of between 3.8 million and more than 6 million homes. This shortage stems from a combination of factors, including underbuilding after the 2008 financial crisis, restrictive zoning, and labor/ material constraints in construction. This means there is a strong demand for new home construction and suggests house prices are likely to remain resilient in the future—a limited supply combined with strong demand provides a solid buffer against significant price declines. INCREASING AGE OF U.S. HOMES. According to the Census Bureau and other real estate research, the median age of owner-occupied houses in the U.S. now hovers around 40+ years, up from roughly 30 years at the turn of the millennium. A large portion of U.S. housing stock was built in the 1960s and 1970s, with many properties needing renovation to meet modern expectations (e.g., open layouts, updated systems, energy efficiency, etc.). This means there is a strong demand for properties to be rehabilitated. LIMITED NEW CONSTRUCTION. Even though new construction is ramping up post-pandemic, builders still face constraints (e.g., labor shortages, high material costs, and local land-use regulations). The result is a slower pace of delivering brand-new inventory, so older homes often remain the primary purchase option for many buyers. INVESTOR REHAB POTENTIAL. With so many houses needing major updates, ranging from cosmetic improvements to bigger-ticket items like HVAC, plumbing, or roof replacements. There’s a clear opening for investors who specialize in quickly revitalizing dated properties and bringing them
to market-ready condition. This is a growing opportunity for investors who are looking to buy and refurbish a house. Given that private finance is a key tool for such borrowers, this too bodes well for the strength of the market. As the private finance industry has grown, the number of lenders and the amount of private financing available to real estate investors has also grown, resulting in a healthy and competitive market—and a range of private lenders for borrowers to choose from. Some lenders can provide attractive pricing, but it may come with more banklike requirements and constraints. Other lenders may be slightly more expensive but can provide extremely flexible funding solutions for almost any real estate investor. When choosing a private lender, consider where their funding comes from. As mentioned, some private lenders are funded by large public securitizations and sovereign wealth funds, giving those lenders an impressive amount of capital that might be some of the best pricing you will find in the private lending market. However, some of these investors also require you to tick a lot of boxes. For a lender to do a publicly rated securitization, the loans in their portfolios need to be very clean loans, so there’s no room for lower FICO scores nor much room for borrowers who are foreign nationals, etc. At the other end of the spectrum is a range of private lenders who have their own balance sheets and can almost act as a private individual making a loan. They don’t have investors that impose the same sorts of constraints on them, so they can make a commonsense assessment
of a loan and a borrower. These lenders can be very straightforward to deal with; however, they will likely have a slightly higher interest rate. At the end of the day, it’s all a balancing act. If, as an investor, you are confident your real estate project has a proper margin, you should be taking a closer look at private lending to determine if it’s a solution.
CHRISTIAN FAES
Christian Faes is the founder and CEO of Faes & Co, an investment firm that builds and invests in technology- enabled direct lending businesses. His team of 200 seasoned experts have been instrumental in building direct lending businesses in the UK, Ireland, Australia, and the U.S. that have amassed over $5 billion in funds under management. Faes also serves as the founder and CEO of Faes & Co’s group company, F2 Finance, a technology-enabled lender launched focused on providing short-term loans to property entrepreneurs and investors. Previously, Faes co-founded LendInvest. Over 16 years, he built it into a leading financial technology company that is now one of the largest nonbank mortgage lenders in the UK. He also co-founded Onate, Ireland’s largest bridging finance company, and founded Fintech Founders, a network for the leading entrepreneurs and founders in the fintech sector.
22 | think realty magazine :: may - june 2025
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