Weekend Interview: RET Ventures Principal Aaron Ru
This series gets into the heads of the decision-makers of CRE, the people shaping the industry by setting investment strategy, workplace design, diversity initiatives and more.
Aaron Ru is a principal at RET Ventures, a venture capital firm focused on real estate technology. RET was founded in 2017 in collaboration with REITs and private owner-operators of U.S. multifamily and single-family properties.
Most of RET's investments are in technologies that solve issues for rental operators by innovating in smart home technology, WiFi, modular construction and more. The firm now has 28 portfolio companies, including SmartRent and Measurabl, and its more than 40 strategic investors own 9,000 multifamily assets and 137,000 single-family homes totaling more than 2 million housing units across the country.
Ru said a glut of financing in 2021 drove growth among some mediocre proptech companies, and now some of those weaker firms are struggling and shaking up the market. On the other hand, he thinks single-family rental investment is in early stages, and expects that to continue to explode in popularity, especially among institutional players that may edge out mom-and-pop investors.
When his head isn't in the digital cloud, Ru likes to take in the big fluffy kind near his Utah home, skiing, mountain biking and scoping out swim spots with his golden retriever, Rosie.
The following has been lightly edited for style and clarity.
Bisnow: Baron Rothschild once said the “time to buy is when there’s blood in the streets.” Where is the blood today?
Ru: Focusing on real estate technology, some companies with mediocre prospects were still able to raise in ’21 due to the glut of VC dollars. Now those companies are shutting down. Good companies (demonstrating strong growth, product vision, product market fit) definitely were able to raise capital in ’21, but even some of those companies are struggling to raise due to many VC investors hitting pause this summer.
In proptech, startups exposed to the retail single-family home transaction have the most blood in the street. Companies like Compass, Better.com, etc. are struggling with mortgage rates skyrocketing and transactions falling precipitously.
Bisnow: What is your most controversial CRE opinion and why are you right about it?
Ru: The institutionalization of single-family rentals will dramatically accelerate in the 2020s. This trend has already begun, but we are far, far from the peak. With massive inflows of capital (more than $40B has been raised in the last two years), the asset class is quickly transforming, and the mom-and-pop investors who dominated SFR will face a lot of increased competition.
Bisnow: If you weren’t in real estate, what path would your career have taken?
Ru: I’ve always loved being a trusted thought partner to innovative executives, and I get to live that every day, working with our portfolio company CEOs to find better ways to apply technology and improve processes for the leading multifamily and SFR operators.
Before my MBA, I worked for three years at United Talent Agency (which represents Angelia Jolie, Kevin Hart, Lebron James and other A-listers) helping them buy other talent agencies. In many ways, being an agent is similar to being a VC — you’re a trusted thought partner and helping steer a client toward projects that make sense.
Bisnow: If you could make one change to the industry, what would it be?
Ru: The industry is still very far behind in the adoption of technology, with approximately 1% of revenue going toward R&D across CRE. Meanwhile, some of the inefficiencies in the industry are staggering; for example, the energy spend at many properties is much higher than necessary because of outdated systems or human-dependent “automation.”
We need to continue to structurally invest in technology, especially in an economic downturn where operating efficiency and leverage can be improved.
Bisnow: What is one thing you would do differently from early in your career?
Ru: Real estate and venture investing are both relationship-driven, with many of our limited partners having known and done business with our partners Chris [Yip] and John [Helm] for decades. In retrospect, I would have chosen to go less broad across a diversity of experiences, and focused on building my network of mentors and relationships in a specific industry sooner.
Bisnow: As a leader, how do you decide who is worth mentoring and who is simply not a good fit?
Ru: Showing true intellectual curiosity is very important in our job. We’re meeting hundreds of entrepreneurs a year who are building technology startups across very different verticals in proptech: construction, acquisitions software, resident apps and amenities. Being able to stay curious and open to novel concepts is really important. The people who burn out are arrogant and think they have figured out how the world works. Being able to reset that view over time is key to driving innovation forward.
Besides curiosity, people also have to be willing to put in hard work. We hear a lot about work-life balance these days, but in your career if you can consistently do what you promise to do for your portfolio companies, LPs and partners, people notice and good things conspire to happen to you.
Bisnow: What are your thoughts on the metaverse? Does it have any relevance for CRE?
Ru: I spent two years covering Web3/blockchain for my last fund before joining RET, so I have more context than most on this topic. We actually spent a lot of time getting to know the Decentraland executives in 2019 and 2020. Ultimately we struggled to articulate coherent use cases for real estate and Web3; digital land isn’t truly scarce like real land, and tokenization platforms that allow users to invest in a “slice” of real estate work perfectly fine without the blockchain. Lastly, there is a lot of regulatory overhang. I would stay away from the space for the time being until all of this is figured out.
Bisnow: What do you see as the lasting impacts of the pandemic on CRE?
Ru: Operators increasingly see the value of future-proofing their operations, and Covid-19 helped accelerate adoption of a number of technologies that have a heavy lift to implementation. As an example, many of our LPs are large multifamily operators, and took advantage of the pandemic to implement technologies like self-touring and virtual touring. In the early days of Covid, when prospects were uncomfortable touring alongside a leasing agent, many multifamily operators installed smart locks to enable self-touring. For a good number of those leasing teams, what started as a Covid contingency has stuck. Some people just prefer to tour apartments solo, and a number of major operators intend to offer self-touring as a touring option for the long term.
Similarly, the residential property types gained a level of primacy they had not had. Early on in Covid, people hunkered down at home for weeks on end. By now, most people are either back in the office or working hybrid schedules, but the aggregate amount of time spent at home is up significantly. This amplifies the importance of improving multifamily and SFR properties and optimizing their operations — it makes amenities more essential, and increases the importance of timely maintenance fixes and energy-efficiency reduction.
Bisnow: As you know, there is a massive conversation underway regarding advancing more people of color and women into the C-suite. What are you doing to address those voices and that movement within your own organization?
Ru: The industry needs more gender and racial diversity. Internally, we’ve had a big focus on hiring and investing in the development of a diverse cohort of investment team members who bring various perspectives to the table. I think this makes us a better, more well-rounded team, and I do believe that the industry as a whole is attempting to move in a similar direction.
Bisnow: So, this is the weekend interview. What’s your typical weekend routine?
Ru: We have the benefit of being a venture fund that’s located away from the bustle of Sand Hill Road in the Bay Area. We’re in Park City, Utah, which is essentially one big outdoor playground; in the winters you’ll find me on the slopes of Alta or Deer Valley skiing; in the summers, I’m mountain biking across Park City. My golden retriever, Rosie, is a big fan of finding places to swim, which there are a bunch in town as well.
