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FEATURE
THINKING CREATIVELY ABOUT WORKFORCE HOUSING, ATTAINABLE HOUSING, AND TRANSITIONAL HOUSING IN COMMUNITIES CAN SATISFY MORE THAN COMMERCIAL GOALS. How Real Estate Can Create Positive Social and Commercial Outcomes
INVESTMENT STRATEGY
Six Ways to Add Community Value
MARKET & TRENDS
2024 Distressed Buying Opportunities
OPERATIONS
The Power of Storytelling
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CONTRIBUTORS Luke Babich
Daren Blomquist Merrill Chandler Taylor Miller Michael Poggi Damon Riehl Jeff Roth John V. Santilli
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Jim Tannehill Kirk P. Taylor Tommy Thornburgh Neil Timmins Michele Van Der Veen Skyler Wilson Ingo Winzer
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4 | think realty magazine :: january – february 2024
LETTER FROM THE EDITOR
The Importance of Community
The term community can encompass a variety of characteristics, depending on the context in which it is used. In terms of real estate, “community” reaches beyond properties and their physical structures. A strong and vibrant community can have an impact on the value, desirability, and overall living experience of a neighborhood. Have you ever driven through a particular area and thought “How cute is this neighborhood?” On the occasions when that’s occurred, the feel or vibe of the neighborhood probably created a sense of “home.” Here are a few key factors that highlight the importance of community in the context of real estate: PROPERTY VALUE. An engaged and connected community with a positive atmosphere can lead to higher property values. Buyers seek out neighborhoods that have a sense of community, often supported by amenities. COHESIVE NEIGHBORHOODS. A strong community can foster a sense of belonging and a true “home” feel. Residents who are happy and take pride in their neighborhoods tend to make for a more desirable community. R ESALE VALUE. When a neighborhood is sought after due to its strong community ties, it tends to have a positive market perception and lead to an easier, faster resale process. COMMUNITY EVENTS AND ACTIVITIES. Communities that organize events, festivals, and other social engagements create an opportunity for residents to connect and build relationships. This feeling of belonging and connectedness creates strong bonds that enhance the overall appeal of the neighborhood. FUTURE DEVELOPMENT POTENTIAL. Communities that invest in their infrastructure and public spaces are more likely to attract potential future residents—and can positively influence property values over time. Creating a sense of community is vital to the long-term success of a neighborhood. When looking to invest, consider ways you can add value to your property by ensuring it has qualities of a viable community. Although “community” is multifaceted, the impact of a community dynamic can have an immeasurable effect on the real estate market in an area. •
CARMEN FIELDS MANAGING EDITOR
thinkrealty.com | 5
FUNDING: EASY STREET CAPITAL INSIDE THIS ISSUE
How Real Estate Can Create Positive Social and Commercial Outcomes THINKING CREATIVELY ABOUT WORKFORCE HOUSING, ATTAINABLE HOUSING, AND TRANSITIONAL HOUSING IN COMMUNITIES CAN SATISFY MORE THAN COMMERCIAL GOALS. FEATURE PAGE 20
KIRK P. TAYLOR
6 | think realty magazine :: january – february 2024
C O N T E N T S
MARKET & TRENDS
OPERATIONS
An Investor’s Guide to Financing Options
The Role of Community in Building Your Real Estate Empire YOUR EMPIRE IS NOT JUST A COLLECTION OF BUILDINGS; IT'S AN INTEGRAL PART OF THE COMMUNITIES IT INHABITS. by Jim Tannehill PAGE 42 How Real Estate Investing Contributes to Communities REAL ESTATE INVESTING IS NOT JUST ABOUT FINANCIAL GAINS, IT’S ALSO ABOUT POSITIVELY IMPACTING THE COMMUNITIES IN WHICH THE PROPERTIES ARE LOCATED. by John V. Santilli
Unlocking the Secrets of Business Credit NAVIGATING THE MAZE OF APPROVAL READINESS by Merrill Chandler PAGE 30 WHATEVER YOUR FINANCING STRATEGY MAY BE, SUCCESS AS A REAL ESTATE INVESTOR TODAY REQUIRES ACCESS TO CAPITAL WHEN YOU NEED IT AND A PARTNER FOR THE LONG-TERM. by CV3 PAGE 28
Where to Spot Distressed Property Buying Opportunities in 2024 BASED ON SCHEDULED FORECLOSURE
AUCTION VOLUME IN LATE 2023, HERE ARE SOME OPPORTUNITIES YOU MIGHT WANT TO CONSIDER. by Daren Blomquist PAGE 8
Prime Suspects for Correction A RECKONING IN HOME PRICES IS COMING. by Ingo Winzer PAGE 12
PAGE 44
INVESTMENT STRATEGY
Lawsuit Outcome Portends Massive Changes for Realtors TO PREPARE, CONSIDER OPTIONS LIKE SYNDICATIONS. by Neil Timmins
Investing in Community Amenities Pays Dividends ENHANCING PROPERTY VALUES AND TENANT RETENTION ARE INVESTMENTS THAT CAN YIELD SIGNIFICANT RETURNS. by Luke Babich PAGE 34
DESIGN
Make Your Next Renovation a Real Splash! WHETHER YOU'RE BUILDING A NEW
PAGE 46
Crafting Emotional Narratives IT’S IMPORTANT TO UNDERSTAND THE PSYCHOLOGY BEHIND COMPELLING REAL ESTATE MARKETING. by Skyler Wilson PAGE 50
KITCHEN OR RENOVATING AN OLD ONE, YOU WILL ENHANCE ANY KITCHEN DESIGN WITH YOUR CHOICE OF BACKSPLASH. by Michele Van Der Veen
How I Turned $500 into a Real Estate Fortune!
FOCUSING ON QUARTER-ACRE VACANT LOTS IN RESORT COMMUNITIES WAS THE GAME-CHANGER. by Michael Poggi
PAGE 14
How does Community Impact REI?
THE IMPACT OF COMMUNITY ON REAL ESTATE IS FORMIDABLE, AND INVESTORS SHOULD CAREFULLY CONSIDER COMMUNITY IN THEIR PROJECTIONS FOR ASSET RETURNS. by Taylor Miller PAGE 52 Building a Real Estate Empire PROPER ENTITY STRUCTURE AND TAX OPTIMIZATION CAN CREATE ADVANTAGES FOR REAL ESTATE ENTREPRENEURS. by Tommy Thornburgh
PAGE 36
FUNDING Preparing for Long-Term Financing of Single-Family Residential Rentals AN ARTICLE SERIES ON NAVIGATING THE PRIVATE LENDING WORLD by Damon Riehl PAGE 24
Six Ways to Add Value to the Community as a Real Estate Professional REAL ESTATE PROFESSIONALS NOT ONLY PROVIDE SAFE AND ATTRACTIVE HOMES AND OFFICES BUT ALSO IMPROVE PROPERTY VALUES AND CONTRIBUTE TO THE COMMUNITY BY PAYING TAXES. by Jeff Roth PAGE 40
PAGE 54
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MARKET & TRENDS: DISTRESSED PROPERTIES
Where to Spot Distressed Property Buying Opportunities in 2024
BASED ON SCHEDULED FORECLOSURE AUCTION VOLUME IN LATE 2023, HERE ARE SOME OPPORTUNITIES YOU MIGHT WANT TO CONSIDER. DAREN BLOMQUIST
F oreclosure auction volume remained muted in late 2023, but scheduled auction data shows which markets will likely have the most volume of distressed property buying opportunities in early 2024. Nationwide, scheduled foreclosure auction volume in the third quarter of 2023 was still 43% below the pre-pandemic level in the third quarter of 2019, according to data from Auction.com, which accounts for nearly half of all properties brought to foreclosure auction nationwide. After ramping up in 2022 following the end of the pandemic-triggered nationwide foreclosure moratorium on government- backed mortgages, scheduled foreclosure auction volume plateaued at about half of pre-pandemic levels in 2023.
COMPLETED FORECLOSURE AUCTIONS: PCT OF Q3 2019 LEVEL SCHEDULED FORECLOSURE AUCTIONS: PCT OF Q3 2019 LEVEL
140%
120%
100%
80%
60%
40%
20%
0%
SOURCE: AUCTION.COM
8 | think realty magazine :: january – february 2024
Scheduled foreclosure auction volume provides a good forward-looking indicator of future foreclosure volume in the next six months. That’s because many properties don’t go to auction the first month in which they are scheduled for auction. On average, properties brought to auction on the Auction.com platform in 2023 were scheduled for auction 1.9 times. The average number of days between the first scheduled auction date and the eventual final auction date was 165 days—about five and a half months.
buying opportunity for many buyers, including local real estate investors and even owner-occupant buyers. “Buy one of those properties that are in really bad condition … fix it … and sell it at a cheap price,” said Karina Barone, a real estate agent and investor based in Birmingham, Alabama, describing her approach to purchasing distressed properties. “The idea of investing was to make a little money but also give back to the community by providing people with affordable housing they can purchase with financing. Most distressed properties sold at auction do not qualify for a loan because of their condition, and the people buying my renovated properties don’t have enough money to buy in cash at the auction.”
Barone recently listed for sale a renovated home that she purchased on Auction.com, but she has also helped several clients purchase distressed properties to live in. “Before I decided to invest, a client of mine saw a house for sale … so I started searching; the house was on Auction.com. I didn’t know anything about auctions back then,” said Barone, recounting the first time she helped a client purchase a distressed property at auction. “It’s more about what you’re doing for others than about the money.” Distressed property buyers like Barone and her clients purchased properties at bank-owned (REO) auction for 57% of estimated after-repair market value (or 43% below after-repair value) on average in the third quarter of 2023,
DISTRESSED PROPERTY PRICING
Despite the relatively low volume in 2023, foreclosure auctions still represent a good
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MARKET & TRENDS: DISTRESSED PROPERTIES
down from an average of 58% a year ago. Buyers foreclosure-auction-purchased at a similar 59% of estimated after-repair value (or 41% below after-repair value) on average in the third quarter, down from an average of 62% a year ago.
DISTRESSED PROPERTY PRICING: PERCENT OF AFTER-REPAIR VALUE
FORECLOSURE AUCTIONS
BANK-OWNED (REO) AUCTIONS
80%
70%
60%
ADDING VALUE WITH RENOVATION
50%
40%
The low purchase prices on distressed properties typically come with high renovation costs. By definition, these properties need significant rehab to be brought back into fully repaired condition. “It was destroyed. The holes in the walls. It was messy,” said Barone of her most recent Auction.com purchase. After substantial renovation, she was able
30%
20%
10%
0%
SOURCE: AUCTION.COM
to return the property to financeable condition so it could be available to a broader pool of owner-occupant buyers. “I was so happy because the appraisal came back $10,000 more than what I was asking for. [The new buyer] is going to start with $10,000 in equity.” The favorable distressed property pricing represents potential wealth-building opportunities, not only for investors like Barone, but also for the owner- occupant buyers she sells to and for the owner-occupant clients she helps purchase distressed properties directly. Barone recounted the story of one client who purchased a distressed property to live in seven years ago and still lives there. “You have to see what she did with that house,” said Barone, noting the client and her husband did most of the work themselves.
10 | think realty magazine :: january – february 2024
DISTRESSED PROPERTY BUYING OPPORTUNITY BY MARKET
2023 AVG FORECLOSURE AUCTION PRICING: PCT OF AFTER-REPAIR VALUE
“When she bought it, it was a $35,000 house. Now it’s worth about $180,000.” Even in markets like Birmingham, where scheduled foreclosure auction volume is 44% below 2019 levels, buyers willing to take on the extra work and risk involved with buying a distressed property can often find inventory to buy. “The center part of Birmingham is run down … so the properties are very, very cheap there,” Barone said. “It needs to be an area that’s a low-budget area but also is a nice street.” OPPORTUNITIES BY MARKET Distressed property-buying opportunities will be easier to find in early 2024 in markets where scheduled foreclosure auction volume in late 2023 was higher relative to 2019 levels.
Larger markets with scheduled foreclosure auction volume in third quarter 2023 that was above the third quarter 2019 level included Detroit (40% above), Denver (44% above), Minneapolis-St. Paul (28% above), New Orleans (1% above), and Indianapolis (8% above). Out of 391 U.S. markets analyzed in the Auction.com data, 87 (27%) had third quarter 2023 foreclosure volumes that were at or above third quarter 2019 volumes. On the flip side, major markets where scheduled foreclosure auction volume in the third quarter of 2023 was still less than half of 2019 levels included New York (74% below 2019 level), Phoenix (57% below), Philadelphia (65% below), Los Angeles (62% below), and Miami (72% below). Nationwide, scheduled foreclosure auction volume in the third quarter of 2023 was up just 1% from a year ago. Scheduled
foreclosure auction volumes were up from a year ago in 172 of the 319 markets analyzed (54%). Among major markets, those with an annual increase in scheduled foreclosure auction volume included Chicago (up 27%), Philadelphia (up 23%), Washington, D.C. (up 35%), Riverside-San
Bernardino in Southern California (up 32%), and Pittsburgh (up 25%).
Major markets with an annual decrease in scheduled foreclosure auction volume in the third quarter of 2023 included San Antonio (down 24%), Birmingham (down 39%), Tucson, Arizona (down 24%), Nashville (down 34%), and Kansas City (down 27%). •
Daren Blomquist is vice president of market economics at Auction.com. In this role, Blomquist analyzes and forecasts complex macro and microeconomic data trends within the marketplace and industry to provide value to both buyers and sellers using the Auction.com platform.
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MARKET & TRENDS: MARKET CORRECTIONS
SYRACUSE, NY
Prime Suspects for Correction A RECKONING IN HOME PRICES IS COMING. INGO WINZER
A
lthough the home price bubble is still percolating in some places, with
HOME PRICE INCREASE 3 YEARS
POPULATION GROWTH 3 YEARS
PRIME SUSPECTS
43%
SYRACUSE, NY
-0.7%
the average sales price up 5% in the third quarter compared to last year (up 11% in Miami!), the slowing U.S. economy almost ensures there will be a reckoning in 2024. Home prices everywhere are well above the level that local incomes can support, so prices will have to realign themselves everywhere. How fast that process takes will differ from market to market. In some markets, there will be a sharp correction over a couple of years; in others, the process will play out much longer. (In the 1980s, after a boom, home prices in New York stayed flat for 10 years.) In some markets, mainly in Florida, strong demand for properties may keep prices high for a longer period, but in others it's difficult to see why prices shot up in the first place. These are the prime suspects for a significant correction in the next year. The accompanying table shows 12 markets where home prices jumped almost 50% over the past three years, while the local
41%
MILWAUKEE, WI
-0.7%
45%
SAN DIEGO, CA
-0.6%
60%
FORT LAUDERDALE, FL
-0.3%
42%
DAYTON, OH
0.0%
43%
WORCESTER, MA
0.3%
46%
PROVIDENCE, RI
0.3%
44%
CINCINNATI, OH
0.4%
46%
NEW HAVEN, CT
0.5%
41%
WICHITA, KS
0.5%
54%
CAMDEN, NJ
0.6%
52%
GREENSBORO, NC
1.0% LOCAL MARKET MONITOR, CARY NC, a Vertical IQ Product
Ingo Winzer is president of Local Market Monitor. The company’s Investors Metro Analysis shows the opportunity and risk in 200 local real estate markets at www.LocalMarketMonitor.com,
population either stagnated or actually decreased. That probably happened with a very small number of sales, but thin markets can fall as sharply as they rise. If you were thinking of selling a property in these markets, ”immediately” would be the best time to do it. •
including strategic analysis of all local ZIP Codes. Winzer has analyzed real estate markets for more than 30 years, and his views on real estate markets are often quoted in the national press. Previously, Winzer was a founder and executive vice president of First Research, an industry research company acquired by Dun & Bradstreet in 2007. Winzer is a graduate of the Massachusetts Institute of Technology and holds a master’s degree in finance from Boston University.
12 | think realty magazine :: january – february 2024
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DESIGN: BACKSPLASHES
Make Your Next Renovation a Real Splash! WHETHER YOU'RE BUILDING A NEW KITCHEN OR RENOVATING AN OLD ONE, YOU WILL ENHANCE ANY KITCHEN DESIGN WITH YOUR CHOICE OF BACKSPLASH. MICHELE VAN DER VEEN
W ith kitchens earning upward of 70%-80% of ROI when selling a home, making sure your next kitchen renovation is a splash is a real must! That’s “splash” as in backsplash . Although you’ll spend much of your money on cabinets, appliances, and countertops, all too often the backsplash ends up being an afterthought. Although backsplashes protect the walls from grease, water, and other damaging liquids, they also offer an opportunity for you to customize your kitchen. Today’s
NATURAL STONE. Taken straight from Mother Earth, natural stone gives any kitchen a natural and earthy look. This style backsplash connects any home to its natural surroundings, a look you can’t go wrong with. Still, there are a couple of caveats you must be aware of if you select a natural stone backsplash. They need to be sealed a number of times to protect them from grease splashes. They also require a good soft bristle brush for cleaning out the crevices of the stones.
backsplashes come in bold colors, creative shapes and sizes, and exciting finishes. They provide a focal point and can even change the feel of the kitchen’s size when you choose a lighter color with a glossy finish. Some backsplashes are even works of art, acting as conversation starters. TYPES OF STYLES Gone are the days of plain, uninteresting solid tiles. Here are just a few of the options when it comes to backsplash styles in 2024.
14 | think realty magazine :: january – february 2024
PATTERNED. Finding their way to the backsplash scene in 2024 are exciting patterns! Herringbones, angular, asymmetrical, and geometric patterns can add to a great kitchen design when they are used in homes suited for those designs. Most of these patterns work well in modern homes, although patterns such as herringbone are a good choice for more traditional homes. Keep in mind that a patterned backsplash will add busy-ness, so it balances a kitchen design that is less demanding. SUBWAY TILES. This timeless look can work in both a farmhouse kitchen design and a modern kitchen design. Today, homeowners and rehabbers have more than just white tiles to choose from. Subway tiles are now available in every color of the rainbow, opening the doors for some interesting kitchen designs. Subway tiles are timeless and easy to care for, making them a great choice for an investment home.
GLASS TILES. For a trendier, up to date look try using glass tiles on the kitchen backsplash. Glass tiles will give any kitchen a flashier feel. With many colors to choose from, they will add a pop to any kitchen design. They look slick and are more reflective, giving a kitchen a bigger feel. Glass tiles are easy to maintain and clean; however, they are more likely to show spotting from soils and splashes, so they need to be wiped down more frequently.
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DESIGN: BACKSPLASHES
down more frequently." “
Glass tiles are easy to maintain and clean; however, they are more likely to show spotting from soils and splashes, so they need to be wiped
MARBLE SLABS. Elegant, expensive, regal and sleek, solid marble slabs make a statement. This look will make any kitchen design stand out. Marble slabs work in a number of home styles. The determining factor for the design comes down to the color of the slabs. When most people think of marble, the first color that comes to mind is white. Yet marble can be found in many colors, including beige, black, blue, brown, gold, green, gray, purple, and red too! Keep in mind that marble is difficult to maintain. Marble is a soft stone and
16 | think realty magazine :: january – february 2024
can absorb wine, juice, and oils that can discolor lighter marbles. Yes, there are sealants for marble, but these sealants will not seal the marble 100%; therefore, the marble is still at risk of staining. MOSAIC TILE. If you’re going for a trendier look, mosaic tiles are your answer. Mosaic tiles come in all colors under the sun and
in just about every shape and size. They can be used as accent pieces with other tiles or as the focal point of a kitchen. Mosaic tiles can be made of ceramic, glass, and even stone. Because they are available in different materials, maintenance requirements vary. One maintenance tool that is a must is a soft bristle brush for grout upkeep.
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DESIGN: BACKSPLASHES
feel. Keep in mind, too, that this application works best with straight and square lines. Grout color that closely matches the tile color gives the illusion of a solid surface. If you’re looking to create more of an impact with the backsplash, choosing a contrasting color is the way to go. It makes the tile stand out more, creating a more dramatic look. Using a darker grout gives the tile in your backsplash more defined edges, and a lighter grout highlights darker tiles to create a much bolder look. If you’re not confident about the direction to go with your grout color, take a look at the display backsplashes at your local store to help you envision how you want your backsplash to turn out. Reviewing online design websites and magazines are other great resources that can inspire you. Although there is much involved in designing any kitchen, don’t overlook the details. They will inevitably make or break the finished look. Choosing a backsplash that pulls the kitchen’s overall design together helps to make an eye-catching statement. •
GROUT OPTIONS Speaking of grout, grout color selection is important. Grout not only keeps dirt and debris from collecting between the tiles but also adds flexibility and strength to your backsplash. It also acts as a sealant by preventing moisture from seeping into the walls behind the backsplash. The color you select has a big impact on the overall look you’re going after with your backsplash. Grout can transform the whole look of the backsplash and the
kitchen. The good news is grout comes in just about every color. Grouts in natural colors work well with any color tile and is always be a safe choice. Grout colors such as white, gray, and black are timeless choices. Greens, blues, tans, and browns also help create a standout kitchen design. Grout color influences the power of the tile design. Choosing a grout color that’s in the same family as the tile helps soften the edges and creates a more seamless look for the backsplash, especially when you’re trying to achieve a more modern or contemporary
Michele Van Der Veen is host of Good Day segments, including Flip It, Decorate Like a Designer, and Stage to Sell. She started her career in real estate investing more than 30 years ago.
A published author, Van Der Veen has been recognized and featured in international magazines for her unique approach to interior design. Acquiring a formal education from the Interior Designers Institute of California, her experience stems from building custom homes to flipping more than 100 homes and working in commercial real estate development alongside her father at a young age. Not afraid to push the limit on her own designs and investments, Van Der Veen will often be heard reassuring her team about her decisions by saying “Don’t worry, we are the comps!” For more on Van Der Veen’s work or to contact her, visit iHeartHomescorp.com.
18 | think realty magazine :: january – february 2024
thinkrealty.com | 19
COVER FEATURE: COMMUNITY
How Real Estate Can Create Positive Social and Commercial Outcomes THINKING CREATIVELY ABOUT WORKFORCE HOUSING, ATTAINABLE HOUSING, AND TRANSITIONAL HOUSING IN COMMUNITIES CAN SATISFY MORE THAN COMMERCIAL GOALS.
KIRK P. TAYLOR
20 | think realty magazine :: january – february 2024
I t’s important for real estate discerning what has staying power from a flash-in-the-pan fad can be a tough task. Too often the trends that meet the structural and economic needs of a developer may not satisfy the human element a customer desires. With creativity, we can meet both commercial and social needs. professionals to stay on top of the latest trends in the industry. But At a recent national conference of high-yield investors, more than half the sessions were focused on housing and real estate. The major themes discussed were supply of workforce housing, attainable housing, and transitional housing in communities with desperate need. These are not localized situations; they are global. A recent study from Fortune magazine showed the average annual commute cost workers $2,000 more in 2023 than it did in 2019. In fact, a new National Low Income Housing Coalition study found “the shortage of affordable housing costs the American economy about $2 trillion a year in lower wages and productivity. Without affordable housing, families have constrained opportunities to increase earnings, causing slower GDP growth.” Housing costs and policies can also shape where people choose to live, work, and study as well as their ability to move or change jobs. The increased cost affects families of lower income at a much higher proportional rate.
How do we solve this?
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COVER FEATURE: COMMUNITY
fit several basic human needs." “
DEDICATED WORKFORCE HOUSING One solution could be an expansion of dedicated workforce housing, which is a proven community builder. Dedicated villages for teachers, emergency responders, and medical personnel, for example, allows vital community members a chance to live in the same community they serve. The Indianapolis-based nonprofit Near East Area Renewal recently created Educators’ Village, which includes 22 new and restored historic homes in conjunction with the city’s school system. Having this extremely necessary population of workers living right in the community in which they work is instrumental to building a community. Building communities from within and finding attainable solutions for this workforce housing dilemma is a theme worth continued attention. COMMUNITY MEMBERS IN TRANSITION Two additional segments to consider when it comes to meeting human needs: communities and individuals in transition. Transition can be counted in days, weeks, months, and years. What the community member is transitioning from or to varies greatly. Life changes due to military service, natural disaster, incarceration, addiction, foster care, family abuse, and separation all create the need for solutions that fit several basic human needs. All of these situations create unique housing challenges. The way these situations are met can be the springboard for future success—or the final straw in someone’s life.
Life changes due to military service, natural disaster, incarceration, addiction, foster care, family abuse, and separation all create the need for solutions that
22 | think realty magazine :: january – february 2024
The Kentucky-based nonprofit Camp G.R.A.V.E.S. is focused on this precise issue. By bringing together short-term safe housing, educational opportunities, employment options, and community resources, the nonprofit hopes to break the poverty cycle that often occurs during these periods of transition. Through a partnership with Camp G.R.A.V.E.S, ek solutions LLC provided upcycled shipping container-based homes to support their mission. Through this partnership, a variety of individuals and families, ranging from those in need of temporary bridge housing due to natural disaster to children aging out of the foster care system now have a place to call home. The need for rapidly deployed and pre-built homes is constant. Giving their residents a new home is priceless. Although simultaneously solving the commercial and social aspects of housing may seem challenging it can be accomplished. Real estate professionals would do well to think creatively about how we can better solve housing needs as well as minimize the hurdles of completing new homes. • Kirk P. Taylor, CPA, is the cofounder and president of Land Betterment Corp, an Indiana Benefit Corporation and certified B-Corp, focused on environmental solutions fostering a positive impact through upcycling former coal mining sites to create sustainable community development and job creation. Taylor is the Chief Financial Officer of American Resources Corp. (Nasdaq: AREC), a next generation, socially responsible, supplier of raw materials to the new infrastructure and electrification market. Taylor has bachelor's degrees in finance and accounting and an MBA.
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FUNDING: SINGLE-FAMILY RESIDENTIAL RENTALS
Preparing for Long-Term Financing of Single-Family Residential Rentals AN ARTICLE SERIES ON NAVIGATING THE PRIVATE LENDING WORLD
DAMON RIEHL
I nvesting in single-family residential rentals can be lucrative, providing a steady stream of income and long-term financial stability. However, securing the right financing for these properties requires careful preparation and strategic planning. This beginner’s guide will explore the essential steps investors should take to position themselves for successful long-term financing arrangements. From enhancing creditworthiness to optimizing property value, we’ll cover the key factors
that can make a significant difference in your quest for favorable financing terms.
areas that need improvement and take necessary steps to strengthen your position.
ASSESS YOUR FINANCIAL SITUATION
BUILD A STRONG CREDIT PROFILE A solid credit profile is vital when seeking long-term financing for single-family residential rentals. Start by obtaining a copy of your credit report and review it for any errors or discrepancies. Address any outstanding issues and make timely payments to improve your credit score. Additionally, maintain a low credit
Before embarking on any financing endeavor, it’s crucial to assess your current financial situation. Evaluate your credit score, debt-to-income ratio, and overall financial health. Lenders will consider these factors when determining your eligibility for long-term financing. By understanding your financial standing, you can identify
24 | think realty magazine :: january – february 2024
utilization ratio and avoid opening new lines of credit before applying for financing.
FREQUENTLY ASKED QUESTIONS
CREATE A DETAILED BUSINESS PLAN Having a well-crafted business plan is essential for showcasing your investment strategy and financial projections to potential lenders. Include information about the properties you own or plan to acquire, your rental income estimates, anticipated expenses, and your long-term goals. A comprehensive business plan demonstrates your commitment to success and helps lenders understand the potential profitability of your investment. SAVE FOR A DOWN PAYMENT Most lenders require a down payment when financing single-family residential rentals. It’s crucial to save diligently to accumulate the necessary funds. Aim to save at least 20% of the property’s purchase price to qualify for more favorable financing terms. Additionally, making a substantial down payment shows lenders your commitment to the investment and reduces the risk associated with the loan. OPTIMIZE PROPERTY VALUE Increasing the value of your single-family residential rentals not only enhances your investment but also improves your chances of securing long-term financing. Consider making strategic renovations and upgrades to attract quality tenants and maximize rental income. Enhance curb appeal, upgrade fixtures, and address any maintenance issues. By presenting well-maintained and desirable properties, you increase your chances of obtaining favorable financing options.
QUESTION
WHAT IS LONG-TERM FINANCING FOR SINGLE-FAMILY RESIDENTIAL RENTALS? Long-term financing refers to obtaining a loan or mortgage with extended repayment terms to fund the purchase or refinance of single-family residential rental properties. It allows investors to secure funding for a significant duration, typically spanning several years. QUESTION WHY IS IT IMPORTANT TO PREPARE FOR LONG-TERM FINANCING? Preparing for long-term financing is crucial because it increases your chances of obtaining favorable loan terms and interest rates. By taking proactive steps to improve your creditworthiness, property value, and financial standing, you position yourself as a reliable borrower, which makes securing the financing you need easier.
QUESTION
HOW CAN I IMPROVE MY CREDIT SCORE FOR BETTER FINANCING OPTIONS?
To improve your credit score, focus on making timely payments, reducing outstanding debt, and avoiding new lines of credit before applying for financing. Regularly review your credit report for errors or discrepancies and address them promptly. Maintaining a strong credit profile increases your eligibility for competitive financing options.
QUESTION
WHAT SHOULD I DO IF I FACE REJECTIONS DURING THE FINANCING PROCESS?
Rejections are common during the financing process, but it’s important to remain patient and persistent. Learn from each experience, address any concerns or feedback lenders raise, and continuously improve your financial position and investment strategy. With determination and resilience, you can increase your chances of finding the right financing option for your single-family residential rental properties. IF YOU WOULD LIKE TO SPEAK WITH ONE OF OUR TEAM MEMBERS WHO CAN SUPPORT YOU ON YOUR REAL ESTATE INVESTING JOURNEY, CONTACT US AT 636-552-4710 OR GO TO LOANBIDZ.COM AND ENTER A REQUEST FOR US TO CONTACT YOU.
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FUNDING: SINGLE-FAMILY RESIDENTIAL RENTALS
With determination and resilience, you can increase your chances of finding the right financing option for your rental properties.
CEMENTING THE FOUNDATION
Preparing for long-term financing of single-family residential rentals is a meticulous process that requires careful planning and diligent effort. By assessing your financial situation, building a strong credit profile, and optimizing property value, you lay a solid foundation for successful financing arrangements. Remember to create a detailed business plan, save for a down payment, and explore different financing options. Additionally, gather the necessary documentation, build relationships with lenders, and maintain patience and persistence throughout the process. By following these steps, you position yourself for long-term financial success and maximize the potential of your single-family residential rental investments. And if you’d like further advice on securing the best possible real estate investment financing for single-family residential rentals, speak to our experts at REI News. • Damon Riehl is the founder and CEO of Investment Property Loan Exchange. He has more than 35 years of lending experience in a broad array of asset classes, including commercial and residential mortgage, small business, and construction lending. Riehl held top leadership positions as head of commercial lending for Ocwen Mortgage, head of unsecured lending for Citibank, global mortgage leader for GE Capital, and head of construction products at Fannie Mae. He is a member of the Harvard Joint Centers for Housing Studies. Riehl has built six de novo lending platforms and used that knowledge to build and grow Investment Property Loan Exchange and the fintech platform LoanBidz.com. Now that you understand the benefits and considerations you need to take when investing in real estate, you may want to start investing in your first property. One of the first steps is to work out a budget and your financing options. Our team at LoanBidz.com can help you figure out affordable options from the most reliable lenders for your exact needs.
RESEARCH FINANCING OPTIONS
statements, and property details. Having these documents ready in advance expedites the loan application process and increases your chances of approval.
There are various financing options available for long-term financing of single-family residential rentals. Research different lenders and loan programs to find the best fit for your investment strategy. Consider factors such as interest rates, repayment terms, and closing costs. It’s also beneficial to consult with a knowledgeable mortgage professional who can guide you through the process and help you make informed decisions. And if you’d like to allow the professionals to help you secure the optimal financing for your investment, talk to our team at REI News. Our experts will do the heavy lifting to find and pair you with reliable, affordable lenders. GATHER DOCUMENTATION When applying for long-term financing, be prepared to provide the necessary documentation to support your loan application. Typical documentation includes personal identification, proof of income, sometimes tax returns, bank
BUILD RELATIONSHIPS WITH LENDERS
Establishing relationships with lenders can be advantageous when seeking long-term financ- ing for single-family residential rentals. Attend local networking events, engage with industry professionals, and join real estate investment associations. Building a network allows you to gain insights, access potential financing oppor- tunities, and demonstrate your commitment to the real estate investment community. BE PATIENT AND PERSISTENT Securing long-term financing for single- family residential rentals may require time and perseverance. Rejections and setbacks are common, but it’s crucial to remain patient and persistent. Learn from each experience, address any feedback or concerns lenders may raise, and continue to improve your financial position and investment strategy.
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FUNDING: SPONSORED CONTENT
An Investor’s Guide to Financing Options WHATEVER YOUR FINANCING STRATEGY MAY BE, SUCCESS AS A REAL ESTATE INVESTOR TODAY REQUIRES ACCESS TO CAPITAL WHEN YOU NEED IT AND A PARTNER FOR THE LONG-TERM.
W ith inventory at an all-time low and home prices and interest rates at an all-time high, real estate investors are anxiously trying to figure out which strategy is best: Buy? Sell? Rent? Flip? The reality is you need more than one strategy and proper financing for each. A well-done fix-and-flip can still reap returns; refinancing equity-filled properties can be a cost-effective way to acquire new properties without tapping into cash; and with the SFR and multifamily market on fire, rentals continue to yield returns.
increasing home prices, potentially turning your flip into a cashflow opportunity for long-term rewards. REHAB. Increased labor and material costs pose a risk to your rehab budget. You can finance up to 100% of your rehab budget, so you can stay liquid throughout your entire project. BRIDGE-TO-CONVENTIONAL. A short- term bridge loan can help you quickly acquire and improve the property or generate monthly cashflow required to refi into a cheaper conventional loan. REFI LISTED PROPERTIES. Once you finish your renovation, a short-term loan can enable you to take cash out while it is listed on the market, so you can swiftly move on to your next project. RENTAL. With fully amortized, interest- only ARMs, you can finance stabilized DSCR properties or vacation rentals. Most properties are not required to be leased at the time of purchase because market data can be used to project rental income. RECAPITALIZE. Tap into the equity of your rental portfolio by refinancing multiple properties into one loan. With up to 80% cash out on the total value, you can then acquire new properties.
CONSTRUCTION. Financing new construction or tear downs creates opportunities for experienced investors and developers to expand and take adva ntage of a highly lucrative market.
FINDING A TRUE LENDING PARTNER
Whatever your strategy may be, thriving as a real estate investor today requires access to capital when you need it and a partner for the long-term—not just for the deal on the table. Having a consistent, reliable capital partner with a deep understanding of financing methods and capital structures will create a solid foundation for your business model and enable you to be prepared for winning opportunities. •
FUNDING YOUR STRATEGY
With so many options available, it’s important to take inventory of your goals, strategies, and financing solutions—which are as unique as each property. Here are some viable funding strategies to consider: FIX AND FLIP. When you find a good flip, you need quick financing that includes funds to renovate. Get data to support the valuation and know what finishes appeal to buyers in the market.
CV3 Financial Services, LLC is a private lender providing business-purpose loans for non-owner-occupied properties to experienced real estate investors. Whether you’re looking to buy and hold, fix-and-flip, or build your rental business, CV3 is your trusted capital partner. For more information, please visit www.cv3financial.com.
FIX AND RENT. Rent rates in many markets are outpacing the
28 | think realty magazine :: january – february 2024
Filmed on location, Titan Talk is a one-on-one interview between you and Eddie Wilson, CEO of Think Realty and the American Association of Private Lenders. This personal endorsement carries extensive publicity, marketing opportunities, and bragging rights, naming you as the exclusive Titan of your real estate sector for a year.
What’s Included
CONTACT SALES@THINKREALTY.COM FOR MORE INFO!
• One-on-one, 20-minute video interview by Eddie Wilson filmed on location. • Video interview posted on Eddie Wilson’s website and social media pages, and the Think Realty Podcast page. • Profile article in Think Realty and Private Lender magazines with coverline status. • Profile article posted on thinkrealty.com, aaplonline.com, and officialew.com, naming you the exclusive Titan of your sector for 12 months. • Video and article circulated to over 24,000 industry professionals via the Think Realty and AAPL e-newsletters. • Six social media posts on Think Realty and AAPL’s Facebook and LinkedIn pages.
Brought to you by:
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FUNDING: SPONSORED CONTENT
Unlocking the Secrets of Business Credit NAVIGATING THE MAZE OF APPROVAL READINESS
MERRILL CHANDLER
I n real estate investing, the thrill of sealing a deal is exciting. So is hitting a milestone. Unfortunately, that excitement can be offset by the headache of finding the right funding. Far too often, serious real estate investors overlook some of the most inexpensive money out there—business credit. Business credit is the backbone of every successful enterprise, yet it remains one of the most misunderstood and elusive components of business ownership.
One critical question you must ask is, “What is the business credit going to be used for?” Just because someone teaches or offers “business credit” doesn’t mean it’s the right business credit for you. There is no “one size fits all” in the business credit world. And, going after the wrong business credit can actually hurt your approval readiness in the future. WHY SERIOUS REAL ESTATE INVESTORS MISS OUT ON BANK MONEY You're not alone as a real estate investor if you've felt like the doors of banks
slam shut when you knock. Historically, real estate investors have been denied unsecured bank money. But why? Most banks are notoriously risk averse. Their cautious stance stems from their responsibility to their stakeholders. When entrepreneurs lack a robust credit history, substantial collateral, or a proven track record, banks often see them as high-risk. And if you add the words “real estate investing,” most lenders turn and run. Further, most real estate investors are unaware of how to correctly present themselves
You may be thinking, “But I thought real estate investors couldn’t qualify for business credit.” Not true, but you must be “approval ready.”
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1. TERM LOANS
Cons: They can have higher interest rates than term loans. Also, there’s always the temptation to over-borrow, which can lead to debt pitfalls.
as "approval ready." It doesn’t just mean having all the paperwork sorted. It's about showcasing a Qualified Fundable Entity in a way that makes banks see you as a promising and, more importantly, “safe” investment. THE WORLD OF BUSINESS CREDIT: THE GOOD, THE BAD, AND THE PROFITABLE Let’s look at some of the more popular business credit instruments and the basic pros and cons for each. This isn’t a comprehensive list or a complete analysis of all the pros and cons. You should always consult your professional advisors before taking on any financial risk.
Pros: Term loans offer fixed interest rates and regular repayment schedules, making budgeting and planning easier. They’re also fantastic for larger, long-term investments. Cons: They often require a strong credit history and substantial collateral. Plus, the longer the term, the more interest you'll end up paying.
3. BUSINESS CREDIT CARDS
Pros: A business credit card, at its core, is just like a personal credit card, but it's specially designed for business use. They come in handy for managing business expenses, keeping personal and business finances separate, and even earning rewards on business-related purchases. True business credit cards do not report monthly on your personal credit.
2. BUSINESS LINES OF CREDIT
Pros: These are flexible, allowing you to borrow as needed. Think of it as a credit card, but for your business. You only pay interest on the amount you draw.
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