Capital Markets Today

As reported recently in HousingWire, the previously announced merger of Invitation Homes and Starwood Waypoint Homes is now complete.  The deal, which was originally announced in August, creates the nation’s largest owner and operator of single-family rental homes. The completion of the merger marks the latest in a series of consolidations in the single-family rental industry that took place over the last few years.  Joining the podcast to discuss the single-family rental market is Greg Rand, Founder, and CEO of Own America. OwnAmerica is a leading provider of acquisition, disposition, and advisory services to institutional investors in the single family real estate market. Prior to founding OwnAmerica, Greg was managing partner at Better Homes and Gardens Rand Realty, a regional real estate brokerage.

As we head into the single-family rental conference, some investors contemplate buying notes secured by real estate versus the real estate itself.  The pros and cons of buying notes versus real estate are debable.  Many note investors will argue that you can manage more notes than real estate projects and there are no property management issues.  Others argue the risk of borrower behavior is too great and would rather deal with a hard asset. Joining the podcast to discuss the difference between the two is Sandor Lau, founder of Noted Financial.  Noted Financial invests in non-performing mortgages nationwide.

The rate of acquisitions by the large investors in the single-family rental market has declined in 2017.  Instead, small and mid-sized companies have become the leading buyers of single-family houses for rent. As home prices rise, these smaller companies have been willing to buy properties in secondary and tertiary markets. They have even entered some prime markets, in spite of the fact that rising home prices may be cutting into investment yields in these areas. Joining the podcast to discuss turnkey single-family rental is RJ Palano.  RJ is the director of “Buy Cash Flow Properties”, a Tampa based company that provides turnkey houses for investors.  Since 2012, “Buy Cash Flow Properties” has acquired and sold over 800 houses to international and U.S. based investors and has also provided over 73 houses to hedge funds for their rental portfolios.

Smart home technology is a modern convenience for the individual homeowner.  Managing lights and utilities by voice command or by remote smart applications from your phone is a convenience that has practical benefits. As the single family rental space evolves and matures, home automation technology at the property manager level has the ability to drive significant efficiencies and costs savings.  Effective use of technology is going to be required to reduce operational costs as margins for acquisitions normalizes into an efficient market. Joining the podcast to discuss the future of home technology is Sean Miller, President of PointCentral.  PointCentral is a leader in enterprise-grade smart home solutions for property managers, property owners and residents.

Last month, ATTOM Data Solutions released its Q3 2017 Single Family Rental Market report.  The report identified the top 25 U.S. zip codes for buying single family rental homes based on potential rental yields and cash flow, vacancy rates, home price appreciation, population growth, neighborhood quality, and average property age. Joining the podcast to discuss the report is Daren Blomquist.  Daren is Senior Vice President of Communications at ATTOM Data Solutions (formerly RealtyTrac), where he directs ATTOM Media, a division of the company that publishes original real estate reports sourced from the ATTOM Data Warehouse, the nation’s most comprehensive property database.  Daren is also executive editor of the Housing News Report, a monthly newsletter published by ATTOM Data Solutions and named best newsletter by the National Association of Real Estate Editors in 2015 and 2016.

There are 3 under looked due diligence issues that can cause a buyer to incur losses.  Often many assets can be demolished, slated for demolition or have significant code violations.  Different counties keep the demolition list in different departments which can cause difficulty in obtaining the information you need. Buyers sometimes close a transaction just prior to a tax sale and are at risk of losing the property to tax sale after purchase.   If the taxes are delinquent, checking to see if a tax sale date is set is necessary so the buyer properly adjusts the price of the asset and is able manage the upcoming sale date. A bankruptcy filing can cause losses if the buyer does not act in a timely manner or of not getting noticed if a loan recently has been purchased.  Until the assignment is of record, the bankruptcy court does not know to notify the new owner of the note of bankruptcy proceedings.  Bankruptcy checks are critical component to your due diligence process. Joining the podcast today to discuss the due diligence process is Alex Goldovsky, Founder and CEO of ProTitle USA.  ProTitle is a Nationwide Residential and Commercial Title Search, Analysis and Due Diligence firm.

Seller financing can be a useful tool in a tight credit market. It allows sellers to move a home faster and get a sizable return on the investment. And buyers may benefit from less stringent qualifying and down payment requirements, more flexible rates, and better loan terms on a home that otherwise might be out of reach. Sellers willing to take on the role of financier represent only a small fraction of all sellers -- typically less than 10%. That's because the deal is not without legal, financial, and logistical hurdles. But by taking the right precautions and getting professional help, sellers can reduce the inherent risks. Joining the podcast to discuss seller financing is Jeff Watson of the Watson Law Firm.  Jeff is an attorney who has had an active trial and hearing practice for more than 26 years.  As a trial lawyer, he has a unique perspective on real estate investing, wealth building and asset protection.  He has tried over 20 civil jury trials and has handled thousands of contested hearings.  Jeff has changed the law in Ohio 5 times via litigation or legislation.  Jeff is also general counsel to the National Real Estate Investors Association.

Most of us have seen REO inventory decrease and prices increase in our local markets. It has been harder and harder to find good deals in which to invest. NPLs offer an alternative to what is available on the MLS.  Pricing for NPLs is much less than real estate and you have several possible exits such as loan modification, refinance, Deed in Lieu, long term cash flow, Short sale, foreclosure, and even long-term rental. Joining the podcast to discuss the acquisition of NPLs is Chaze Guinn, President of Managing Director of Granit Strategic Investments.  Chaz has been instrumental in the architecture of the acquisition, portfolio management, investor relations, and trading platform at Granite. Chaz specializes in distressed whole loan trading, and has built a reputation on a track record of structuring, negotiating, and executing some of the hardest trades possible in the low-value market segment.  Granite is an excellent source for investors to purchase NPLs.

Last week, Fannie Mae announced its fifth sale of reperforming loans as part of the company’s ongoing effort to reduce the size of its retained mortgage portfolio.  According to the enterprise, the sale consists of about 9,900 loans, having an unpaid principal balance of approximately $2.2 billion. Fannie Mae also announced the sale of $1.4 billion in non-performing mortgage loans.  Along with the 4 larger nationwide NPL pools, there are 2 community Impact pools totaling about $130 million Fannie Mae noted that selling non-performing loans are intended to reduce the number of “seriously-delinquent loans” that Fannie Mae owns in an effort to “stabilize neighborhoods. Joining the podcast to discuss the purchase/management and capital raise for re-performing and non-performing loans is David Van Horn, President of PPR Note Company.   PPR has been in the mortgage advisory and fund management business since 2007. It acts as advisor to several investment funds that acquire distressed residential debt nationwide. PPR’s funds manage 1st and 2nd mortgages as well as REO properties.

Generally speaking, there are two types of note buyers; The institutional investor will purchase notes on a national basis with their own funds. They might hold for a long investment, liquidate or trade out and maybe even securitize on the secondary market.  The private investor purchases notes on a smaller scale, usually limited to a certain geographic region. The private investor market has grown significantly over the past several years creating a liquid market place to buy and sell on a smaller scale.  There is a certain level of knowledge that needs to be acquired for a private investor to be successful.  Structuring their investments, sourcing deals and managing their portfolio are just a few of the areas in which expertise is required. Joining the podcast to discuss alternative investments and private placement opportunities is Ryan Parson.  Ryan is the Chairman and Chief Investment Officer at Heritage Capital USA, Inc. and Mile Marker Club, as well as the Director of Investor Relations at Colonial Capital Management. Ryan works with individual and business clients to provide financing solutions for all types of real estate and alternative investments.