required returns, satisfied simultaneously out of the same rent roll, and nobody thinks it is exotic. A capital stack is the most ordinary thing in commercial real estate.

We do it for lenders. We do it for institutions in a joint venture with a waterfall. We have never once done it for a person.

What it costs

You can see the cost in two places, and neither of them is a projection.

The first is the frozen transaction market. The Federal Housing Finance Agency put a number on it: rate lock-in prevented an estimated 1.72 million home sales between the second quarter of 2022 and the second quarter of 2024. By the end of that window it was suppressing sales by roughly forty five percent.

The standard explanation is affordability, which implies the problem resolves when rates fall. I sat across the desk from those people for two years and that is not what I saw. What I saw was an owner with a three percent mortgage who wanted to move for a job, or after a divorce, or because a second child arrived, and who could not sell the house without also surrendering the loan. The house and the debt are welded to the same transaction. Two entirely separate economic decisions, one indivisible act. They stayed put. Every one of them stayed put.

The second place is stranger, and it is the reason I ended up writing a paper instead of just complaining about this at closings.

Open the national income accounts. There is a line called imputed rental of owner occupied housing. For 2022 the Bureau of Economic Analysis puts it at $2,021.1 billion. It is the rent that 86 million American households would be paying if they were tenants in their own homes. Economists agree the income exists, which is why it is counted in GDP.

Not one dollar of it is received by anyone.

It is the largest income stream in the American economy that exists in measurement and not in fact, and it is uncollectable for exactly one reason. To receive rent on a house you have to not own the whole of it, and to stop owning the whole of it you currently have to leave. There is no instrument between keeping everything and selling everything. Two trillion dollars a year sits in that gap.

Why I think this is fixable

If you partition a property's income by required return rather than selling the whole thing at one price, the twelve percent buyer and the four and a half percent buyer are satisfied out of the same net operating income at the same time. Neither is overpaying. Neither is excluded.

The building stops having a cap rate. It has a yield curve.

And once that is true, the addressable buyer for any given asset stops being the narrow band whose hurdle happens to match it and becomes, roughly, everyone with capital and a return requirement. That is a very different market from the one we have, and it is checkable arithmetic rather than a thesis. Take a real building, take a real income stream, and see whether the blend clears a price the seller can live with. It either does or it does not.

The same move solves the other half. An owner who can release part of a property rather than all of it does not have to surrender the mortgage to reach the equity, and the equity they reach was never borrowed, so no new debt is created. That is the opposite of every existing channel to home equity, all of which are loans.

Who is telling you this

I am not writing from outside the business. I started as a loan officer in 2004, took my broker and NMLS licenses in 2010, and I am originating loans this week. The 1.72 million is not a statistic I went and found. It is two years of my own calendar.

I have also tried to fix this before and failed at it in public, which I think is the more useful qualification. After 2008 I built an online mortgage shop called Shooploop, trying to do roughly what Rocket ended up doing, and got outspent by people with more money than me. In 2018 I started a company called BlockPark to put property ownership on chain, raised a builders round, and bought a block in downtown Las Vegas to test the first version of it. It did not pan out. I would rather tell you that than have you discover it.

What I do now, when I am not writing papers, is automate the part of this I can already reach. My brokerage runs an autonomous loan operations engine. It reads the inbound mail, routes each message to the right loan file, drafts borrower correspondence and condition packages, and writes every action it takes to an append-only audit log. It signs its own emails and discloses that it is software. It is not permitted to send wire instructions, quote a rate, or promise an approval, and those limits are written down rather than assumed.

I also operate a small deal marketplace in private lending, where capital states what it wants before a deal exists and listings are matched against it rather than marketed cold. That is where I learned the thing this essay rests on: a deal clears when the capital is already sitting there, and does not when you have to go and find it.

I mention it for one reason. When I say the remaining work on the other project is a bounded engineering problem rather than a research risk, that is a claim about whether I can ship, and you are entitled to test it against something that is already running.

What I would like

I have written this up properly, with the mechanism specified, the arithmetic shown, and six predictions stated in a form that would let someone disprove them. One of those predictions can be tested by any rental operator using their own portfolio and requires nothing from me at all.

I would rather be told I am wrong by somebody who knows this market than find out in production. If you have spent time on the pricing side of commercial real estate, or in origination, or running a fund with a hurdle you could never make fit a good building, I am interested in where this breaks.

Daniel Riceberg has worked in real estate lending since 2004. Licensed broker, California and Arizona residential and nationwide commercial, NMLS 286633. He runs Broker Your Loan, a mortgage brokerage, and founded BTCglobal. Previously Shooploop, BDR Cascadia, and BlockPark Technologies.