REI Ink - February 2021

A BUSINESS P U B L I C AT I O N F O R R E A L E S TAT E INVESTORS FEBRUARY 2021

DLP RE A L ESTATE CA PITA L PAS SIO N ATE LY C R E AT I N G PROS PE R IT Y TH RO UG H R E A L E STATE DR E A M . L I V E . PROS PE R .

FOC

US:

CE GEN I L I D DUE RISK T & MEN AG E N A M SP

AL ECI

10

38

I N C REASING

REGIONAL SPOT LIGHT:

P ORT F OLIO VALU E

C H ARLOT T E,

AND REDU C ING RISK

NORT H CAROLINA

REI INK I

REI INK

Let our expertise add value for you.

AD

PROPERTY MASTERS—WE’RE HERE FORYOU

Since 1996, Property Masters has offered renovation services with a difference to clients through the US. Though we’re all about value, what we value most is your success, your relationship, and your trust.

Whether your property is residential or commercial, our promise is the same: we’re going to treat your investment the way we would treat our own.

“ We ’ v e w o r k e d w i t h P r o p e r t y Masters for years. The industry keeps changing, and Property Masters has the flexibility to change right along with it.”

BANK OWNED // PRIVATE EQUITY // INVESTMENT SINGLE FAMILY // MULTIFAMILY VALUATIONS Whatever your real estate asset is, Property Masters adds value. In the past two decades, we’ve seen and done it all. Our experience translates into added value for you.

INVESTING INYOUR INVESTMENT Adding value to investment properties requires more than just manpower. You need impeccable quality, reliable service, and a partner with a proven track record. We help our clients prepare their properties (or assets) for an expedient sale at a maximum return.

Nicole Stilley Regional Director I I F E BAccount R UA RY 2 0 21 877.253.3445 nicole.stilley@propertymasters.com

Heather Hoyt Regional Account Director 866.854.0330 heather.hoyt@propertymasters.com

Main: 866.200.0110 www.propertymastersres.com

WHAT’S INSIDE PERSPECTIVE

R I S K M A N AG E M E N T

R I S K M A N AG E M E N T

DUE DILIGENCE

4

10

14

18

HINDSIGHT

INCRE ASING

RENTA L

RISK MITIGATION

IS 2020

PORTFOLIO

PROPERT Y RISK

A ND DUE

VA LUE A ND

M A NAGEMENT

DILIGENCE IN THE PA NDEMIC

REDUCING RISK

DUE DILIGENCE

DUE DILIGENCE

PROFILE

22

26

30

ADDITIONAL

RISK

INVESTORS

REWARD

DLP REAL ESTATE CAPITAL

REGIONAL SPOTLIGHT

S I N G L E - FA M I LY

S I N G L E - FA M I LY

FROM THERE TO HERE

38

46

50

56

CHARLOT TE, NORTH CAROLINA

THE SINGLE-

DESIGN TIPS:

FROM DENTIST

FA MILY RENTA L

ACCENT WA LL S

TO RE AL ESTATE

FLOCK TO SINGLE FA MILY RE NTAL

M ARKET H AS

E XECUTI VE

BECOME A SE ARCH FOR SUPPLY

REI INK 1

REI INK

PUBLISHER’S LETTER

2021! NOW WHAT? What can be expected in 2021? UNCERTAINTY!

RO BE RT RA KOWS KI Publisher & CEO

Our December issue had a story in it titled, “How a Biden Administration May Affect Real Estate Investors.” Two of the speculations were the elimination of 1031 Exchanges and a tax on flippers. The article pointed out that the Sanders Campaign did, in fact, recommend placing “a 25% House Flipping tax on speculators who sell a non-owner-occupied property, if sold for more than it was purchased for, within 5 years of purchase.” Bernie Sanders is slated to be the Chair of the Senate Budget Committee. UNCERTAINTY! The January issue had a story on the future of Opportunity Zone (OZ) tax benefits. The takeaway

ROBERT RAKOWSKI Publisher & CEO

SUZANNE ANDRESEN Chief Revenue Officer

EDITORIAL BOARD Kelly Brooks | Property Masters Bill Deegan | Heartland Income Properties Robert Greenberg | DLP Real Estate Capital

And, on January 14th, Biden unveiled a $1.9 trillion stimulus plan that includes extending the eviction ban to March 31 in a bid “to avoid a flood of foreclosure and eviction filings” awaiting courts in the nearly 10 months since the federal government originally put a COVID moratorium into effect. While many larger real estate companies have not experienced “a significantly greater number of delinquencies or defaults,” what happens up through March

WRITERS

Carole Ellis, Erika Garcia, Greg Godderidge, Meaghan Hanley, Debbie Lastoria, Jennifer McGuinness, Rick Sharga, Shaun Shenouda, Alyssa Sprague, Shawn Woedl Copyright ©2021 by Choice Publishing LLC, ISSN 2641-9602. All rights reserved. No part of this magazine may be reproduced in any form or by any electronic or

may be a different story.

YET MORE UNCERTAINTY! But then again, there is just as much uncertainty in the stock market as there is in real estate. According to the book, Superforecasting,

by Philip Tetlock and Dan Gardner, experts across complicated disciplines fail to make accurate forecasts. Their research found that the average expert was a horrible forecaster, regardless of experience and degrees earned. A recent headline of a CNBC story was, “Wall Street Analysts Make a Big S&P 500 Call for 2021; Market History Says Ignore Them.”

REALLY UNCERTAIN! Welcome to 2021! Time to put your experience, lessons learned, and gut intuitions to work!

Thanks to all!

visit REI-INK.com/subscribe or email robert@rei-ink.com. Annual subscriptions are $59.95; single-issue copies are $6.95.

The views and opinions expressed in this magazine are not necessarily those of Choice Publishing LLC or the publisher. The articles are intended for general information only and are not intended to provide specific recommendations or advice. Be sure

David Hicks | HomeVestors

mechanical means without permission

Jennifer Stoops | Park Avenue Properties

REI INK is a monthly publication of Choice

when considering a new strategy or

Publishing LLC. To subscribe or to order

idea. We are not responsible for the

single copies, please call (816) 623-0762,

content of any paid advertising.

Erica LaCentra | RCN Capital

Mike Tedesco | Appraisal Nation

2 F E B R UA RY 2 0 21

was that the Biden Administration has already announced its intention to make changes to the Opportunity Zone incentive, but “the scope of any alterations for the OZ incentive are hard to determine.” MORE UNCERTAINTY!

in writing from the publisher.

to consult your attorney, accountant and other relevant business professionals

By

AD

There is a place where the loan search ends And before your investment strategy begins And there are financing options that delight, And there the terms are just right And there are no hidden fees in sight Don’t delay your deals, we’re ready to lend For investors with real estate dreams to grow Contact RCN Capital and you'll know The place where the loan search ends

Visit RCNCapital.com \ Email Info@RCNCapital.com \ Call 860.432.5858 RCN Capital, LLC is licensed as a California Finance Lender under Department of Business Oversight license number 60DBO-46258.

Arizona Mortgage Banker License BK-0932325. Oregon Mortgage Lending License: ML-5571; NMLS Company ID: 1045656.

REI INK 3

REI INK

PERSPECTIVE

HINDSIGHT IS 2020 Looking Back on Last Year’s Top REI Insurance Claims

BY S H AW N WO E D L

W

ith 2020 in the

to 2019. Last year broke

option is to use 5/8"

rearview mirror,

2005’s record of 28 named

marine plywood cut ahead

we can look back on the

storms, blowing through

of time to fit over windows.

year and see what we

the assigned alphabetical

Tape does not prevent win-

learned. Last year proved

names and moving into

dows from breaking.

that you cannot prepare

the Greek alphabet. While

for everything, but some

these storms certainly

A well-maintained prop-

of the most common

caused significant dam-

insurance losses that

age (especially those late

happen across the real

in the season), they luckily

estate investment indus-

didn’t reach the damage

try, year after year, can

estimates of 2017’s Maria,

be mitigated or avoided completely with some planning and commitment. Let’s look at the

than $90 billion combined).

Prepare Your Properties

damage. Be sure gutters and downspouts are secure and clear of debris.

Keep trees and shrubs well-trimmed so they are more wind resistant. Be sure the battery backup for your sump

for the Storm

pump is working to pre-

If you own properties in

vent drain backups.

the Southeast or along

When it’s safe to visit the

the Eastern Seaboard, you

property, you may find

can take steps to prepare

broken windows, holes

for impending storms and

in the roof, or standing

limit the damage your

water. Use tarps to cover

C AU S E O F L O S S #1 : W I N D/ H A I L

property may endure. Well

openings in case of addi-

before a storm hits, ensure

tional rain, or secure with

With a record-setting 30

you have fans, water

plywood to discourage

named storms (more than

pumps, cleaning supplies,

thieves from accessing the

two and a half times the

and a portable generator

property. Water can cause

annual average), it is no

on hand. You may consider

mold to form quickly.

surprise that Wind claims

installing permanent storm

Act swiftly to dry out wet

increased 21% compared

shutters, but a second

items. Put furniture on

most common claims submitted last year and some practices an investment property owner can follow to protect their valuable assets.

4 F E B R UA RY 2 0 21

Irma, and Harvey (more

erty can help mitigate

blocks, remove area rugs, and bring in a water pump and fans.

Preventable Fire Losses

including the basement.

Space heaters should not

Have a plan to inspect

be used as the primary

them monthly and

heating source. If allowed,

change the batteries

they should be equipped

twice per year.

with safety features such

for negligent fire losses.

Place fire extinguishers at

as auto-shut-off, be

Cooking is the leading

readily accessible loca-

cause of home fires,

tions in the kitchen and

starting from either a

other main areas. Fire

grease fire that gets out

extinguishers can help put

run overnight.

of control or from unat-

out small fires before they

tended cooking.

become uncontrollable.

Cold weather and

The COVID-19 pandemic meant more people were

Now is a great time to be

staying at home, which

sure your insurance policy

increased opportunities

covers Named Storms (a storm or weather condition identified by name by the National Weather Service).

Some standard property policies exclude this cause of loss and require that it be purchased separately.

Don’t be caught flat footed after the fact—review your policies now, before hurricane season.

It is critical (and often required by your insurer) that your properties, whether tenant-occupied

Research the various types available and educate your tenants on their use, as well.

plugged directly into an outlet, and never be left unattended or allowed to

increased homelessness can also mean that vacant and renovation properties are more susceptible to squatters who need shel-

or vacant, have working

During colder months,

ter. It is not uncommon

C AU S E O F LOSS #2: FIRE

and well-maintained

heat sources can also lead

to see a property burn

smoke detectors. They

to fire losses. Have all fire-

because someone taking

Fire is one of the most

should be inside every

places and chimneys pro-

refuge there lit a fire to

avoidable causes of loss

bedroom, outside each

fessionally inspected, and

stay warm. Be sure the

for investors but remains

sleeping area, and on

fixed if needed, before the

home is properly secured

one of the most common.

every level of the home,

cold season hits.

to keep them out.

REI INK 5

REI INK

PERSPECTIVE

Wildfire Losses

offers a product called

2020 was also a record-

Tenant Protector Plan that (among other things)

setting year for wildfires

offers $1,000 to the land-

with more than 52,000

lord for rent lost due to a

recorded fires from

tenant who leaves mid-

California to Colorado.

lease or is evicted. This

Last year nearly 9 million

is not a policy that offers

acres went up in flames,

coverage when tenants

almost double from 2019

simply stop paying rent,

and 2.3 million more than

as has been common this

the 10-year average.

past year.

If you invest on the West Coast or within a mountain zone, there are regular maintenance practices that can create

enough to reach any

that may block views of

area of the home.

the house and provide

a “defensible space”

C AU S E O F L O S S #3 : T H E F T A N D VA N DA L I S M

around your properties.

Vacant and renovation

Keep the area around the

homes are always more

home clear of dead vegetation, dried leaves, pine needles, ground debris, and anything that will

at risk for theft, but the pandemic has heightened this risk. Many theft losses can be avoided by taking

burn. Remove tree limbs

simple security measures.

that overhang the roof,

Make thieves and van-

and keep the roof and gutters clear of branches and debris.

dals believe the house is being lived in. Set exterior lights on a timer or install

Do not store combusti-

motion-activated lights.

ble materials in or near

A well-lit exterior may

the house and make sure

discourage thieves from

vents are covered with

approaching your prop-

1/8" mesh screen. Be

places for thieves to hide.

Make sure the property is properly secured—lock doors and windows and reinforce them with sturdy hardware. Use an alarm system with monitoring.

If someone does break in, they may leave just as quickly if the alarm goes off. Lastly, monitor the property frequently, check the mailbox, and establish a good relationship with the neighbors.

Between March and September of 2020, the majority of states issued some level of moratorium on evictions. In September, the CDC issued a federal order halting eviction for nonpayment of rent through at least January. It has been difficult to complete eviction judgments to vacate the property, and this reimbursement payment requires that the tenant no longer resides in the home.

It is thought that up to

C AU S E O F L O S S # 4 : SKIP RENT

40 million Americans (40%

erty at night. Keep the

This is new on our list of

be at risk of eviction when

sure the property has

yard cut and clean, and

top claims. National Real

the moratorium is lifted,

garden hoses long

trim back trees and shrubs

Estate Insurance Group

more than ten times the

6 F E B R UA RY 2 0 21

of renters in the US) could

DEFAULT SERVICES:

ENTER 2O21

PREPARED! NTC’s suite of innovative default servicing solutions compliment and support any servicers process of handling non-performing loans and adhere to all regulatory and investor requirements.

For 30 years NTC has assisted to reduce process times, decrease cost and improve efficiencies. As we’re entering 2021, be prepared by partnering with an experienced provider you can trust.

AD

+ ASSIGNMENTS OF MORTGAGES: Assignment Chain Verification & Document Preparation + ASSIGNMENT VERIFICATION REPORT (AVR) + ASSIGNMENT CHAIN RESTORATION + CHAIN OF TITLE BINDER FOR NOTES & ENDORSEMENTS + TITLE POLICY CORRECTIVE, RETRIEVAL & REPLACEMENT + DOCUMENT RETRIEVAL/COUNTY RESEARCH + MORTGAGE MODIFICATION TITLE & RECORDING ®

CALL FOR MORE INFORMATION

800.346.9152 x310

REI INK 7

REI INK

PERSPECTIVE

annual average of 3.6 million filed evictions (less than half result in an eviction judgment). So, while we hope these numbers decrease, we do expect these claims to continue

C AU S E O F L O S S # 5 : WAT E R

heat. Prior to the first

inspections. Communicate

Water Damage claims for

freeze, shut off the water

regularly with your tenants

at the street and drain the

about your expectations

plumbing system.

of them and to under-

investors are most often the result of burst pipes during winter freezes and can often be completely

to rise through 2021.

preventable.

Loss of Rents

Insulate pipes on exterior

Early in the pandemic, many clients submitted Loss of Rents claims as a result of tenants unable to pay rent. However, it is important to keep in mind that for most policies, Loss of Rents requires that the property sustained

walls, in crawl spaces, and the attic. Open cabinet doors to allow heat to circulate to un-insulated pipes under sinks and appliances, and let warm water drip overnight, especially for faucets on outside walls.

H O N O R A B L E M E N T IO N : PREMISES LIABILIT Y

While liability claims are not as common, they can be expensive. The most frequent liability losses are slip-and-fall accidents with injuries that range from broken bones to paralysis, and even death.

Slip-and-falls can be caused by uneven sidewalks, steps in need of

stand the condition of the property, and promptly address unsafe or problematic conditions.

You want insurance to be there to help when the unexpected happens. But with years of catastrophic losses, rates are increasing across the industry. Investment properties that carry more risk are becoming more

repair, or absent handrails.

difficult for which to find Keeping your claims his-

affordable coverage.

damage from a covered

If the property is vacant,

loss that renders the home

the heat should be main-

B E P R OAC T I V E

uninhabitable. Many poli-

tained to at least

To avoid liability and many

cies also contain a bac-

55 degrees and have

of the property losses

from preventable losses

teria and virus exclusion

someone check the

listed above, implement

can help you stabilize

and some are now even

property daily during

a scheduled mainte-

your rates and keep your

adding a specific COVID-

cold snaps to make sure

nance plan for every

coverage intact in 2021

19 exclusion.

the house is maintaining

property. Perform annual

and beyond.

tory as clean as possible

Shawn Woedl is the CEO & President of National Real Estate Insurance Group (NREIG), an independent

insurance agency in Kansas City. He joined the company in 2014 and has been instrumental in growing NREIG’s Insurance Program for real estate investors into the largest in the country—insuring more than 90,000 locations today. Through his efforts, the Program has expanded to accommodate for investment properties up to 20 units, vacation rentals, and non-performing notes, as well as the

addition of countless ancillary coverages. He is responsible for overseeing all aspects of the agency, specifically focused on building strong carrier and industry relationships, developing new and

innovative product offerings, and managing internal sales and service processes. He is a nationally recognized speaker with an expertise in Commercial Property insurance.

8 F E B R UA RY 2 0 21

SINGLE-FAMILY RENTAL SOLUTIONS

SINGLE FAMILY RENTAL SOLUTIONS YIELD BOTTOM LINE RESULTS

AD

Altisource’s single-family rental (SFR) suite of solutions helps you to research, bid and close your real estate investments all with a single-vendor.

/

Scale your rental investments using our robust nationwide RentRange® rental data solutions to more accurately assess trends and predict values at property

PROVEN RESULTS

216K+ Real Estate Properties have been marketed and sold using the Hubzu platform

and portfolio levels

/

Leverage Hubzu®, our industry leading online real estate marketing platform for easy and transparent residential property auctions for acquisitions and dispositions

/

Standardize your closing process nationally with our vertically integrated Premium Title™ and Springhouse® Valuation services

100M Properties in RentRange nationwide property database*

50% National Solution

Custom Reports

Advanced Modeling

Same Day Disbursement

Premium Title and settlement savings with bulk SFR compared to single transactions

CONTACT Lora J. Helt at lora.helt@altisource.com to learn how Altisosurce’s comprehensive SFR suite of solutions can help elevate your investment portfolio.

REI INK 9 *Single-family and multi-family residential properties © 2019 Altisource. All Rights Reserved.

191111

REI INK

R I S K M A N AG E M E N T

INCREASING PORTFOLIO VALUE AND REDUCING RISK The Need to Perfect Loan Collateral and Document Custody

BY D E B B I E L A S T O R I A A N D M E AG H A N H A N L E Y

E

very loan has a value

In a perfect world, you

The assumption was that

at origination. The

would originate all your

a good process would

loans and have that pro-

reduce the risk of loss

loan officer makes their commission, and based on the secondary market, the investor pays for a loan in accordance with the underwriting basis for which it was closed. This value should survive the life of the loan—but we all know it may not. The value may be impacted by a refinance for a better interest rate or default by the borrower, and this is considered based on statistics. However, there is an exposure that exists with the condition of the collateral file, which is not often taken into consideration upfront. Having a solid process of tracking and maintaining (at a minimum) the mortgage

10 F E B R UA RY 2 0 21

cess put in place. Now enter the complex world of mortgage banking, where your portfolio was not self-originated, but rather acquired or purchased. Then add into the equation that your purchases include reperforming or nonperforming assets. If the collateral file is the underlying basis of your loan value, how do you manage to a complete and perfected file regardless of the origination source?

should the borrower run into a financial setback and default. We all know that this was not the case, and then suddenly in 2008, the collateral file became the most important factor to sell a loan, foreclose, or even successfully release the lien. The problem was, while everyone was focused on the underwriting factors, the collateral file management was a secondary afterthought at best. Fast forward, it has been reported that homeowners in some form

T H E G R OW I N G N E E D FOR A MORE COMPLETE C U S T O DY P R O C E S S

of default are back to 11%

Before the financial crash,

This, compounded with

investors focused their

note, recorded mortgage,

loan origination require-

and title policy at origina-

ments on a solid loan

tion is key.

underwriting process.

when pandemic related forbearance is considered. increased origination and payoff volume, along with the work from home challenges will again put stress

on any collateral handling

the foreclosure crisis

costly review process is

practices including the

because servicers were

still impacting the cost of

well-managed ones.

not able to provide the

servicing overall and will

courts with proper doc-

only get worse again as

umentation indicating

we prepare for the impact

With the challenges of 2020, the needed controls on managing a perfected collateral file have become more of a priority at origination. However, we are still seeing literally hundreds of thousands of collateral files with important documents missing, sometimes even the promissory note or endorsement to the proper interested party/entity.

Regardless of whether you know the condition of the file, a perfected collateral file will be required for ALL life of loan events—which may be much more costly to manage when required than a proper review and remediation upfront.

For example, this caused serious problems during

their right to foreclose. In judicial foreclosure states, this problem proved to be very costly. In some states, the inability to produce the signed note meant the servicer’s entire case was lost. As a result, servicers are now required to validate their standing prior to first legal proceedings.

This process includes not only a review of the collateral file but also a comparison to current land records to ensure all assignments of record are considered in the determination of the lender of record. While the number of loans in default had returned to pre-crash lev-

of pandemic related forbearance fallout.

The market for whole loan sales is re-opening and all indicators point to a healthy expansion in 2021 especially when factoring in the non-QM origination and EBO (Early Buyout Program). Purchasing and/or selling these assets typically requires loan review factors such as the underwriting and the mortgage position, as well as the condition of the actual collateral file validated with the land records. Typically, in today’s environment, this process could include:

els with proven successful

1) a due diligence firm,

loss mitigation efforts, this

2) a title company,

3) a custodian, 4) a collateral

remediation expert,

5) a ttorneys, and then

the custodian again.

Not only does each contributor charge at a minimum a per order intake fee to begin the work, but the compilation of results from all parties in this fast-moving market is also taking too long. To further complicate matters, the results are inconsistent, causing further delays. The result is that some buyers are finding it difficult or impossible to combine analytics from all these parties relating to the loan in time to know the real value of the portfolio so they can make a quick resale back into the market.

If a firm that has just purchased a portfolio with the intention of turning it R E I I N K 11

REI INK

R I S K M A N AG E M E N T

right away cannot quickly,

Some new origination or

Financial services firms

Then, the buyer must wait

and accurately, assess the

seasoned portfolio issues

are paying too much to

value of the loans, they

even longer for another

that should be considered

are likely to undersell.

We have personal experience with a firm that, after successfully completing a project of the type outlined in this story, increased their purchase price by $50 million from the data compiled vs. the data confirmed. This

for best execution downstream are: E nsuring you have proper controls for Agent and/or Correspondent follow-up B uilding a tracking and reporting vehicle that incorporates third party

suggests that the down-

data sets

side risk of failing here will

P re-sale review and

be measured in tens of millions of dollars lost.

C L E A R S IG N S T H AT T H E I N D U S T RY N E E D S A BET TER SOLUTION

In our work of helping portfolio sellers prepare their pools for sale, we have found that the existing

remediation to proactively resolve known issues for first mortgages (Jumbo and Agency), CRA Loans, HELOCS, and standalone second mortgages, Non-QM, HECM, and non-performing and

exception reports are often

re-performing loans

inaccurate even when

C omplete collateral

reviewed by multiple firms.

The non-note collateral is often improperly married to the note collateral and improperly handled trailing documents fill backlogged queues. Worse, where each of the parties investigating the files returns a

due diligence on all file locations V alidate MERS compliance including a file to land record comparison Q UA N T I F Y I N G T H E H IG H R I S K S I N T H E C U R R E N T SYS T E M

different result, it must be

These problems result

re-reviewed to resolve the

in lost time and money

discrepancies.

for everyone involved.

1 2 F E B R UA RY 2 0 21

involve several different vendors and sometimes still only getting a partial solution. This exposes them to substantial risk because, without timely and accurate information, it is impossible to make good decisions about what to sell, how to price it, or what to buy.

Document Custody has traditionally been the last line of defense for a quality portfolio and the first source of information for a loan under inspection, but without the research and remediation components, it simply cannot get the job done. The result is that portfolio sellers must remediate the collateral files on a reactive basis.

This is costly for several reasons, including investor penalties, fines, enforcement actions, and curing and management of side letter exceptions, just to name a few.

In terms of time, it can be up to 60 days before the buyer receives the

firm—which charges an additional intake fee—to validate and fix the problems. By the time the pool is finally ready for sale, the market may have shifted, impacting the demand and price. Worse, the seller can price the pool without good information on the loans within it and undersell it by tens of millions of dollars or oversell and be flooded with side-letter exceptions as well as buybacks.

W H AT A B E T T E R SYS T E M L O O K S L I K E

Whether it is foreclosure, portfolio sales, compliance, or some other reason that the industry must call upon the loan’s collateral file for information, the industry will continue to struggle until it can combine all the important elements into a single solution. Without fixing the problem of effective document custody, investors cannot even effectively put a value on the loans they own.

exception report from

Consequently, the job of

the document custodian.

the document custodian

must evolve. A custodian

To keep the docu-

must be a partner to the

mentation safe and

investors and servicers, with solid procedures in place to ensure the integrity of the collateral over time.

After studying this problem for at least the last decade, we have arrived at a set of core functions that must be included in a complete process that can solve these problems the industry is encountering today.

These include: 1) S ecure and efficient document custody.

readily available, the solution must offer a state-of-the-art vault with advanced physical security, fire and other disaster protection, climate control and effective file and document tracking.

3) E fficient collateral

review. When it is time to determine the value of the loans in a pool, the solution must be able to provide fast, efficient information about the collateral files. The document custodian of the future post-pandemic must

2) E ffective remediation

be able to house and

must offer the ability

pools quickly to keep

support. The solution

remediate massive

to perfect the files

the industry moving

by locating missing

and not add to the

also be able to report status on very short timelines, providing ample time for effective decision-making.

Against the grain of a traditional custodian, this may be the only solution.

This goes well beyond the scope of today’s document custody providers, but it is essential if we are to have any hope of solving the problems we have seen in the past and

documentation or

problem by backlog-

expect to grow in our

creating new docu-

ging or losing vital

industry this year due to

ments if required.

documents. It must

the pandemic.

Debbie Lastoria is the Vice President of National Sales, where she brings over 35 plus years’ experience

in the industry to the organization since she began her career with NTC over 10 years ago. Previously, she was the Vice President at Peelle Management Corporation for nearly 15 years, where she developed new

leads and accounts. Prior to Peelle, she was the Director of Portfolio Developing for TransOhio Savings Bank, where she was first introduced to the mortgage finance business. In 2015, she was one of the

women who made HousingWire’s “Women of Influence” list; in 2016, she made the list as a ”Leading

Lady” in the MReport’s Women in Housing magazine; and, in 2019, she was awarded a Bronze for ‘Woman of the Year’ in Sales by the Stevie Awards, where they recognize women for their achievements in Sales.

Meaghan Hanley has worked in the mortgage industry for 19 years, including 10 years on the loan

origination side and more recently in servicing and capital markets. Before working with Nationwide Title Clearing, Meaghan worked as a senior loan officer for many large banks and lenders, including

AmSouth Bank, Suntrust Mortgage, and Charles Ruttenberg Financial. Meaghan is currently holding the position of Assistant Vice President of Business Development, where she now assists clients by providing customized solutions for diligence, collateral reviews and remediation services. Some of her larger

clients include three of the top 10 lenders and servicers in the country. In 2015, she was nominated for HousingWire’s Rising Star, and in 2017, she was nominated for HousingWire’s ‘Women of Influence’ as well as awarded the title of “Inspiring Women in Business” by the Tampa Bay Metro Magazine.

REI INK 13

REI INK

R I S K M A N AG E M E N T

RENTAL PROPERTY RISK MANAGEMENT Preventative Measures for Successful Risk Mitigation

BY S H AU N S H E N O U DA

W

hile there is no

civilian fire deaths (75 per-

connections that pose the

stopping acts of

cent); 12,200 civilian inju-

most issues. According to

God, you fortunately can mitigate many of the risks pertaining to your rental properties relatively easily and inexpensively. As you might suspect, some of the most prevalent risks pertain to losses caused by the residents. Given the increased propensity to spend more time at home due to COVID19, there is an overall increased risk. Proactively taking steps to evaluate those risks and putting best practices in place to minimize those risks could save your rental property as well as lives!

FIRE!

According to the National Fire Protection Association (NFPA), there were 340K

1 4 F E B R UA RY 2 0 21

ries (73 percent), and $7.8 billion in direct property damage (52 percent).

Over the past three years, house fires have resulted in 40% of SES Risk Solutions overall losses which sustained an average loss of $70K per fire. We have also seen an uptick in frequency due to more people working from home, overloading their outlets, cooking fires, etc.

WIRING

Nearly 1/3 of the properties we insure were built in the 1960s and 70s, which coincidentally is when aluminum wiring was often used as opposed to the more expensive and higher performing copper wiring.

house fires in 2019 (26

Aluminum conducts

percent) resulting in 2,770

electricity safely. It’s the

the U.S. Consumer Product Safety Commission (CPSC), homes with aluminum wiring are 55 times more likely to have “fire hazard conditions” than homes wired with copper. Since permit data is often incomplete and/or unavailable, our investors do not always have easy access to determine if the wiring has since been updated.

Solution: Engage with a professional contractor

to inspect the property(s) to determine if the wiring has since been updated.

Our research suggests the cost to be between $1500-$3000 to upgrade, if needed.

FIRE EXTINGUISHERS

Another highly effective and affordable best practice is equipping all

your rental properties with a fire extinguisher.

In a study performed by FETA (Fire Extinguishing Trades Association) where it recorded over 2,600 incidents, they concluded that in 81.5% of cases the portable extinguisher successfully extinguished the fire and in 74.6% of the cases the fire department was not required to attend.

Despite the effectiveness, according to the PEMCO Insurance Northwest Poll, 27 percent of Northwest residents live without a

$20. While they are easy to use, they will only be used if they are easily accessible. They also

have a shelf life, so it is

important to implement

a recurring replacement

process. We also recom-

mend incorporating the

location of the fire extinguishers and how to use them into your property management process.

S M A R T H O M E D E V IC E S

Despite marketing advantages, better tenant satisfaction and increased

fire extinguisher in their

profits, the value proposi-

home. The poll suggests

tion for most smart home

that among the most

devices has only recently

at-risk are renters, who are significantly less likely than homeowners to have fire extinguishers—58 percent of renters vs. 82 percent of homeowners.

Solution: Generally, fire

extinguishers are around

become more compelling as the price point for these devices has come down considerably. In fact, demand for smart home devices is growing so fast that experts have coined the term IoRE—or Internet

of Real Estate—to describe

have invested in installing

the booming market in

such devices.

smart home devices. The smart home device market has doubled in size from about $44 billion to $91 billion over recent years and is expected to reach $158 billion by 2024, according to data from Precise Security.

While tenants are likely to value smart lights and virtual personal assistants (VPAs), installing smart home products in your rental property can also be an easy and cost-effective way to protect your property. The acronym “Smart” comes from “SelfMonitoring, Analysis, and Reporting Technology”.

Some insurance companies, like SES Risk Solutions, value this increased real-time awareness and

Solution: Evaluate the specific needs of your property and investment strategies when considering Smart home technology options. The two we have found to provide the most value are: 1) F lood or moisture

detectors. Renters

may not place a high degree of value on these devices, but for a small price, moisture sensors can potentially save landlords a considerable amount of money through water damage prevention. Easy to install and affordable, these detectors can alert you to problems like slow leaks that may other-

may even offer a premium

wise go unnoticed

discount for landlords that

before they turn into

REI INK

R I S K M A N AG E M E N T

T E N A N T L E GA L L I A B I L I T Y C OV E R AG E

major issues. They can

Consulting, vacancy risk

should perform regular

also quickly inform you

management may not be

maintenance, remove

of big problems like

top of mind for investors.

fire-prone debris,

However, according to

check the plumbing,

agement strategy for real

SES Risk Solutions loss

ensure the smoke

estate investors is to offset

history data, losses on

detectors are function-

vacant properties are over

ing, confirm there has

risk by requiring their

1.5 times more prevalent

been no intrusion, etc.

burst pipes that can do major damage quickly.

2) S moke and carbon

monoxide (CO) detectors. Smart smoke

alarms and carbon monoxide detectors take safety a step further than traditional models. Rather than just sounding an alarm, these smart versions can also alert you and/ or your renters if there is a problem via an app.

and severe. There is the obvious increased risk of slow detection of an issue be it smoke, water leaks, etc. There is also an attractive nuisance, which can draw in squatters and thus increase propensity for vandalism, theft and arson as well as bodily injury.

Solution: Top 3 suggested

VAC A N CY

preventative measures:

Another very important

1) I nspections. The

set of loss prevention best

Another effective risk man-

residents to procure coverage that would protect

2) W interization. Make

their rental property from

drained and heat

(accidental or otherwise).

sure plumbing is remains on.

3) S ecure the property.

Set up motion-

activated exterior lights and put interior lights on a timer (simulate real usage). Home security systems and cameras are another great option. Lastly,

tenant induced damage Many investors/property managers require their residents to show proof of renters insurance in order to fulfill the lease requirements. However, nearly 1/3 of renter’s insurance policies are cancelled by the tenant mid-lease. Investors need to work with their insurance providers to

landlord or property

make sure that your

management com-

insurance policy has a

pany should physically

vacancy provision that

inspect the vacant

would cover your prop-

above 94%, according to

property on a regular

erty in the event of a

property per month for

John Burns Real Estate

basis (weekly). They

loss while vacant.

$100,000 in coverage.

practices are centered on vacancies. With nationwide occupancy rates

establish a Tenant Legal Liability program. Costs can be less than $10 per

Shaun Shenouda is the Chief Operating Officer, Programs Executive at SES. He joined SES in

2014 as SVP of Operations and Technology, where he primarily focused on delivering customer

value through innovation and service excellence. Shenouda has 20 years of experience offering

master-policy Property & Casualty insurance, service, and technology to financial institutions. Prior to joining SES, Shenouda held the position of Senior Vice President of Integrated Solutions and

Analytics at QBE, where he focused on business transformation, customer experience optimization, and M&A integration initiatives. Shenouda has a degree in Management Information Systems and received his MBA from Pepperdine’s Graziadio School of Business and Management.

16 F E B R UA RY 2 0 21

AD

R E I I N K 17

REI INK

DUE DILIGENCE

RISK MITIGATION AND DUE DILIGENCE IN THE PANDEMIC What Investors Must Do to Ensure Favorable Outcomes and Future Earnings

BY E R I K A GA R C I A

I

t is vital to fully under-

residential properties

the coronavirus pandemic,

stand the risks and

are now more in demand

it seems the demand for

rewards of real estate

than before the pandemic.

inventory has only grown

investment during our

Due to the coronavirus,

stronger. The increased

current economic decline

renters in high-rise condo-

caused by the coronavirus

miniums started looking

demand for SFR’s persists

pandemic. Investing in

toward renting single-

real estate can provide the potential for a stable income stream and value appreciation, along with generous tax benefits.

However, real estate investors must recognize that the pandemic may impact where people work, spend their money, and the location they choose to live.

The pandemic has impacted investment property types differently. Commercial properties such as hotels, restaurants, gyms, etc.,

1 8 F E B R UA RY 2 0 21

family homes. This is clearly fueled by people wanting to remove themselves from the overly crowded markets and living conditions.

The coronavirus has led society to yearn for more private outdoor spaces, distance between household members, and more room for all to enjoy and feel comfortable amidst this pandemic, thus creating an increase in demand for single-family rentals.

INCREASED DEMAND F O R S F R I N V E N T O RY

due to the lack of new single-family rentals and a decrease in rental turnover. So, to meet demand, investors must remain steadfast in their due diligence efforts and avoid the allure of quick turnaround and shortsighted due diligence.

While the need for standard procedures and reviews are necessary to ensure the right fit, price, and returns, today’s market, one fueled by the coronavirus pandemic, requires a due diligence process that may look and feel a bit different.

have taken the bulk of

Even though the SFR

Due diligence requires

the hit. At the same time,

market was strong before

investors to look at:

S trong Population

markets see potential

in Migration

buyers and renters mov-

L ow Unemployment

ing all over the country

Rate H ybrid of Physical and Virtual Site Visits C omprehensive Inspections and Appraisals While Maintaining Mandated Health and Safety Precautions

for various reasons. The new “remote working” or “hybrid” work approach has changed people’s approach on managing

AS THE PANDEMIC CONTINUES TO HAVE A SIGNIFICANT IMPACT ON THE ECONOMY, REAL ESTATE INVESTORS ARE CHALLENGED WITH NAVIGATING THE EFFECTS OF PORTFOLIO PERFORMANCE.

their day-to-day lives.

This, in turn, changes where people live and how they live. Factors such as unemployment, rent-

These will be vital factors in the future of singlefamily rentals and other

Alongside these tried-

ability, population density,

and-true guidelines, there

demographics, and their

are several other factors

purchase/rent buying

investors must look into

power must be viewed

and investigate to ensure

through today’s lens and

impact on the economy,

favorable outcomes and

are crucial to making great

real estate investors

future earnings. Today’s

real estate investments.

are challenged with

investment properties.

As the pandemic continues to have a significant

R E I I N K 19

REI INK

DUE DILIGENCE

navigating the effects of portfolio performance.

It is increasingly essential to ensure that portfolios yield the most significant possible results by invigorating portfolios with newly vetted real estate investment and

DI V E R S I F Y

BY A S S E T T Y P E

pandemic, economic

treatment, known as

Diversification of their real

circumstance, financial

1031 Exchange. This can

condition, and supply

save investors up to

and demand will all

40% on their tax bills

impact the capability

when net gains are on

of profit of a real estate

property sales.

estate portfolios by asset type will help avoid the risk of over-concentration in one particular category of property.

placing greater emphasis

DI V E R S I F Y BY GEOGRAPHY

on the risks of those

Diversification of their real

portfolios given the current landscape.

Four main categories are crucial to risk mitigation.

D iversification by Asset Type D iversification by

estate portfolios across different cities and states will alleviate the risk of over-concentration in a particular market. Specifically, keeping an eye out for cities and states with lower unemployment levels.

investment at a given time. Keeping an eye out on market rent and staying within the “affordable� range would be vital in avoiding high turnover or vacant properties.

TA X B E N E F I T S O F R E A L E S TAT E INVESTING

Now more than ever, investors must look for new and innovative ways to build diverse and profitable portfolios. Through the uncertainty of the coronavirus pandemic, the impact on different real estate asset types is unknown. It can be essen-

Real estate is one of the

tial to enlist the services

most tax-advantaged

of professional real estate

types of investment in

asset managers who can

the US. Deductions for

help develop defensive

AVO I D H IG H R E N T ASSET T YPES

depreciation are available

market strategies aimed

to all investors. Moreover,

at preserving cash flow

The real estate market is

while positioning assets

T ax Benefits of Real

some direct real estate

continually changing.

investments may qualify

and portfolios for future

Estate Investing

As we see today, any

for like-kind exchange

market opportunities.

Geography A voidance of High Rent Asset Types

Erika Garcia is the COO and managing partner at Precedent Management LLC. She primarily

focuses her practices on HOA, Taxes, Liens and Code Violations. She has been involved with the management and marketing of single-family homes throughout the United States since 2008.

Garcia has worked in both the public and private sector industries. She has effectively managed residential properties and vacant lots nationwide totaling over $24 billion under management.

Her roles include knowledge of polices, regulation of contracts, oversight and management of staff, monitoring employee production, extensive decision making, assisting with business proposals, corporate plans of action, and feasibility studies for the future growth of the organization.

2 0 F E B R UA RY 2 0 21

AD

R E I I N K 21

REI INK

DUE DILIGENCE

ADDITIONAL INVESTORS FLOCK TO SINGLE FAMILY RENTAL Will diligence standards degrade based on competition and lack of inventory?

BY J E N N I F E R M C G U I N N E S S

C

urrently, there are

form, but even in a time of

Market in 2020 by 23%,

approximately 49

uncertainty, Single Family

thus exceeding other real

Rental Investors continue

estate sectors by signifi-

million rental units occupied in the United States of which, approximately 12 million are Single Family detached rental homes and 2.8 million are leased townhomes. Most of these units are existing homes on scattered lots versus new construction.

To date, over 5 million homes have been converted from owner occupied properties to rentals.

Based on this approximate 17 million units and their performance, there continues to be significant investor interest in the sector. Today, the market

2 2 F E B R UA RY 2 0 21

to report record occupancy levels and rental growth. DBRS Morningstar recently reported that that rents in institutionally owned single-family rentals have grown more than 3% (annualized) in 2020. Invitation Homes as an example, reported renewal rent growth for pre-existing tenants to be up 3.3% in the second quarter of 2020 and new tenant lease growth up 5.5% in the same timeframe. Another driver of investor interest has been the Single-Family

presents fundamentals

Rental REITS (Real Estate

that could lead investors

Investment Trusts), as

to be uncertain about how

they generally outper-

investments could per-

formed the broader REIT

cant margins (i.e., exceeding multi-housing by 9%, office by 22% and shopping centers by 33%).

A D DI T IO N A L INVESTORS AND N E W C A P I TA L

Away from occupancy and rent growth, the COVID pandemic and the subsequent stay-at-home orders have forced many to work from home and educate their children from home; hence, individuals and families are seeking more space. The two largest Single Family Rental Investment Trusts, Invitation Homes and American Homes 4 Rent, own a combined 135,000 units, which makes up less

Pretium and Ares Man-

change in the stable

agement Corp. partnered

cash flow curve the

to acquire Front Yard for $2.4B and initially for $13.50 a share but later revised this to $2.5B and $16.25 per share to its investors (a 63% premium over Front Yards closing share price). This acquisition just closed. than 2% of the total units.

$625MM joint venture

According to Amherst

between JP Morgan Asset

Capital Management,

Management and Amer-

there are more than 25

ican Homes 4 Rent, and

institutional landlords in the space today. Even historical investors like Blackstone, who sold off their remaining interest in Invitation Homes last year to JP Morgan Asset Management, have remained invested in the sector in some capacity, e.g., they still hold a minority stake in Tricon Residential.

Additional capital has been raised and acquisitions have been made that indicate the investor appetite is strong in this sector. Examples of recent

a $300MM fund raised

by Brookfield Management, amongst others.

On the acquisition front, Front Yard was initially to be acquired by Amherst Holdings for $2.3B but the parties terminated this agreement in May of 2020, opting instead for an equity investment by

S U P P LY A N D D E M A N D

The big questions in my mind and I am sure many market participants are: I s there enough supply for the investment demand in this sector?

When looking at the capital raised, if there is not enough supply, will the investment managers have to become too aggressive in their acquisition strategies to be

Amherst of 4.4MM shares

able deploy their capital?

of common stock, at the

I f this should occur,

initial offering price of $12.50 ($55MM invested).

They also provided a $20MM committed two year unsecured and com-

does this mean that the due diligence of the properties (and/ or of the tenants that reside in them) could be

announcements include,

mitted financing facility

a $375MM joint venture

to the company. Fast

itive and thus increase

between Rockpoint Group

forward to October 2020,

the risk profile of the

and Invitation Homes, a

just 5 months later, when

investments driving a

“relaxed” to be compet-

sector has historically experienced? And, if so, could this adjust the potential of continued capital appreciation that many investors are betting on today?

When looking at the market today, the biggest challenge I see initially is that demand does outweigh supply if you are solely looking at “for sale” real estate and mortgage rates. For example, the National Association of Realtors (“NAR”) reported that as of October of 2020, homes for sale were down 20% from October of 2019. It is important to note, however, that generally unsold inventory is on the market for 2.5 months whereas it was 3.9 months a year ago.

Homebuyers are also “paying up” for real estate and there are many renters in cities seeking more space and now looking to live in the suburbs, due to both COVID and the fact that they are now at the age to acquire homes. The demand of the homebuyer, REI INK 23

REI INK

DUE DILIGENCE

coupled with the demand

started rental community

homes due to the risk of

Since home prices are

of the Institutional investor,

divisions of their own.

contracting COVID and

strong and generally in

continues to drive home

Single Family housing

prices up in many markets.

A good example is California, where NAR reports that the average price of a home increased more then 15% from 2019 to 2020.

starts have increased by over $1.2 million in November per the Census Bureau which is more then a 25% increase from 2019.

We have not seen this

This, hand in hand with

number of housing starts

record low mortgage

since before the financial

rates, has well positioned

crisis. While a lot of the

home buyers to make

new construction will go

better purchase offers

to owner occupants, this

which could result in

significant addition of new

lower investment returns

homes will begin to equal-

for investors, should they

ize the lack of supply for

have to increase “buy

investors. Also, with the

prices” to acquire addi-

release of the COVD vac-

tional real estate. What

cine, if the country begins

the market is not looking

to truly open again, we

at as closely however, is

believe we will see a rise

how many of the home-

in listings, as today we

builders have now either

believe they are at record

entered joint ventures

lows in part based upon

with investors to “build for

people not wanting oth-

rent” communities or have

ers walking through the

the fact that the government has instituted both eviction and foreclosure moratoriums.

OUR EXPERT ASSESSMENT

The government moratoriums have allowed even those parties who are unable to make their mortgage or rental payments to remain in their homes rather than sell them or be evicted. On President Biden’s first day in office, he signed an order asking federal agencies to extend both the eviction and foreclosure moratorium through March 31st, 2021 (they were initially to expire on January 31st).

Upon expiration of these

high rental markets are beginning to peak (thus increasing the value of the investor current property holdings and new construction starts are continuing to increase significantly), we believe that although there will initially be more demand than supply, that this should equalize as we move through 2021. It will also bring better rental opportunities to areas that may not be a focus today. If this occurs and the investors are a little patient with their capital in the earlier part of the year, we do not believe we will see significant increased risk in the single-family rental

“stays”, we should see an

investment sector nor a

“uptick” in listings as well.

decline in diligence.

Jennifer McGuinness is the Founder and Head of Aggregation & Structured Finance, of Mortgage Venture Partners & Strategic Venture Partners. McGuinness brings over twenty (20) years of experience in mortgage lending and aggregation, banking, asset management, servicing, securitization, and financial services to Strategic Venture Partners ("SVP") and Mortgage Venture Partners ("MVP").

McGuinness was named a 2019 HousingWire Vanguard, Winner of the 2019 Women with Vision Award, as well as nominated for two Keystone Awards, the Diversity & Inclusion Award, and the Laurie Maggiano Legacy Award in both 2019 and 2018. She was also named a "Leading Lady" for the Five Star Institute’s Women in Housing Award for 2017. MVP and SVP were named 2020 Top 25 Fintech Innovators.

2 4 F E B R UA RY 2 0 21

insure smarter.

With monthly billing and no minimum-earned premiums, discover insurance solutions designed for real estate investors. National Real Estate Insurance Group’s Program can insure a residential portfolio of any size with one to 20-unit rental, renovation, or vacant properties, including mobile homes, condos, and vacation rentals, all on one monthly schedule.

Simplify your insurance experience.

AD Request a proposal today.

nreig.com/REI-Ink 888.741.8454

REI INK

DUE DILIGENCE

RISK REWARD Do Your Diligence on Foreclosure Homes

BY R IC K S H A R GA

B

uying a property

First, there are pre-

either via a Trustee Sale

always comes with

foreclosure properties.

or a Sheriff ’s Sale,

some degree of risk.

These are homes in the

depending on the state

That is true when buying

earliest stages of the fore-

laws. Properties at this

a brand-new home or

closure process, called a

stage of foreclosure are

buying a property that is a

Notice of Default in states

century old. The trick, for

that practice non-judi-

auction properties.

real estate investors and

cial foreclosures and Lis

homebuyers alike, is to do

Pendens in judicial states.

At the auction, one of

the due diligence neces-

In this stage, the home-

sary to minimize that risk.

owner is typically 90-120

FORECLOSURE PROPERTIES: HIGHER R I S K , P O T E N T I A L LY H IG H E R R E T U R N S

Buying foreclosure properties adds a few elements of risk that aren’t generally factors in a traditional home purchase. Investors who specialize in buying foreclosure homes under-

2 6 F E B R UA RY 2 0 21

days past due on their mortgage, and officially defaulted on the loan. The clock has started to tick on the foreclosure process, and the homeowner has a predetermined period of time (which varies state-to-state) to make up the missed payments, or the home will be sold at

generally referred to as

two things happens: either someone attending the auction bids a high enough amount to meet the lender’s sale price, or the lender repossesses the property, which in industry parlance then becomes an REO—or “real estate owned” asset which the lender will ultimately resell on the open market. These properties are generally referred to as REO homes

stand that, but are willing

a foreclosure auction.

to take on that added

If the default isn’t cured

risk due to the larger

during this initial notice

potential profits they

period, the lender sends

often realize. There are

a Notice of Sale, which

properties, and bank-

three different types of

informs the homeowner

owned properties—all

foreclosure properties

that the property is going

fall under the general

investors can purchase.

to be put up for auction,

heading of “foreclosure

or bank-owned homes.

Those three types of homes—pre-foreclosure properties, auction

Financially-distressed homeowners have been known to let maintenance slide (and sometimes do damage on purpose out of anger towards the lender), so diligence is critical.

Auction properties probably represent the highest properties.” But there are

typically buy the prop-

is actually owed to the

significant differences in

erty at a modest discount

lender before agreeing

how to purchase them, the

compared to similar prop-

to a sale—there are often

potential savings, and the

erties, since the owner

fees and fines that have

generally needs to close

accumulated during the

in purchasing them.

a deal quickly and with a

default period and those

N AV I GAT I N G T H E FORECLOSURE RISK/ R E WA R D S P E C T R U M

in order to avoid losing

respective risks involved

Let’s take a look at the risk profile of each type of foreclosure property, and some of the things to look at in order to optimize results.

Pre-foreclosure properties are probably the least risky of all foreclosure homes. Investors can negotiate terms directly with the homeowner

high degree of certainty everything to a foreclosure auction. Ideally, the investor and homeowner settle on a price that covers what’s owed to the lender, is below full market price, and still leaves the homeowner with some cash as they exit the property. Very much a traditional home sale, which just happens to be on a property in the early

will need to be covered by the sales amount. Second, investors should do a preliminary title search to see if there are any other encumbrances on the

risk and highest potential returns of any of the foreclosure homes. Lenders sometimes offer these properties for the amount owed on the defaulted loan, plus fees and fines, in order to avoid having to take possession of the home. It’s rarely that an auction property is sold at or above full market value, since the bidders are

property, like a second

almost always investors,

mortgage, tax liens and

and investors need to buy

mechanics liens – if the

at a below-market price

owner wasn’t making

that allows them to make

mortgage payments,

a profit.

there’s a good chance

Property condition is

some other payments weren’t being made as well, and some of those

probably the biggest risk with auction properties.

There are no internal

either with or without the

stages of a foreclosure.

assistance of a real estate

But investors need to take

be attached to the house.

a few extra steps before

Finally, never buy a

buying a pre-foreclosure

pre-foreclosure property

traditional mortgage

home. First, they need

without having a thorough

inclined to be coopera-

financing. An investor can

to find out how much

property inspection done.

tive. Seasoned investors

agent, and usually purchase the property using

past due amounts could

inspections available on these properties, since they’re occupied, and the residents aren’t generally

R E I I N K 27

REI INK

DUE DILIGENCE

can get an idea about the

in the excitement of a

and slightly more risk and

mentioned above, espe-

interior by taking a look at

bidding war on a property

better returns than many

cially checking the title

the exterior, but there are

they ABSOLUTELY MUST

pre-foreclosure homes.

to make sure it’s clean,

often surprises and hidden

HAVE! And over-paying

Lenders sometimes sell

investors should ask

issues to account for when

significantly. So, doing

these properties as/is,

whether the property will

estimating repair costs.

research on local prop-

with no warranties (and

be conveyed with a Grant

There’s a risk of the occu-

erty values, then having

sometimes without allow-

Deed, which offers certain

pant resisting the eviction

the discipline to set—and

ing inspections). Typically,

implied warranties, or a

order after the foreclosure

stick to—a “not-to-exceed”

these homes are priced

Quitclaim Deed, which

sale, so it’s helpful to know

bid, is extremely import-

to sell, but do carry some

does not.

how the local sheriff ’s

ant. And the note above

extra risk. Other lenders

office handles those

about doing a preliminary

will do a minimum amount

Successful investors

situations. Some investors

title search is even more

of work—removing any

set aside some “cash for

important for these prop-

contents the occupants

keys,” where they offer

erties than for pre-fore-

left behind and add-

the occupant a payment

closures. Plan to attend a

ing a fresh coat of paint

to entice them to leave

few auctions before you

and some carpeting.

without being physically

bid at one, just to see how

Generally, lenders list

removed (and hopefully

the process works, and

these properties with a

without them damaging

familiarize yourself with

real estate agent or sell

the property).

the environment.

them via an online auc-

A very unique risk when

Bank-owned homes

tion company. Some can

purchasing this type of

are probably a middle

property is the auction

ground in terms of risk

itself. More than a few

and return. They offer less

investors have found

risk and lower discounts

In addition to the recom-

will be well worth the pos-

themselves caught up

than auction properties

mendations for diligence

sible challenges ahead.

be financed while others require cash purchases. It all depends on the lender.

learn how to optimize the risk/reward balance in real estate transactions. And while even the most diligent investors will make a mistake from time-to-time, those who do their homework enter into foreclosure purchases with a good understanding of the potential risks involved, and some degree of assurance that the return on investment

Rick Sharga is the executive vice president of RealtyTrac. He oversees the marketing and public

relations initiatives as well as implements new marketing strategies to increase brand awareness.

One of the country’s most frequently-quoted sources on real estate, mortgage and foreclosure

trends, Sharga has appeared regularly over the past 15 years on CNBC, the CBS Evening News, NBC Nightly News, CNN, ABC World News, FOX, Bloomberg and NPR. Sharga was included in the Inman News Inman 100, an annual list of the most influential leaders in real estate in both 2013 and 2014.

Sharga is a recipient of the Stevie® Award for National Marketing Executive of the Year.

2 8 F E B R UA RY 2 0 21

AD

Nationwide Property Inspections and Preservation Inspections Preservation Insurance Loss Inspections REO Services

Violation Management Yard/Property Maintenance Vacant Property Registrations Utility Management Construction Status Inspections Origination Inspections

Protecting your properties. Protecting you.

NFROnline.com • 800-639-2151 x 2220

REI INK 29

REI INK

PROFILE

PAVING THE WAY FOR INVESTOR SUCCESS

3 0 F E B R UA RY 2 0 21

DLP’s Company Culture Creates Laser Focus on Productivity & Returns

BY CA R O L E VA N S IC K L E E L L I S

A

fter Don Wenner,

career path as a finan-

lawyers, and accountants.

on the weekends. One

cial advisor based on a

“I was good at math,

evening, a frequent patron

DLP Real Estate Capital,

salary chart that showed

entrepreneurial, and

of the restaurant, Nathan

attended his eighth-grade

financial advisors made

driven. I thought, ‘Hey,

Robinson, recruited him

career day, he plotted his

more money than doctors,

I could do really well at

to sell alarm systems.

that,’” Wenner recalled. As

“He convinced me that if

it turned out, he was right,

I came to work for him, I

but the journey ultimately

would make $2,000 per

led him to something

week. At 19 years old, that

much bigger than finan-

sounded really great,”

cial advisory. Instead, he

Wenner recalled. His first

became the founder and

weekend, he earned more

CEO of a multifaceted

than twice that, and the

organization dedicated

numbers climbed from

to “leading and inspiring

there. Soon, Robinson,

the building of wealth and

who was also a real estate

prosperity through the

agent at Keller Williams,

execution of innovative

had recruited Wenner to

real estate solutions,” the

sell real estate as well. “I

DLP family of companies.

was still determined to

founder and CEO of

Before Wenner could imagine and ultimately found DLP, however, he had to encounter the

become a financial advisor, but I quickly obtained my real estate license,” Wenner said.

vast potential of real

By October 2006, the

estate investing firsthand.

young financial advisor

This happened thanks

was applying his practi-

to a surprising series

cal, pragmatic strategies

of events. Throughout

to the housing market,

college, he worked at big

using a guaranteed sales

firms like BlackRock and

program that would be

McGladrey & Pullen [now

the template for many

RSM] and waited tables

of the numerous, similar R E I I N K 31

REI INK

PROFILE

HIRING PEOPLE DRIVEN FOR GREATNESS: DLP’S 10 CORE VALUES

programs agents often offer today. “From day one as a real estate agent, my message was, ‘Your home sold in 68 days,

C

onventional wisdom states that corporate core values should be kept to a minimum to ensure that employees can remember them and that they are easy to understand. Of course, nothing about DLP or its employees is conventional, and founder and CEO Don Wenner likes it that way. That is why he felt comfortable starting the company with 6 core values and eventually expanding the list to 10.

Every year, the company reviews its core values to make sure it is living up to its own standards, that there is not a need to adjust or remove any verbiage, and that Wenner or other leaders would not like to add just one more to the list. “These are the things that are important to us. They drive us, and every one of them matters,” Wenner said. “We did not create them lightly, and we maintain them diligently.”

Here are DLP Real Estate Capital’s 10 Core Values:

guaranteed, or I will buy it,” Wenner said. It was the peak of the real estate market, and his message was a perfect fit for the times. Wenner developed a lifelong love of real estate, a deep-seated passion for helping people invest in real estate both as a personal home and as an investment vehicle, and a firmly grounded

1. D RIVEN FOR GREATNESS (defined as seeking knowledge and pursuing

belief in the importance

2. L EADERSHIP (defined as exemplifying integrity, positivity,

vision. “If you can see

3. GRIT (defined as perseverance and passion for long-term goals)

as you have the vision, a

“growth and greatness” daily both personally and professionally) and humble confidence)

of having a clear plan and it, you can do it, as long

4. E NTHUSIASTICALLY DELIVERING WOW (defined as going above

plan, and disciplined peo-

5. L IVING FULLY (Defined as applying DLP’s quest for excellence and pursuit

he explained.

and beyond, delighting and amazing everyone we encounter)

of passions to all aspects of life)

6. I NNOVATIVE SOLUTIONS FOCUSED (defined as creating solutions that produce “new, previously-thought-to-be-unimaginable results” for clients)

7. T WENTY MILE MARCH (defined as consistently hitting targets day after day, year after year, regardless of prevailing conditions)

8. E XCELLENCE & EXECUTION (defined as establishing and surpassing expectations through the company’s combination of focus, commitment, and engagement)

ple [ready to take] action,” Today, Wenner is the founder and CEO of DLP Real Estate Capital, the parent company of a family of DLP companies specializing in investment housing funding

9. H UMBLE CONFIDENCE (defined as “confidence without arrogance, project-

(DLP Lending), innovation

10. S TEWARDSHIP (defined as maximizing the resources entrusted to us to

and sellers (DLP Realty),

ing humility and warmth to empower others” with an emphasis on collaboration) deliver positive returns)

3 2 F E B R UA RY 2 0 21

solutions for homebuyers property, asset, and

construction manage-

part-time assistant, is still

10 core values—and being

Those core values (see

ment (DLP Real Estate

with the company, and so

excited about participat-

sidebar) drive every

Management), loan ser-

are many others who came

ing in a workplace that

aspect of DLP’s organiza-

vicing (Alliance Servicing),

to work with DLP in those

embraces each of these

tion and form the founda-

and title services (Alliance

early years. “I always hire

multifaceted goals and

tion of a company that has

Property Transfer).

people who understand

characteristics in an indus-

grown exponentially since

Jumping in with both feet

how the organization

try that conventionally

its founding. “I under-

operates and who are

recommends keeping the

stood from very early on

willing to support our cul-

core values at three

that there is only so much

ture,” Wenner explained.

or fewer. “We started

that one person can do

“That is why so many from

with six, which is arguably

and took steps from the

my original team are still

too many according to

beginning to bring on

with us today.”

some people, but over

great people with incred-

the years we just had to

ible skill sets to help me

add four more,” Wenner

build and expand what

laughed. “We evaluate

became the DLP family of

them every year to make

businesses,” said Wenner.

when the market was at its height taught Wenner another lesson he would never forget: A company only grows when its people and its culture are in harmony. “I always wanted to hire people who were hardworking, willing to wear many hats, tended to

A F O U N DAT IO N IN LEARNING, S E L F -I M P R OV E M E N T & G R OW T H

be driven and curious, and

Part of understanding

sure they are representa-

“I never wanted to be

who had ‘can-do’ atti-

the company culture

tive of us, and they really

a ‘time-teller’ who was

tudes,” Wenner explained.

involves understanding

are the values that drive

always personally needed

His first employee, a

and embracing Wenner’s

our organization.”

when a challenge arose in

REI INK 33

REI INK

PROFILE

my business. I wanted to

for solid, dependable,

be a clock-builder, invest-

and impressive returns

ing in leaders and orga-

and asset management

nizations that would take

had taken hold and the

control and ownership

company was thriving. In

within DLP.”

fact, in the first eight years

The expansion of DLP was

in operation, DLP grew

fast and, Wenner says, organic. As the housing market headed into a full-blown crash in 2007 and 2008, Wenner’s sell-

its annual revenues by at least 60 percent, Wenner said. That consistent, significant growth indicated to him that it was

your-home-guaranteed

time for the next step.

program took off. As he

“We started to think about

began buying and holding

where we wanted to go

his own real estate during

next, and we decided to

that time, other investors

start two new things: We

began asking how they

started lending capital to

could be involved and

real estate investors who

build their own portfo-

did similar things as us

lios. “Things moved fast

and we started investing

from there,” Wenner

in larger, multifamily prop-

said. By 2012, DLP had

erties,” Wenner said. This

a real estate portfolio,

was the beginning of DLP

was building a manage-

Lending and the launch

ment company, running

point of DLP’s multifam-

a construction company,

ily investment strategy,

and starting a brokerage.

including raising capital

“We were investing cap-

through DLP’s invest-

ital, buying and flipping

ment funds. “We have

homes and apartment

1,050 families who have

communities, and begin-

entrusted their capital

ning to raise capital,”

with us into our invest-

Wenner recalled. “That

ment funds,” Wenner said

was the most challeng-

proudly. “We have a goal

ing part of all.” By 2014,

and a responsibility to

however, his reputation

continue to scale.” DLP

3 4 F E B R UA RY 2 0 21

GROW TH- ORIENTED STR ATEGY MEETS RELIABLE ACQUISITIONS & RETURNS

P

robably one of the greatest pieces of evidence that DLP Real Estate Capital

founder and CEO Don Wenner’s vision

and highly pragmatic yet growth-oriented infrastructure is working is that his family

of companies continues to thrive, grow, and build consistent wealth for investors. Three

entities within the DLP family play a particu-

larly notable role in this process: DLP Capital Partners, DLP Lending, and DLP Real Estate

Management. In typical fashion, Wenner has placed some of the most experienced and talented individuals in the industry at the

head of each of these companies, creating

a natural flow of passion and experience at the top level of each.

D L P R E A L E S TAT E M A N AG E M E N T

“I have been in multifamily residential and commercial real estate for years, working

with all different types of properties from residential to retail to commercial,” said

Melanie French, president of DLP Real Estate Management. For French, one of the things

that drew her to DLP was the investors-first mindset that pervades the company.

“We are among the only—if not the only—

investment vehicle of our kind where our investors are paid before ourselves,” she

explained. “That makes my side of the equation crucial when it comes to due diligence,

acquiring responsibly and productively, and

planning for asset management in a period of time when

Delgado also expressed pride in the unique features

factors and health issues like the COVID-19 pandemic.”

flexible redemption options, and tax advantages. “We

many things feel very unpredictable due to economic

of the DLP funds, such as their evergreen qualities,

French is particularly proud of the management style

subordinate our management fees so our investors

heavily on the long-term, living “flow” of residents

he explained. “We place premium value on borrowers

or “borrower” or “buyer”.

as well.” And, of course, because the funds are ever-

that DLP Real Estate Management employs. It focuses

get paid first, and we invest alongside our investors,”

rather than lumping them into categories like “renter”

having skin in the game, and we have skin in the game

“We have residents who grew up in one of our com-

munities in middle or high school, then, after or during college, got their own apartment in another DLP com-

munity,” she said. “Then, we see them start their fami-

green, they have flexibility and longevity to keep the returns coming in rather than having to liquidate and

sell at a predetermined date regardless of market, Delgado concluded. “It’s just a better strategy,” he said.

lies and stay within our properties or even buy their first

D L P L E N DI N G

they make their own money, they start looking to invest.

Lending, brings flexibility and innovation into his facet

homes from us or one of our borrowers or funds. Then as When they come to us and that cycle continues, that is the real product of what we are doing, and managing our assets effectively at every stage and level is what

makes that type of growth possible for our investors and the people who live their lives in our communities.”

D L P C A P I TA L PA R T N E R S

French shares her extreme focus on the value of due diligence and innovative services with Rich Delgado, managing director of DLP Capital Partners. The company’s role is to source capital from investors, deliver returns and distributions, and manage reporting both to individual investors, often high-net-worth and ultrahigh-net worth investors, and to registered investment advisors. “We work with institutional investors, pension funds, and trust endowments,” Delgado explained. “We are currently on our eighth fund in the past decade and, despite economic swings, still averaging double-digit returns with no losses.”

Delgado credits that track record to intense, effective, passionate due diligence. “We have a phenomenal track record because of the types of loans we buy and make and the types of properties we acquire,” he said.

“We have never had to write off principal or interest on any loan, ever.” The company focuses mainly on shortterm bridge loans with low loan-to-value (LTV). “We require our borrowers to have a lot of skin in the game, and we diversify within our funds geographically and into multiple types of properties.”

Scott Meyers, senior vice president of Sales with DLP of the company. “We differentiate ourselves by our

mindset,” he explained. “We evaluate every transac-

tion as if we were the client executing the investment because our client’s likelihood of success determines the risk we are evaluating.” The company’s goal is to

cultivate relationships with people who, like the DLP family of companies, place premium value on excellence, execution, and the “delivery of wow”.

That “delivery of wow” manifested particularly

starkly in March and April of 2020, when the COVID19 pandemic threw the private lending industry into a near-shutdown. Many lenders either suspended

operations completely or made significant changes to lending guidelines, often increasing rates or signifi-

cantly changing leverage requirements. DLP Lending

continued to lend at regular leverage—benefiting both borrowers and investors—while much of the rest of the

industry came to a grinding halt.

“We issue valid lines of credit regardless of market

conditions, and that optimizes our investors and our borrowers for success in any environment,” Meyers said. “We haven’t yet had a default during COVID

because we were and continue to be very, very dis-

ciplined in our underwriting and our operations. Our fundamentals simply have not changed.”

Learn more about the DLP Real Estate Capital family of companies at DLPRealEstate.com.

REI INK 35

REI INK

PROFILE

has recorded 60 percent

strategy, people, opera-

annual growth or higher

tions, and acceleration,”

for 14 straight years.

Wenner said. “That is

REFINING THE SECRETS OF SCALE

MEL A N IE FRENC H

That need to scale brought the family of companies to a new juncture, one that would involve Wenner and his team taking on a new facet of real estate and business leadership. “Not every person can be in every meeting as you grow.

When you have multiple

SC OT T M E YE R S

businesses and they are all fast-growing, you need structure,” Wenner said.

The company leadership began searching for a structure that would help them scale and communicate about hiring, development, goals, priorities, and operations. First, they used established systems, but ultimately refined the entire infrastructure

R IC H DELGADO

into an original process known within as the Elite Execution System (EES).

3 6 F E B R UA RY 2 0 21

how we have grown consistently even while launching new businesses, expanding into new markets, and going through different market cycles.”

The CEO wrote a book on the system, Building an Elite Organization: The Blueprint to Scaling a High Growth, High Profit Business, and uses the processes described in that book to educate his own employees and help other companies scale profitably and consistently to make a bigger impact.

Wenner and DLP have been using the EES system within all of the DLP businesses, with Elite Real Estate members, and with the nonprofits and ministries that they support. The DLP Elite Membership is a unique mentorship and capital partnership platform that combines in-depth train-

“We apply everything

ing, one-on-one business

across the four quad-

consultation, and debt

rants of every business:

and equity investment

opportunities to help

make substantial financial

members implement EES

investments into nonprof-

in order to set goals and achieve “more in 90 days than their competition achieves in a year”.

The combination of the book, the EES system, and associated training events for employees and business partners enable DLP to help other investors improve their own operations, assist businesses in multiple sectors to scale and grow effectively, and help nonprofit foundations and ministries grow their own organizations.

Notably, DLP supports numerous nonprofit entities and ministries both on a corporate level and through voluntary support from employees

its, but we also want to invest in operations that will get the biggest bang for their efforts and their buck,” Wenner explained.

“The Elite Execution System and EES technology helps investors and other groups do this.”

O R GA N IC G R OW T H I N A L O N G -V I E W SETTING

I A LWAYS WA N T E D T O H I R E PEOPL E W HO W E R E H A R DWOR K I NG , W I L L I NG T O W E A R M A N Y H AT S , T E N DE D T O B E DR I V E N A N D CURIOUS, AND WHO HAD ‘ C A N - DO ’ AT T I T U DE S .

DON WENNER

Wenner has always been prone to taking the long

because my ambitions

Wenner and DLP excel.

deciding at 12 to pursue

are endless. I have always

financial advisory services

had the belief that if you

“We spend a lot of time

as a career or transitioning

can see it, you can do

smoothly from effective

it. I know and see a lot,”

sales and marketing in real

he explained.

estate to running roughly

To clearly see something

view, whether it was

half a dozen real estate businesses and multiple

in the “long view,” however, you need intense

making sure we understand every risk, every angle of the asset, every facet of the opportunity before we invest time or capital,” Wenner said.

at the company (there

investment funds.

is that company culture

“I’m a natural when it

standing of the subject.

us really, really well over

again). “We all want to

comes to expansion

These are areas in which

many, many years.”

focus and in-depth under-

“And you know, it’s served

Carole VanSickle Ellis is the chief operations officer for the Self Directed Investor Society. She is the featured writer for REI INK and

also provides written content for other select publications, including Huffington Post and Motley Fool’s Millionacres. Ellis is the former editor of UGA Research magazine, a sought-after keynote speaker and host of the popular 9-minute real estate podcast, REI.Today.

You can reach her at carole@rei-ink.com.

R E I I N K 37

REI INK

REGIONAL SPOTLIGHT

Queen City Real Estate Ramps Up in 2021

BY CA R O L E VA N S IC K L E E L L I S

3 8 F E B R UA RY 2 0 21

CHARLOTTE,

NORTH

CAROLINA C

harlotte, North

flip, buy to hold and rent,

Carolina, is probably

or invest in multifamily

best known for banking.

properties,” said Marco

Despite trailing 21 other

Santarelli, founder and

U.S. cities in size and fall-

CEO of Norada Real Estate

ing firmly into the “sec-

Investments. “Even with

ond-tier” or 18-hour city

the short-term impact

categories in economic

of the ongoing global

parlance, the Queen City

pandemic that impeded

is the second-largest

real estate sales activity

banking center in the

in the entire nation, in the

United States (behind only

long term, the Charlotte

New York City) and has

real estate market remains

been successfully luring

strong.” Santarelli added

major employers, includ-

he expects housing

ing Fortune 500 behe-

demand in Charlotte to

moths like Honeywell,

continue to outpace sup-

into the metro area for

ply thanks to strong demo-

years. The results of this dedicated, pro-business approach in Charlotte kept the local economy on solid ground during much of the 2020 COVID19 lockdowns and appear quite likely to solidify the city’s standing as a thriving, recession-insulated market in 2021.

graphic momentum as young professionals move to the area for work, a high quality of life, relatively affordable cost of living, and a wave of conscientious redevelopment.

A NEAR-PERFECT C O M B I N AT IO N F O R S U S TA I N E D G R OW T H

The Charlotte metro

“Charlotte is a hot mar-

boasts the unique com-

ket for investors whether

bination of being an

they want to renovate and

attractive place to live, an REI INK 39

REI INK

REGIONAL SPOTLIGHT

attractive place to work, an attractive place to start or own a business, and an attractive place to retire.

This is likely why Charlotte has grown faster over the past year than almost every U.S. city (trailing only Phoenix, San Antonio, Fort Worth, and Seattle).

The Charlotte housing market ranked ninth on

EVEN WITH THE SHORT TERM IMPACT OF THE ONGOING GLOBAL

since he reopened in June 2020, but noted that weekends have been especially busy since he

PANDEMIC...IN THE LONG

reopened. Charlotte’s rel-

TERM, THE CHARLOTTE

and humid, subtropical

REAL ESTATE MARKET REMAINS STRONG. M A R C O S A N TA R E L L I

atively short winter season climate are conducive to outdoor eating and entertainment, a boon during a period when consumers are encouraged to socially

PriceWaterhouseCooper’s

distance and gather out-

“U.S. Markets to Watch

side or not at all.

in 2019” and fifth in 2020 on Forbes’ list of “Best Cities for Jobs”. 2020 also brought more accolades from U.S. News & World Report, including a sixthplace spot on the “Best Places to Live” list and a 23rd-place ranking on the “Best Places to Retire” list.

Both of these rankings represent significant leaps upward, 14 spots and nine spots, respectively.

Regarding the city’s sixth-

efforts to keep retail and

place ranking on her pub-

restaurants open, albeit at

lication’s “25 Best Places

limited capacity. The state

for Young Professionals” list, Thorsby cited competitive annual salaries, the city’s growing population, and “new construction in the area” including more stores and restaurants “attracting downtown visitors” as attractions for the city’s burgeoning

remained at a state-delineated “phase 3” level of operation and imposed and extended a statewide curfew from 10 p.m. to 5 a.m. for multiple months.

“I think [Governor Roy Cooper] is doing everything in his power not to shut us down,” said

STRONG F U N DA M E N TA L S I N THE QUEEN CIT Y

Although North Carolina was historically known for tobacco and textiles, Charlotte has been a force to be reckoned with in the financial and banking industries for years. Bank of America has been headquartered in the Queen City since 1998, when NationsBank

“At the top of this year’s

millennial population.

Best Places to Live rank-

Investors should note

ings, we see a combina-

that although the ongo-

tion of metro areas that…

ing COVID-19 global

offer a balance between

pandemic and associ-

cost and quality of living,”

ated health policies have

explained Devon Thorsby,

affected Charlotte’s retail

The owner admitted gross

real estate editor at U.S.

and restaurant scene, the

revenues are down for his

gressive banking culture,”

News & World Report.

city has made notable

restaurant by 30 percent

Charlotte is now home to

4 0 F E B R UA RY 2 0 21

one Charlotte restaurant owner after Cooper extended phase 3 restrictions for a third time at the end of December 2020.

and BankAmerica merged to form today’s BOA (see sidebar). Thanks to low taxes, pleasant weather, and what FIG Partners bank analyst Christopher Marinac describes as “pro-

Wells Fargo and Bank of

population, Charlotte

America headquarters.

welcomed two new

BB&T and Suntrust (now

Fortune 500 companies

Truist) moved their com-

(Honeywell and Truist),

bined headquarters to the

retained 18 Fortune 1000

city in 2020.

companies in the area,

“Banking really is an ecosystem,” Marinac noted.

“You see it in Charlotte pretty clearly.”

Wells Fargo head of digital business development, Jonathan Hartsell, cited his bank’s presence in Charlotte as, in part, the result of a decision to work together with other banking institutions to “have a bigger impact”. He explained, “Growing fintech talent and resources within the region benefits all of us as we seek to accelerate innovation in our industry.”

With more than two decades of major banking activity and a growing presence in the biotechnology, energy, and information technology (IT) sectors, Charlotte

kept unemployment in the mid-range single digits

FORTUNE 500 AND FORTUNE 1000 COMPANIES HEADQUARTERED IN CHARLOTTE, NORTH CAROLINA

(between 6 and 7 percent), and ranked 7th on SmartAssets’s “Best Cities to Work from Home” list.

Even prior to the pandemic, Charlotte already was attracting companies and residents who

C

harlotte, North Carolina, and the surrounding region are home to nine Fortune 500

companies and 18 Fortune 1000 companies.

C H A R L O T T E ’ S F O R T U N E 5 0 0 C O M PA N I E S

B ank of America

Truist

productively from home,

L owe’s

S onic Automotive

making it an extremely

H oneywell

C ommScope

D uke Energy

B righthouse

N ucor

Financial

valued the ability to work

attractive market in the pandemic and postpandemic economies.

The Charlotte economy is rounded out with a

C H A R L O T T E ’ S F O R T U N E 1 0 0 0 C O M PA N I E S

B ank of America

D omtar

including energy-oriented

L owe’s

C oca-Cola

industries that have

H oneywell

Consolidated

D uke Energy

S ealed Air

N ucor

J ELD-WEN

serves as a major distri-

Truist

D entsply Sirona

bution hub for the east

S onic Automotive

A lbermarle

C ommScope

C urtiss-Wright

B righthouse

I ngersoll-Rand

Financial

S PX Flow

variety of other sectors,

earned the city the nickname, “The New Energy Capital”. Charlotte also

coast and is home to the

is perfectly positioned

NASCAR Hall of Fame.

for 2021. While other

Although NASCAR’s cor-

areas of the country lost

porate headquarters are

employers, jobs, and

located in Daytona Beach, REI INK 41

REI INK

REGIONAL SPOTLIGHT

THE QUEEN CIT Y AND BANK OF AMERICA C

harlotte is one of the biggest financial centers

Bank remained relatively small for the next 70 years.

in the United States, only trailing New York City,

In the late 1950s, the institution merged with another

at present, and occasionally falling into third place behind San Francisco (although never for long). Many people hailing from outside the southeastern United States wonder how a relatively small, southern city became such a powerhouse in the financial industry.

The credit goes, in large part, to Bank of America, which has been part of Charlotte since the founding of BOA ancestor, Commercial National Bank, in 1874.

According to the Charlotte Museum of History, Commercial National Bank was founded in Charlotte with just $50,000 in equity and $200,000 in deposits. During the recently ended Civil War, every bank in the Carolinas had failed. Commercial National Bank sought to fill the void in banking in the area, a role that was desperately

Charlotte banker, American Trust and Security National of Greensboro. The two institutions renamed themselves North Carolina National Bank (NCNB) and continued an aggressive strategy of mergers and growth that would eventually lead to today’s permissive banking policies in North Carolina that make Charlotte such an attractive financial center today.

By 1982, NCNB had become NationsBank. In 1998, NationsBank acquired BankAmerica, which had been based in San Francisco, and kept the headquarters of the new Bank of America firmly in Charlotte. Bank of America was the first coast-to-coast bank, and its presence in Charlotte, first as a coast-to-coast institution

needed since Charlotte was already emerging as a rail

and then as an international banking giant, cements

center and textile hub. However, Commercial National

the Queen City’s place as a leading financial center.

Florida, nine in 10 NASCAR

small, has played a huge

its unemployment closer

set aside for small busi-

teams operate within 75

role in the city’s ability to

to 13 percent and, further-

nesses [in Charlotte],”

miles of Charlotte.

attract and retain employ-

more, had driven that rate

noted Yardi Matrix senior

ers. During 2020, when

down to nearly 6 percent

associate editor Laura

national unemployment

by the end of 2020.

Calugar in the Yardi

rates jumped to nearly

“To partly off-set the

Summer 2020 report on

Charlotte’s determined

15 percent, the Bureau

effects of the health crisis,

the city. “Large invest-

support of local busi-

of Labor Statistics (BLS)

$30 million of the federal

ments are also planned

nesses, both large and

reported Charlotte kept

coronavirus aid bill was

for the metro,” she added,

D E DIC AT E D S U P P O R T F O R L O C A L E M P L OY E R S L ARGE & SMALL

4 2 F E B R UA RY 2 0 21

making particular note of

will continue to see a

healthcare administration

talent drain as people

company Centene, which

relocate in search of cities

plans to spend $1 billion

with a lower cost of living,”

on a 1-million-square-foot east coast headquarters in Charlotte starting in 2021. That move alone is expected to generate 6,000 jobs.

“The Queen City has been diversifying its economy in the last decade, which has shielded it, to some extent, from the effects of the health crisis,” Calugar said. “Charlotte’s business appeal is evident by several relocations to the area by companies including Honeywell and Truist Bank.” Charlotte boasts a total of 9 Fortune 500 companies and 18 Fortune 1000 companies, and is likely to continue to attract this caliber and scale of employer thanks to generous tax initiatives and highly affordable costs of living – particularly when compared to the west coast and northeast.

Jarred Kessler, co-founder and CEO of EasyKnock, told Forbes. He predicted “second-tier cities like…

Charlotte” would experience residential building booms in 2021, and suggested alternative financing options would likely expand to “provide additional flexibility in times of crisis”.

A N AT T R AC T I V E 2 02 1 M A R K E T F O R R E N TA L OW N E R S & DEVELOPERS

Real estate investors considering investing in the Charlotte area are likely to find the city friendly to investors and particularly well-positioned for rental owners and real estate developers. WalletHub ranked Charlotte as one of the best cities for renters in 2021 due to its thriving rental market, relative affordability, and quality

ing. At the end of 2020,

2021. North Carolina has

roughly 40 percent of all

consistently allocated

households in Charlotte

funds for rental assistance

were renter-occupied.

from federal stimulus

Although eviction mor-

monies, which has cre-

atoriums were in place in Charlotte and the rest of North Carolina during early and mid-2020, the only current eviction

ated an environment in which many landlords say they are able to continue providing stable housing without facing mortgage

policies in effect are

delinquency themselves.

those imposed by the

Kim Graham, executive

“As companies announce

of life. Recession-resistant

plans to allow employ-

employment sectors like

U.S. Centers for Disease

director of the Greater

ees to permanently work

IT and biotechnology also

Control (CDC) orders that

Charlotte Apartment

remotely, high-tax cities

make the market appeal-

will likely expire early in

Association, observed that REI INK 43

REI INK

REGIONAL SPOTLIGHT

CHARLOTTE TAKES TOP R ANKINGS ACROSS THE BOARD

the emergency assistance

2021, and that growing

package passed in late

population is going to

December last year was “especially helpful for Charlotte-area landlords” due to provisions in the legislation that targeted cities with population

C

sizes similar to Charlotte’s. harlotte, North Carolina, is unique because it appeals to residents (and,

by extension, real estate investors) across a wide variety of professional and economic demographic categories. Here is a subsection of recognitions the city has received:

“The federal government understood and heard that we can’t have a moratorium on evictions without rental assistance going directly to land-

B est Places for Young Professionals in

lords,” Graham told a

2020-2021 (6th, U.S. News & World Report)

local newspaper. “I think

need more housing. In fact, according to Realtor. com, it is the best-positioned market for growth in the southeastern United States in 2021.

“As a devastating 2020 comes to an end, all factors are indicating a steady expansion is ahead,” wrote Barings Professor of Financial Economics at the Belk College of Business

that’s great.”

John Connaughton in

in 2019 (9th, PriceWaterhouseCooper)

With its recession-resis-

December 2020 in his

B est Places to Retire in 2020-2021

tant economy, growing

M ost Important U.S. Market to Watch

(23rd, U.S. News & World Report) B est Real Estate Market Positioned for Growth in 2021 (1st, Realtor.com) F astest-Growing Cities in 2020

population, and attractive climate, Charlotte is cer-

Barings/UNC Charlotte Economic Forecast. “2021 represents the first full

tainly in a good position

year of an economic

to continue growing in

comeback.”

(5th, WalletHub.com) F astest Economic Growth in the U.S. 2019 (16th, suburb of Concord,

Carole VanSickle Ellis is the chief operations officer

WalletHub.com)

for the Self Directed Investor Society. She is the

B est Real Estate Markets in 2021

content for other select publications, including

featured writer for REI INK and also provides written

(6th, WalletHub)

Huffington Post and Motley Fool’s Millionacres. Ellis

( North Carolina) Best States to

sought-after keynote speaker and host of the popular

Work from Home (9th, WalletHub) T op Metros for Optimistic SmallBusiness Sentiment (5th, SmartAsset.com)

4 4 F E B R UA RY 2 0 21

is the former editor of UGA Research magazine, a 9-minute real estate podcast, REI.Today.

You can reach her at carole@rei-ink.com.

CHARLOTTE, NC AT A GL ANCE STAT I ST IC S , ANALYSIS & GRA PHIC S C OURT E SY OF R E N T R A N GE

Current 3bd SFR Rent

3bd SFR - 5-year Rent Change

© 2021 Mapbox © OpenStreetMap

© 2021 Mapbox © OpenStreetMap

3Bd Avg Rent $1,250

The Charlotte-ConcordGastonia NC-SC MSA is the 34th largest metro by population with 2.63M residents. Current 3-bedroom SFR rental prices average $1,450 for the MSA.

18.0%

© 2021 Mapbox © OpenStreetMap

Rent vs Income 40.0%

5 -Y E A R R E N TA L P R IC E A P P R E C I AT IO N

In the last five years, 3-bedroom single-family rental (SFR) average rental prices over the Charlotte MSA have increased by 31.5%, ranking the metro 20th place for five-year rental price appreciation.

Five-year rental price increases have risen the most in Charlotte within the Interstate 485 loop, also Concord and Gastonia with 30% to 40% 5-year increases (dark green).

The sage green areas have a moderate 5-year increase of 15% to 25%.

The remaining ZIP codes in the MSA (white) have only mild rental price appreciation under 15%.

Gross Rental Yields by Zipcode

© 2021 Mapbox © OpenStreetMap

5yr Rent Price Increase $1,650

3-BEDROOM S I N G L E - FA M I LY R E N TA L P R IC E S

High-rent areas to the south side of Charlotte, Matthews, and Fort Mill areas, along with Huntersville to the north, have an average rent range between $1,500 to $1,800. The least expensive areas (white/ light red) around the outskirts of the MSA start around $1,000 to $1,250.

Rent vs Income

22.50%

35.00%

Avg Gross Rental Yield 8.0%

12.0%

R E N T-T O -I N C O M E

YIELDS

The Charlotte MSA had a median household income of $66,400, ranking 99th highest amongst MSAs.

Median SFR home prices are currently $270,000, gaining 46% in the last five years.

Three-bedroom SFR rentvs-income (R/I) ratio has been rising quickly due to overall rental increases in the MSA, yet the current R/I of 28.2% is still more affordable vs. the national average of 32%.

Gross Rental Yields (GRY), excluding expenses, across the top 200 U.S. markets average 8.6%.

The weighted average GRY in the Charlotte MSA has a slightly better average yield of 9.8%.

Dark-blue areas reflect highest R/I ratios over 32% to 40% in central Charlotte, Gastonia.

Light-blue areas around have affordable R/I between 25% to 30%.

White colored areas for the east and south areas of the market have the lowest R/I below 25%.

Dark purple sections represent yields over 12%.

Light purple areas have moderate yields between 8% to 12%. Lastly, white shaded areas have yields of less than 8.

REI INK 45

REI INK

S I N G L E - FA M I LY

THE SINGLE-FAMILY RENTAL MARKET HAS BECOME A SEARCH FOR SUPPLY Investors Are Exploring New Ways to Expand Supply

BY G R E G G O D D E R I D G E

T

he durability and

national housing supply/

rentals averaged 95.3

stability of the Single-

demand imbalance, the

percent in the third

Family Rental (SFR) market

SFR growth trend is so

quarter of 2020, holding

is one of the few real

strong that a new Build-

estate investment bright

steady from the second

to-Rent (BTR) micro-SFR

spots of the past year. If

quarter, following a 100-

market has been created

basis points spike from

by enterprising and forward-looking market par-

THE SFR M ARKET IS STILL SM ALL AND FR AGMENTED WITH THE 20 BIGGEST SINGLEFA MILY OPER ATORS CONTROLLING ONLY ABOUT 300,000 UNITS.

ticipants for the purposes of creating additional rental housing stock.

Build-to-Rent single-

the SFR market since 1994.

From their 2007 lows, occupancy rates for all SFR properties are up by 5.6 percent.

with traditional single-

What’s driving occupancy

family properties are forming the backbone for a vibrant SFR industry. What is driving this ers, and investors? And is

4 6 F E B R UA RY 2 0 21

the highest reading for

family homes coupled

demand for tenants, buildthe 2020 trend continues,

the first quarter. That is

there a role for evaluation

rates skyward is a combination of relentless demand and evaporating supply. Increasing numbers of Millennials have been fueling demand as they have formed fam-

the SFR asset class is posi-

service providers?

tioned to be one of the

According to the Census

multifamily properties.

biggest stories of 2021.

Bureau, occupancy rates

The COVID crisis accel-

With the backdrop of a

across all single-family

erated demand for SFR

ilies and moved out of

properties as tenants have moved from cities in search of more indoor and outdoor space.

At the same time the traditional sources of rental property inventory have dried up. Foreclosures are on hold nationwide, retirees who are usually looking to downsize are staying put during the pandemic, and it is

C R E AT I N G N E W S U P P LY

Investors have taken notice,

Together, those pres-

steady cash flow of rental

sures have spurred home

attracted not only to the properties but also its

builders to create addi-

stability. The most attrac-

tional supply. Build-to-rent

tive element is opportunity.

properties have been on

The SFR market is still small

an upward trend for the

and fragmented with the 20

last two decades but have

biggest single-family rental

skyrocketed in the past year. There were more than 14,000 BTR starts in the third quarter of 2020, representing a 27 percent

operators controlling only about 300,000 units. That leaves roughly 16 million rental units nationwide that have not yet been aggre-

pop over the previous

gated and securitized.

difficult to find mom-and-

year, according to the

pop property owners

Expansion into this vast

National Association of

untapped sector of the

seeking to sell.

Home Builders.

market is dependent on

getting increasingly

R E I I N K 47

REI INK

S I N G L E - FA M I LY

the ability to review and

trol over their acquisitions

evaluate properties at

and at the same time give

scale. This has been a

lenders an extra level of

challenge during a public

confidence in the quality

health crisis when in-per-

of the transactions they

son and on-site inspections are limited. Radian

underwrite.

to facilitate securitization

SFR MARKET BEING DRIVEN T O N E W H E IG H T S

of SFR and BTR proper-

Currently, approximately

offers a range of services

ties. Our collateral review and validation services include a thorough review and validation of sponsor and/or borrower data, property documentation and loan files. This is especially important for large institutional investors. In fact, we have served as diligence agent for every institutional SFR

only 6 percent of new single-family homes are purpose-BTR, which should contribute about 700,000 new units over the next 10 years. That is not nearly enough to meet demand, says real estate advisor RCLCO. Based on current trends, RCLCO believes the SFR market will likely

A historic confluence of

ply, either by aggregating

economic, demographic,

existing properties or

and public health trends is driving the SFR market to new heights. As the market matures and

building new ones.

One prediction seems certain: The industry will continue to rely on pro-

be undersupplied over

securitization transaction

earns more recognition as

the next decade, despite

to date. Professional due

its own asset class, new

the increased attention

investors including institu-

diligence services allow

the segment is currently

tional players, will explore

make that search for sup-

buyers to have more con-

receiving.

new ways to expand sup-

ply more profitable.

fessional collateral review and diligence services to

Greg Godderidge has more than 15 years’ experience managing within the banking and real estate industries. He joined Radian in 2011, holding roles across various departments including asset

management, title, sales and Single Family Rental. As Vice President of SFR Operations, Godderidge is responsible for managing a team of employees based in Salt Lake City that conduct due diligence for institutional SFR transactions.

4 8 F E B R UA RY 2 0 21

B ECOME

THE MAJORITY OWNER IN A JOINT I NVESTMENT

Fund more Investments with Less Capital

MORE INFO

AD

The Most Passive Way to Invest in Real Estate

You Provide the Capital

100’s of Successful Fix & Flips

We Provide Experience & Sweat Equity

After SCAN HERE

Before

Leverage our Success for a Better Rate & Return!

20+ Years of Experience

INFO@PIPGROUP.COM

877.335.2529

REI INK 49

REI INK

S I N G L E - FA M I LY

DESIGN TIPS: ACCENT WALLS Renovating a Room With Just a Little Bit of Work

BY A LYS S A S P R AG U E

A

that elevates a room to

a dark color like navy blue

a more upscale feel that

or black on a single wall.

ingly popular way to give

fits into any budget. The

When combined with

your home a unique and

designs homeowners use

lighter colors through the

can be individually tai-

rest of the room, a dark

lored from subtle to bold.

accent wall can add depth

So, if you are not quite

without overpowering the

ready to take a big leap,

entire room.

you can always start small

While wallpapering your

ccent walls have become an increas-

personal touch. And they can be designed to renovate any space or style.

The walls can range from varying levels of difficulty as well, making it a perfect homeowner DIY project

5 0 F E B R UA RY 2 0 21

and add into it as your style changes!

entire home (or a whole room) is definitely a thing

The easiest way to add an

of the past, homeowners

accent wall is as simple as

have been impressed

applying a coat of paint.

by the ability of a single

Paint one wall in a room

wall of wallpaper used as

a different color and

an accent wall. The right

consider using a differ-

wallpaper will give a space

ent finish on the paint to

a more interesting design

really make it stand out.

without having to fill the

This color can be just a

wall with dĂŠcor. Especially

couple shades darker (or

with a temporary wallpa-

lighter) than the remain-

per (no long-term commit-

ing walls in the room.

ment) that can be easily

Or you can go as far as

removed, this is a huge

using a bright bold color

opportunity to add in per-

like yellow to brighten

sonal touches with

the space and make the

a design that could be

room feel bigger. Since an

subtle or quirky—com-

accent wall is meant to be

pletely dependent on

different, consider using

your personality!

Ready for a real opportunity in real estate?

Get Real Access To A Steady Stream of Buys

AD

HomeVestors® directly connects huge numbers of homeowners motivated to sell, often before they try MLS, to our team members. And that could be you.

Get Real Results And Better Opportunity As America’s #1 Home Buyer, we can give you access to our financial portal, accurate offers

powered by our proprietary ValueCheck™ software, decades of expertise to share, and more.

Even during tough times, our team members have seen consistent growth.

Be The Next Real Deal In Real Estate Only HomeVestors offers you the powerful brand, experienced personal support and marketing muscle to grow your business faster, along with flexible business plans that allow you to choose the one that best fits your life. Contact us today.

Call us today or sign up for our free webinar

855-530-9049 *Each franchise office is independently owned and operated.

getHVAdeals.com/rei

R E I I N K 51

REI INK

S I N G L E - FA M I LY

If you are looking to take

time consuming, with

texture to the wall and

Overall, adding an accent

on a bigger project, there

additional planning the

painting it semi-gloss

are many ways to person-

final product is more than

white can give it the same

wall to your space can

ally design and create

worthwhile. This type of

feel as upgraded chair

an accent wall using

project also allows for

rail or wainscoting. You

varying wood materials—

many pattern options:

can also consider painting

reclaimed wood, shiplap,

square/rectangle, her-

this designed wall a bold

or even using 1"x2"s to

ringbone, or even any

color! When combined

give a textured design

pattern you create your-

with a bold color, the wall

without using paneling.

self! The wood design

will really pop and have a

dining room. The possibil-

While this will be more

will naturally add more

more glamorous outcome.

ities are endless!

completely renovate the room with just a little bit of work! This will make the room have more dimension—whether it be your bedroom, living room, or

Alyssa Sprague is an Account Manager at Property Masters, Inc., where she assists in the daily organization and scheduling of home renovations. She also held the role of President of the

inaugural Think Tank group at Property Masters. She believes that in a group effort, ideas can be exponentially expanded with positive encouragement to produce the best possible outcomes.

5 2 F E B R UA RY 2 0 21

Did 2020 throw you a

Curve?

Let us help you get back on track.

AD

Establishment and First Year Administration Fees WAIVED on all new accounts.

HM

E N T FE

E

BL

D E IV A W FEE

1s

IN

Offer good from Nov. 16th, 2020 through Dec. 31, 2021, but don’t wait.

Open an account with Preferred Trust today!

IS

ESTA

We are so confident that we can provide a superior customer experience and we’re willing to prove it!

t YE A R A D

M

Preferred Trust Company 2140 E Pebble Road, Suite 140 | Las Vegas, NV 89123 | 888.990.7892 | PREFERREDTRUSTCOMPANY.COM PREFERRED TRUST COMPANY, LLC (“Preferred Trust”) | 2140 E Pebble Road | Suite 140 | Las Vegas, NV 89123 | 702.990.7892 | www.preferredtrustcompany.com | Financial Institutions Division of Nevada License No. TR1002. Preferred E I I N K provided 53 Trust performs duties of a custodian and as such, does not sell investments or provide investment, tax, or legal advice. Preferred Trust is committed to safeguarding all non-public personal R information to us by our customers. Preferred Trust collects, retains, and uses customer information where we reasonably believe that it will help administer our business or provide services to our customers. We collect and retain customer information only for specific business purposes and upon request will inform customers why we are collecting and retaining the information. We use information to protect and administer records, accounts, and funds; to comply with certain laws and regulations; to help us design or improve our services; and to understand the financial needs of our customers. Preferred Trust is an accredited member of the Better Business Bureau.

R IN E IV E S T OIRNP VR EO S TFO I LRE P R O F I L E ISN KN S O R E D C O N T E N T PO

Almas and Asif (AJ) Jadavji THE ENTREPRENURIAL SPIRIT Prior to becoming independent

worked as an Accountant and later

Sprint store. That one Sprint store grew

HomeVestors ® business owners,

as an IT Director. However, both

into twenty stores stretching from San

Almas and Asif (AJ) Jadavji already

Almas and AJ came from entrepre-

Antonio to Houston. When the stores

possessed the two main ingredients

neurial families and knew that eventu-

were at their peak, they decided to

ally they would want to own their own

sell them. According to Almas, “In the

business. In 2006, that opportunity

first six months of my daughter’s life,

for success: THE ENTREPRENURIAL SPIRIT and WORK ETHIC.

presented itself when Almas and AJ

I never once changed her diaper…my

While still living in Canada (they

moved to San Antonio, Texas, and

mother did all that. My career was so

both have dual citizenship), Almas

along with Almas’ father, opened a

time consuming.”

A NEW BEGINNING WITH ZERO EXPERIENCE While still in San Antonio, Almas and AJ attended a “franchise expo” where HomeVestors had a display.

After listening to a presentation, they decided to give it a try. So, in 2015, Almas and AJ became HomeVestors independent business owners and started Raw Capital LLC. With absolutely zero experience in real estate, except for AJ being a huge fan of HGTV, they jumped

5 4 F E B R UA RY 2 0 21

right in with a positive attitude

sectors and built strong and

to add 12-15 rental properties to their

and a little apprehension. Their

profitable organizations.

personal portfolio. “If I could do it

attitude was that “every failure was

Contrary to the advice of experienced

like a trial run, so let’s just trust the

mentors, Almas and AJ decided that

tools we’ve been given and follow

their very first deal would be a “fix

Now, AJ does all the buying and Almas

the process.” Beginning a real estate

and flip” (probably an HGTV influ-

does the rehabbing. They have also

career with a HomeVestors franchise,

ence). They bought a house, rehabbed

started doing short-term rentals in addi-

with little or no experience, is not

it, and then it took them a year to

tion to the traditional long-term rentals.

uncommon. Many of the independent

sell it. Having learned a lesson by not

Recently they began financing prop-

business owners came from the

“following the process”, they then

erties and hold the notes for passive

military or other private industries/

made a self-correction and proceeded

income with no landlord headaches.

Almas and AJ are extremely optimis-

San Antonio which affects their ability

business sooner, we could have hit our

tic about 2021. Having just achieved

to buy homes at a rate they’d like, the

goals sooner,” she explained.

their five-year milestone with Hom-

selling side of the business right now is

eVestors, they have zero apprehensions

very profitable.

moving forward. Even though there is

Almas’ only regret is not having

to people who know more than you, and

a shortage of inventory currently in

started sooner. “If we started this

trust the tools you’ve been given.”

What exactly does it mean to be a

HomeVestors ® business owner, you

software for analyzing properties

HomeVestors business owner?

get immediate access to motivated

and deals, and access to a nationwide

Owning a real estate business is

seller leads, financing resources,

network of coaches and peers. Your

life changing and naturally comes

one-on-one coaching with your local

house-buying business is yours and

with risks! When you become a

Development Agent, proprietary

you run it as your own venture.

again, I would follow the process from day one,” explained Almas.

M OV I N G I N TO 2 0 2 1

The Jadavji’s advice to new investors entering 2021: “Don’t be scared, listen

H O M E V E S TO R S

Almas, AJ, and their two children (Ayden, 12; Ariyanna, 10) currently reside in San Antonio, TX. If you wish to contact Almas, she can be reached at almas.jadavji@homevestors.com.

Each franchise office is independently owned and operated.

REI INK 55

REI INK

FROM THERE TO HERE

FROM DENTIST TO REAL ESTATE EXECUTIVE Five Brothers' Nickie Kalas is Dedicated to Growth & Service

BY CA R O L E VA N S IC K L E E L L I S

N

ickie Badalamenti-

business. Instead, long

“When my dad turned 85

Kalas grew up in

before becoming pres-

in 2014, we were still on

the business of real estate.

ident and CEO of Five

the recovery track from

As the youngest child

Brothers, she started a

the recession in a lot of

of Joseph “Joe Bada”

career in another family

ways,” Kalas said. “He

Badalamenti, founder

business: dentistry.

realized that things were

“My brother is an ortho-

going to continue to be

and present-day chairman emeritus of field service solutions provider Five Brothers Asset Management Solutions, the industry was always operating in the background of her childhood home.

5 6 F E B R UA RY 2 0 21

dontist. My older sister is a dental hygienist, and my other sister is also a dentist, so I landed in dentistry,” Kalas explained.

After Kalas finished dental school, the two sisters started a dental practice.

different in the industry.

He was going to need some help.” The siblings decided Kalas would be the one to train in the business, spending part of her time at Five Brothers and part of her time at the dental practice.

“My dad started [Five

Then, the housing crash

Brothers] with my mom,

happened. Five Brothers

who worked hand-in-hand

weathered the storm.

with him. We always had

Due to the ensuing tidal

contractors coming to the

wave of new compliance

house to get paid, and my

requirements, their clients

full-time at Five Brothers.

dad did all of his delegat-

and investors needed

“You cannot be as effec-

ing from home in the early

field solutions more than

tive as you want to be

days of the business,”

ever. Joe Bada began

when you are trying to do

Kalas recalled. However,

to realize it was time to

two full-time jobs part-

this did not mean she

bring in the next gen-

time,” Kalas said bluntly.

planned to join the family

eration of the family.

“We had to decide where

Stretched thin, the family decided Kalas would leave the practice she ran with her sister to work

YOU CANNOT BE AS EFFECTIVE AS YOU WANT TO BE WHEN YOU ARE TRYING TO DO TWO FULL-TIME JOBS PART-TIME. NICKIE K AL AS

it was more important

family company, but Kalas

That mindset has served

the same boat, and we are

I spend my time. What

thrived at Five Brothers,

the company well for more

making our best deci-

than 50 years, enabling

sions based on the best

we did know was that

which she knew from the

Five Brothers had to be a

start was going to be her

priority. We had—and still

new and permanent loca-

have—a lot of employees relying on our business to support their families.

That is how I ultimately came on with Five Brothers full-time. Those employees are our family.”

T R E AT I N G L I F E AND BUSINESS AS A JOURNEY

tion. “This is a business that requires all hands on deck. After my first year in the business, I knew it was going to be my home,” she said. “When you are running a business with this many people involved, you quickly understand the responsibility that

Many people might have

goes along with running

struggled with stepping

that business. You can’t

into a learning role at a

take anything lightly.”

it to weather multiple economic cycles and, at present, continue operations during an ongoing global pandemic. “When the pandemic hit, we moved very quickly to protect our employees and our clients. Everyone moved to remote work.

We got ready to help our clients deal with moratoriums on evictions and

information available.”

Because she entered the business with relatively “fresh” eyes after planning and training for a career in dentistry, Kalas has a uniquely effective manner of communicating about tough decisions and changing regulatory environments. She is clear, concise, and

foreclosures and help

honest about her rela-

them weather the storm,”

tively short tenure in the

Kalas said. “We’re all in

business. In fact, she

R E I I N K 57

REI INK

FROM THERE TO HERE

says, that new, somewhat

scale, anyone can. I don’t

she recalled. These days,

in one of the toughest

unusual perspective

think it is ever easy to

Kalas brings a combi-

servicing environments

can be an advantage.

have someone come into

nation of that learner’s

in history. As public

“I always say that if I

a business fresh like I did

attitude and a trained-

health intersects with

understand what we are

and learn on the job, but

on-site mentality to tough

real estate and housing

doing or trying to accom-

everyone was so sup-

challenges like meet-

policy in unprecedented

plish on a large or small

portive of that process,”

ing client expectations

ways, investors must

WEATHERING THE LOWS & GROWING THROUGH THE HIGHS

O

ne thing Nickie Kalas knows for certain is that

It is a particularly apt outlook for a CEO who came

life is a journey. That positive and determined

on board with the company with the stated goal of

outlook helped her make a huge transition from a

supporting not just the company but its employees

family dental practice to the family real estate business

as well and who is currently facing an unprecedented

six years ago and was cemented in her psyche when

economic environment brought on by a modern, global

she faced a more personal challenge: her husband’s

pandemic. Kalas refuses to be another forecaster

diagnosis of acute leukemia.

predicting “doom and gloom” for the industry or the

“We have three kids, and my youngest was 10 at that time,” she recalled. Her husband responded well to treatment and survived, but, Kalas explained, “That type of thing changes your perspective. You realize you really do not have much control over the master plan.” She credits the experience with creating a greater level of flexibility and confidence

national economy, instead treating 2020 as an opportunity to focus inward and prepare for the unexpected in 2021. “We have not just been focused on property preservation in 2020. We took advantage of the opportunity to make technological enhancements, improve our communications processes, refine our website, and really fine-tune the entire business,” she said.

in her own ability and her family’s ability to work

“Sometimes, it can be easy to get entrenched in the

through challenges. “Life is a journey. We learned

operations of today when things get really busy,” Kalas

to roll with things more than we ever had. Now we

concluded. “We take every available minute to be for-

know that as long as everybody has their health,

ward-thinking about our direction, our ability to be effi-

we can manage.”

cient, and our potential to ramp up and adapt in 2021.”

5 8 F E B R UA RY 2 0 21

E E R F TIL

UN 21 0 2 .

1 .

5

CONNECTING AGENTS & BROKERS WITH NATIONAL INVESTORS & SERVICE PROVIDERS SHARING LOCAL MARKET INTEL

AD

WEEKLY REGIONAL SNAPSHOTS PROVIDE NATIONAL INVESTORS WITH LOCAL INTEL. Broadcast in the REI-INK weekly newletter.

Enroll for free at rei-ink.com.

CONNECT. PARTNER. EXPLORE.

Membership Benefits include: Suppor t national acquisition and disposition initiatives with local real estate professionals Capture local market intel beneficial for por t folio analysis Expand your business par tnerships with our Ser vice Providers

rei-referralnetwork.com 207.443.3314

suppor ting the evolving nature of Real Estate Investing Collaborate with industr y colleagues, while building a national Real Estate Investor Referral Net work

REI INK 59

REI INK

FROM THERE TO HERE

have confidence in their

and keeping the latter

be essential in 2021 and

all aspects of property

servicing and field ser-

actively working in the

beyond when the pre-

preservation,” Kalas said.

vices providers, because

field wherever health

dicted uptick manifests.

Five Brothers also has a

so much of the industry

policy permits. “Dealing

“We believe we are about

national vendor footprint,

spent 2020 in a holding

with COVID is a real, daily

to see some big numbers

which means the company

pattern while politicians

thing for these vendors,”

in terms of foreclosures,

can cover all 50 states,

and health providers

Kalas said. “They have to

tried to work out the best

initiations of foreclosures,

Puerto Rico, and Guam.

keep their crews healthy,

way to “stop the spread”

evictions, and defaults,”

Kalas credits the compa-

handle quarantines, and

Kalas said. “There are a lot

ny’s proprietary digital

keep projects on sched-

of people out there right

platform for keeping

ule. On top of all that,

now who are unemployed.

employees and investors

when the moratoriums

That means investors

in that close, consistent

expire, they are going

are going to see a lot of

contact that she values

to have a substantial

changes in the value of

so highly during the

uptick in volume to deal

homes and the availability

COVID-19 pandemic.

with.” Kalas insists Five

of homes going forward.”

“We have a longstanding

Because Five Brothers

history of doing business

handles a vast array of real

in this industry, and we

estate-related services,

are ready to help investors

the company, led by Kalas,

make the best decisions

has spent much of 2020

for the new economic

preparing to act when cli-

cycle in housing when it

ents call in 2021. “We have

comes,” Kalas said. “We

been in business for 55

will be here throughout

years and handle default

the process as inves-

servicing, REO services,

tors and the economy

without devastating the economy in the process.

“We had to make quick decisions in order to provide the best benefit to our clients,” Kalas explained. “We pride ourselves on our level of integrity, and that integrity has provided us with a level of flexibility when it comes to conforming to what specific clients need.”

This flexibility has served Five Brothers clients and vendors well, providing

Brothers keep in close, consistent contact with vendors to make sure they are ready for anything in 2021, and the company does the same thing with employees and clients.

A F I R M F O U N DAT I O N FOR FUTURE OPPORTUNIT Y

the former with a relative

That close contact has

BPOs, valuation services,

come back to the table

degree of peace of mind

been and will continue to

inspection services, and

and fully engage.”

Carole VanSickle Ellis is the chief operations officer for the Self Directed Investor Society. She is the featured writer for REI INK and

also provides written content for other select publications, including Huffington Post and Motley Fool’s Millionacres. Ellis is the former editor of UGA Research magazine, a sought-after keynote speaker and host of the popular 9-minute real estate podcast, REI.Today.

You can reach her at carole@rei-ink.com.

6 0 F E B R UA RY 2 0 21

www.keystonebest.com www.keystonebest.com 890 Forty Foot Road, Suite 110 890 Forty Foot Road, Suite 110 Lansdale, PA 19446 Lansdale, PA 19446 Ryan Hennessy | Chief Executive Officer Ryan Hennessy | Chief Executive Officer C: 215.206.9545 | D: 267.308.9256 www.keystonebest.com C: 215.206.9545 | D: 267.308.9256 890 rhennessy@keystonebest.com Forty Foot Road, Suite 110 rhennessy@keystonebest.com Lansdale, PA 19446

Innovative Solutions, Innovative Solutions, Optimized Execution Optimized Execution

Ryan Hennessy | Chief Executive Officer C: 215.206.9545 | D: 267.308.9256 rhennessy@keystonebest.com

Innovative Solutions, Optimized Execution

Why Keystone Why Keystone We partner with our clients

AD

to enhance the management of real needs, We partner and withexecution our clients to estate enhance the delivering superior services that optimize management and with execution of realtoestate needs, We partner our clients enhance the performance and drive results.

Ourreal tenure asneeds, real management and execution estate delivering superior servicesof that optimize estatedelivering expertsand issuperior the of innovative, services that optimize performance drivekeystone results.

Ourour tenure as real performance and drive results.

Our tenure as real leadership, & results-driven culture that allows us estate experts is the keystone of our innovative, estate experts is the keystone of our innovative, to harness our advantages to create tangible leadership, & results-driven culture that allows us leadership, & results-driven culture that allows us results. to harness our advantages to create tangible to harness our advantages to create tangible results. results.

Why Keystone

Asset Management Asset Management Asset Management Portfolio-centric approach that

Portfolio-centric approach generates paralleled REO that generatesapproach paralleled REO Portfolio-centric that execution, leveraging scalability, execution,paralleled leveragingREO scalability, generates strategy analytics & workflow strategy analytics & workflow execution, leveraging scalability, flexibility flexibility strategy analytics & workflow flexibility

Multi-Channel Workflows Ability to develop customized operating procedures Multi-Channel Workflows

that drive execution without attachment to linear models Ability to develop customized operating procedures that Multi-Channel Workflows drive execution without to linear that models Ability to develop customizedattachment operating procedures

Situation Flexibility Ability to adapt to diverse and evolving market conditions Situation Flexibility

drive execution without attachment to linear models

while maintaining best-in-class Situation Ability toFlexibility adapt to diverse andperformance evolving market conditions Ability adapt to diverse and evolving market conditions whiletomaintaining best-in-class performance Compliance while maintaining/ Infrastructure best-in-class performance

Ability to deliver/efficient solutions based on execution Compliance Infrastructure

Compliance / Infrastructure while maintaining real estate and industry compliance Ability to deliver efficient solutions based on execution Ability to deliver efficient solutions based on execution while maintaining estate and industry compliance while maintaining real real estate and industry compliance

Valuation Valuation Valuation Diverse suite of reports designed to

Technology Technology Superior technological architecture Technology

Diverse suite reportsvalue designed to Superior technological architecture capture true of market based with dynamic dashboard interfacing capture true of market value based to with Superior dynamic dashboard Diverse suite reports designed technological architecture on a stronger analysis of asset & to create unique & interfacing efficient user on a stronger analysis value of asset & to with createdynamic unique &dashboard efficient user capture true market based interfacing surrounding market conditions experiences conditions experiences onsurrounding a strongermarket analysis of asset & to create unique & efficient user surrounding market conditions experiences

AA History ofInnovation Innovation History of Keystoneisisa acertified certified Women’s Women’s Business Enterprise, small business, and and Keystone Business Enterprise, small business, A History of Innovation SSAE compliant firm.

With our 23+ years of operation and over $130 billion in SSAE compliant firm. With our 23+ years of operation and over $130 billion in R E I I N K 61

estatevalued valued and managed, managed, we continuously address industry Keystone is a certified Women’s Business Enterprise, small business, and realreal estate and weare areable abletoto continuously address industry shortfalls by aligning proactive identification with innovative resolution.

SSAE compliant firm. With our 23+ years of operation and over $130 billion in shortfalls by aligning proactive identification with innovative resolution.

REI INK

I N D U S T RY DATA

U. S . F ORECLO S U RE ACT IVIT Y DRO PS TO 16 -YEAR LOW I N 2 0 2 0 Foreclosure Starts and Completions Hit New Record Lows Nationwide Amid Pandemic

A

nearly 2.9 million in 2010,

2,200 counties nationwide,

we had during the Great

to the lowest level since

with address-level data on

Recession, we really won’t

sor of the nation’s most

tracking began in 2005.

nearly 25 million foreclo-

know how big that backlog

comprehensive foreclo-

Those 214,323 properties

sure filings historically,

is until after the govern-

TTOM Data Solutions, licen-

sure data and parent company to RealtyTrac (www.realtytrac.com), a foreclosure listings portal, released its Year-End 2020 U.S. Foreclosure Market

with foreclosure filings in 2020 represented

customized reporting.

0.16 percent of all U.S.

The report also includes

housing units, down from

new data for December

0.36 percent in 2019 and

2020, showing there were

down from a peak of

Report, which shows fore-

2.23 percent in 2010.

closure filings—default

ATTOM’s year-end fore-

notices, scheduled auctions and bank repossessions—were reported on 214,323 U.S. properties in 2020, down 57 percent from 2019 and down 93 percent from a peak of

also available for license or

closure report provides a

10,876 U.S. properties with foreclosure filings, up 8 percent from the previous month but down 80

unique count of properties

percent from a year ago.

with a foreclosure filing

“The government’s mor-

during the year based on publicly recorded and published foreclosure filings collected in more than

atoria have effectively stopped foreclosure activity on everything but vacant and abandoned properties. There is a backlog of foreclosures

U.S. HISTORICAL FORECLOSURE AC T I V I T Y R ATES U.S. FORECLOSURE FILINGS

building up—loans that were in foreclosure prior to the moratoria; loans that would have defaulted

FORECLOSURE RATE (% OF HOUSING UNITS)

under normal circum-

ment programs expire.”

B A N K R E P O S S E S S IO N S DECREASE 95 PERCENT SINCE THEIR PEAK IN 2010

Lenders repossessed 50,238 properties through foreclosure (REO) in 2020, down 65 percent from 2019 and down 95 percent from a peak of 1,050,500 in 2010, to the lowest level as far back as data is available—2006.

Counter to the national trend, there were metropolitan statistical areas with a population greater than 200,000 that saw a yearover-year increase in REOs, including Lake Havasu, Arizona (up 30 percent);

3.0M

3.0%

2.5M

2.5%

2.0M

2.0%

distress due to the pan-

1.5M

1.5%

demic,” said Rick Sharga,

1.0M

1.0%

Executive Vice President of

(up 25 percent).

0.5M

0.5%

RealtyTrac, an ATTOM Data

Lenders repossessed

0M

0% ‘05 ‘06 ‘07 ‘08 ‘09 ‘10 ‘11 ‘12 ‘13 ‘14 ‘15 ‘16 ‘17 ‘18 ‘19 ‘20

6 2 F E B R UA RY 2 0 21

stances; and loans whose borrowers are in financial

Solutions company. “While it’s still highly unlikely that

Champaign, Illinois (up 29 percent); Chico, California (up 26 percent); and Bremerton, Washington

1,972 U.S. properties through completed

we’ll see another wave of

foreclosures (REOs) in

foreclosures like the one

December 2020, down 2

percent from last month

whose finances have been

and down 86 percent from

Orlando, Florida (down

affected by the pandemic

71 percent).

cent); Trenton, New Jersey

D E L AWA R E , N E W J E R S E Y, I L L I N O I S P O S T T O P S TAT E F O R E C L O S U R E R AT E S I N 2 02 0

City, New Jersey (0.40 per-

a year ago.

F O R E C L O S U R E S TA R T S AT N E W R E C O R D L OW N AT IO N W I D E , I DA H O O N LY S TAT E T O S E E A N A N N UA L I N C R E A S E

Lenders started the foreclosure process on 131,372 U.S. properties in 2020, down 61 percent from 2019 and down 94 percent from a peak of 2,139,005 in 2009, to a new all-time low going back as far as foreclosure starts data is available—2006.

“The impact of the government foreclosure moratoria and mortgage

will ultimately default on their loans, and whether the strength of the housing market will help cushion the fallout.”

States that saw declines in foreclosure starts from last year included Oregon (down 79 percent); Kansas (down 77 percent); Arkansas (down 77 percent); Nevada (down 71 percent); and Massachusetts (down 70 percent).

Counter to the national trend, Idaho saw a slight uptick (up 4 percent) from

forbearance programs is

last year.

nowhere more obvious

Those metropolitan

than in the foreclosure start numbers from 2020.

We ended the year with a near-record number of seriously delinquent loans, but historically low levels of foreclosure activity,” Sharga said. “The good news is that the government and mortgage industry succeeded in working together to prevent unnecessary foreclosures; the question remains how many homeowners

statistical areas with a population greater than 1 million that had at least 500 foreclosure starts in 2020 and saw the greatest decline in foreclosure starts from last year, included Jacksonville, Florida (down 74 percent); Las Vegas, Nevada (down 74 percent); Washington, DC (down 72 percent); Memphis, Tennessee (down 72 percent); and

States with the highest foreclosure rates in 2020 were Delaware (0.33 percent of housing units with a foreclosure filing); New Jersey (0.31 percent); Illinois (0.30 percent); Maryland (0.26 percent); and South Carolina (0.24 percent).

Rounding out the top 10 states with the highest foreclosure rates were Florida (0.23 percent); Connecticut (0.22 percent); Ohio (0.21 percent); Georgia (0.19 percent); and Indiana (0.18 percent).

Rockford, Illinois (0.44 per(0.44 percent); Atlantic cent); and McAllen, Texas (0.35 percent).

Metro areas with a population greater than 1 million that had the highest foreclosure rate, were, Cleveland, Ohio (0.34 percent); Chicago, Illinois (0.30 percent); Baltimore, Maryland (0.29 percent); Philadelphia, Pennsylvania (0.29 percent); and Riverside, California (0.28 percent).

AV E R AG E T I M E TO FORECLOSE I N C R E A S E S A N N UA L LY

U.S. properties foreclosed in the fourth quarter of 2020 had been in the foreclosure process an average of 857 days, a

P E O R I A , R O C K F O R D, TRENTON POST TOP METRO FORECLOSURE R AT E S I N 2 02 0

3 percent increase from

Among 220 metropolitan

States with the longest

statistical areas with a population of at least 200,000, those with the highest foreclosure rates in 2020

the previous quarter and from a year ago. average time to foreclose in Q4 2020 were Hawaii (2,186 days); New York (1,465 days); Kentucky (1,390

were Peoria, Illinois (0.48

days); Pennsylvania (1,275

percent of housing units

days); and Massachusetts

with a foreclosure filing);

(1,223 days).

REI INK 63

REI INK

AD

6 4 F E B R UA RY 2 0 21

AD

visit e b i t/ bscr oduc r To s u p / k.com n i i e r / cribe subs it e vis s i t r ve a-kit i d e To a d /m .com k n i i re REI INK

65

TURNKEY SOLUTIONS REI INK

from The Home Depot

The Home Depot’s Renovation Services provides a complete range of turnkey repair solutions for mortgage servicers, asset managers, property investors and financial institutions.

AD

TURNKEY, SCALABLE RENOVATION SERVICES

COMPETITIVE PRICING

DEDICATED PROJECT MANAGEMENT

AFTER

BEFORE

Contact Us Today! renovationservices.homedepot.com

WIDE PRODUCT SELECTION

THDRenovations@homedepot.com

6 6 F E B R UA RYINSTITUTIONS 2 0 21 | INVESTORS | SERVICERS | PROPERTY MANAGERS FINANCIAL