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FACTS • At its core, crowdfunding is the collective efforts of individuals to pool their money together to support any investment. • Real estate crowdfunding is meant to be profitable for investors and it enables investors to buy securities, like shares of apartment buildings, retail centers or office buildings. • Crowdfunding for real estate is an exciting opportunity to cut out middlemen and deliver insider access to transactions investors otherwise would not have access to. • Rather than investing $200,000 or more in a single investment, by pooling money together online, investors can be part of the action and invest with as little as $5,000.
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Carina Calhoun is editor-in-chief of N Magazine. She may be contacted at carina.calhoun@nawrb.com.
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FACTS • Top-tier properties achieved record prices globally in 2012 with international buyers driving the sales. • The luxury property market has limited supply. High net-worth individuals are continuing to invest in real estate, often in second and multiple homes. • Recent changes to tax laws in some countries have impacted market activity and will continue to do so in 2013. • Prestige residential real estate values will more likely follow growth trends in non-consumable luxury goods than trends in the general housing market. 34 | N Magazine
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Las Vegas Real Estate Continuing Education Course Renee Marie Smith June 2013 Smith provided a three-hour course on her short sale secrets that included the need to update marketing tips for short sale listings, how to qualify an agent’s short sale skills and short sale industry expert expectations for the next 12 months.
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KDYA Radio Program Dianne Langston Hosts an Educational Radio Segment July 2013 NAWRB board member, Dianne Langston, hosted an educational radio program on KDYA discussing topics such as distressed sales, options, tax consequences and VA benefits – amongst others.
REO-to-rentals: Handle with care Big players and a changing market make for an exciting and challenging dynamic
the National Association of Home Builders found that builders are feeling the impact of rising costs, confirming that the costs for refurbishing and maintaining rental properties are also going up. Several companies are ramping up to buy more properties compared to last year — even acquiring large parcels of land to build single-family rentals. Waypoint Homes Realty Trust, American Residential Properties and other large real estate investor groups are actively recruiting acquisition purchasers in their local markets. As a result, the inventory of REOs to choose from is getting smaller with the most dilapidated homes left, leaving smaller investors to dig through the leftovers. Too much inventory in too few of hands can drive the market in certain neighborhoods similar to the stock market in a buy-and-sell mode. This can be a good dynamic in the short run but may have detrimental consequences to neighborhood values in the long run.
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It was only recently that large investment companies really started looking at diversifying their portfolios into singlefamily rentals vs. large-unit apartment complexes. At that time, roughly 84% of the single-family leases were managed by mom-and-pop local management firms, accordBy Desirée Patno ing to a statistic released at a real estate conference last year. Some of the first companies to enter the mix have already exThe REO-to-rental concept can be a be purchased with the help of sophisticated local real estate ited the SFR rental strategy because of the high operational flexible, viable business plan, but experts at 25% or more below market value on a individual costs. Some of the large companies that don’t have a costpotential investors should enter the basis. A California property recently re-sold for $539,500 after effective operating are getting market with their eyes wide open. having been purchased fourinfrastructure months earlierin forplace $349,100 at a out or extending their holding timecosts fromoffive to eight years due to Subsequent selling of REO rental trustee sale. Substracting renovation $27,000, that’s high acquisition prices. properties to occupants leads to still a realized profit of 26%. Deals are out there and can be sales purchases haveluck. been acquired at pride of ownership and helps refound withNumerous hard worktrustee — and sometimes some good normal, non-distressed market value. In some rental markets, duce the overhead costs or a potenproperties sit vacant longer before investors can find qualified POTENTIAL OBSTACLES tial nightmare rental experience. And with increasing market Notand only are these properties required to be values, realizing less than the desired 8% to 9% ROI can still Keepingtenants. operating maintenance costs under control is brought upprimary to code by most for cities, but many desired are victimized by vandalbe acceptable as one’s REO-to-rental book value appreciates. one of the factors an investor’s ROI. The ism and hitto-rental with nightmare thatmany are not only destrucMany businesses and individuals in the real estate industry single-family REObusinesstenants model has layers, tive to properties but don’t havemore the funds forthan a landlord to are now investors in some fashion and in growing numbers and managing scattered houses is much complex pursue them forunits. collection. in the REO-to-rental space. Competition is fierce. The single- managing multifamily Buy-and-hold business plans areproperty models that family investor market includes individual real estate agents With individual houses, mobility to each can can be change on an impulse. The majority of REO-to-rental portfolios and investors buying a few properties, mom-and-pop invest- a big deterrent. The problem isn’t necessarily the actual dis- aren’t regulated in any manner similar to other equity investments ment groups and large portfolio purchases by hedge funds tance between houses as compared to the time it takes to physthat publish the intent to in sellmetro their areas interest. What would and private equity groups. ically get to must each property, especially where Prices of single-family distressed properties are down 27% traffic ishappen an issue. Additionally, the property management to the housing market if we created the perception of from the peak of the housing market, while traditional proper- and maintenance costs for rental houses tends to be higher a sell-off frenzy? ties dropped 21% from the peak, according to CoreLogic. But than for apartment That’s important to consider if where A recent complexes. study by RadarLogic analyzes the markets prices have been on the rise for a number of months now with your portfolio isn’tare geographically Volume price investors bringing in concentrated. the biggest discounts. RadarLogic inventory in desirable markets very tight. Still, property can discounts forthe services to negotiate. Furthermore, said abilityare to difficult make a profit ultimately depends on appreciation in property values. Thus, the markets recommended for institutional investors are areas the firm believes are more COPYRIGHT 2013 BY HOUSINGWIRE • 2701 Dallas Pkwy, Ste 200 • Plano, TX 75093 • 469.893.1480 • www.HousingWire.com REPRINTED BY PERMISSION likely to benefit from• home price appreciation.
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FUTURE SNAPSHOT Final Approvals:
market due to overly tight credit standards and limited inventory. The following five key factors should be weighed carefully in order to make the REO-to-rental process work successfully: Short sales: The listing broker and seller need to be held responsible for reviewing all offers. Note holders should have a say in the deficiency of the notes besides evaluating the comparable values. If we sell properties above appraised value, why does the note holder/s only look at the appraised value? Currently most listing brokers control all the cards. Trustee sales: Some investors are making wholesale deals with interested buyers/clients, sometimes as quickly as one hour, and turning a profit. Major auctioning platforms versus the traditional auctioneer can also entice more buyers and draw out the actual sale of the property from minutes into hours sometimes resulting in bringing in a higher price than a more traditional sale might. Trustee sales are characterized “as-is” with no title warranties-clearance of associated debt, condition and occupancy status are also an option for investors to consider, but buyer beware. Many times a newbie investor thinks they are buying a first deed of trust when in reality they are buying a second deed of trust or find themselves a recipient of a dropped bid — a practice that results in paying more that the property is worth. Federal assistance programs: Grant funds are available to help neighborhoods recover from the foreclosure crisis yet are being victimized by investor partnerships that are buying and flipping the properties. The funds are also being used in areas not heavily affected by foreclosures. Enhanced compliance and regulation is needed to ensure federal grant funds are being used properly in the midst of the REO-to-rental craze. Bulk sales: Removing the normal process of liquidating distressed inventory by selling in bulk entices large, well-monied investors but it can offset neighborhood stabilization efforts. Proper marketing and attention given to individual sales can realize a greater return. Regulations should be addressed to limit the use of volume selling. Short term REO-to-rentals: Flipping houses quickly can be extremely profitable especially as property values rise. When the cost of running the business starts overtaking the “perceived book value” or limits your cash flow, or, the backers want to cash-out, what will the market look like and how will these dynamics impact your business model and your risk? It is something investors must consider. Real estate brokerages and lenders feed their local housing market through their actions. The housing landscape will never be the same as it was prior to the subprime crisis and subsequent financial crisis. A place to live that we call home is so important. Do your homework, give proper and objective consideration to the risks and variables, develop a sound execution plan and you may find this to be a seriously viable business venture. Desirée Patno is president and CEO of Desirée Patno Enterprises.
5/15/13 9:39 PM
She is also founder and president of the National Association of
The investor market is creating a housing market that looks better than it is and prevents the first-time buyer from entering the
Women REO Brokerages, a trade group for women in the REO/real estate business.
COPYRIGHT 2013 BY HOUSINGWIRE • 2701 Dallas Pkwy, Ste 200 • Plano, TX 75093 • 469.893.1480 • www.HousingWire.com • REPRINTED BY PERMISSION
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