HOUSINGNEWS REPORT
FEATURED ARTICLE
SINGLE FAMILY RENTAL LEVERAGE
A Sampling of Single Family Rental Loans
Financed: 7,324,326 Free & Clear: 11,070,894
Financed 40%
Here are three loan types offered by one of several newcomers to the real estate investor financing space, Colony American Finance: • Rental portfolio loans - Fixed rate financing for 5 to 10 years on a pool of stabilized rental properties - Loan amounts from $500,000 to hundreds of millions of dollars - Rates typically run between 5 and 6.5 percent - Typically have a prepayment penalty attached • Single asset rental loans (just introduced) - One loan for one rental property - 30-year fixed rate product similar to a conforming loan from Fannie or Feddie - Rates typically run between 6.5 percent up to 8 percent on the high end • Credit lines up to $50 million - To purchase rentals or fix-and-flips
Free & Clear 60%
Source: ATTOM Data Solutions
McBride said he’s noticed a shift in the type of customers Colony is attracting in the past 18 months. “Early on it was the mid-sized investors all the way up to the large institutions (that) had the most urgent need for capital,” he said. “We see a lot more opportunities from the smaller, mid-sized operators, and so that is where we are focusing our efforts: the broad base of the pyramid.” Beasley observed a similar trend in customers coming to Roofstock to acquire single family rentals. He said smaller “retail” buyers make up about 25 percent of demand for homes listed on the website, with the remaining 75 percent split between institutional investors and foreign funds. Retail Buyers Surprise “(The retail buyers) surprised us. We were expecting it to be closer to 10 percent,” he said, adding that surprise finding has caused the company to adjust its strategy to account for those “15 to 16 million homes that are owned by mom-and-pop investors and being a marketplace for
them. … We actually think we can improve liquidity in this space and increase the number of owners.” Roofstock only lists single family rentals that are already leased and performing, and its properties are not listed with a broker on the multiple listing service (MLS), allowing both buyers and sellers to save on transaction costs as well as on the three to four months of lost rent that would result if the properties were vacated before they were sold, according to Beasley. “We promote liquidity by squeezing out some of the costs of transactions,” he said noting that Roofstock’s fee is about 2 to 3 percent of the purchase price. “The seller is saving a lot of costs… And the buyer is buying at a discount to fair market value.” By providing third-party property inspections and incorporating 3-D mapping of the interior of the home, Roofstock’s goal is to allow investors to purchase homes far beyond their backyard, “sight unseen,” said Beasley.
- A 12- to 24-month term
- A substitute for hard money loans with a lower rate of between 8 and 10 percent
ATTOM Data Solutions • P5
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