REI INK

Now Is the Time to Winterize REO Properties

Expert advice to get ready for winter by Andrew Oliverson The enormous demand for rental housing and the scarce supply of new properties has created white-hot conditions for those with inventories of well-kept, salable assets. But cold weather comes to even the hottest markets and as winter approaches, it is wise to take actions now to keep those properties ready for the sunnier days ahead. The timing is critical as acting now to winterize assets is the best way to avoid having an otherwise valuable home fall into disrepair. There are several steps to take when preparing a vacant property for the winter. Ideally, to ensure the protection of assets from the seasonal elements and to help identify and address any potential maintenance issues before cold weather sets in, properties should be spruced up in the early fall and winterized soon after. Winterization should be thorough enough to maintain the property in good order from early October until the end of March or longer, depending on the local weather and temperatures. In addition to identifying and addressing any urgent interior maintenance issues, a decent fall spruce-up should include a focus on exterior conditions: Remove all exterior debris. Perform a final lawn cut and remove all grass clippings, leaves, limbs and debris from the property. Leaves, pine needles and twigs should be removed and disposed of offsite in an appropriate manner. Flowerbeds, driveways and sidewalks should be edged. Remove all weeds and saplings from flowerbeds and around shrubs and fence lines. Weed-wack around the house, fences, and trees, and remove dead vines from fences, latticework, etc. Remove all fallen limbs and excessive leaves from the roof. Clean out gutters and remove all holiday lights. If there is a gutter guard, replace it after cleaning out the gutters. Prune branches from trees and shrubs that encroach on entryways, walkways, or sidewalks and trim at least four to six inches from the house or roof. With the property looking well-kept on the outside and in good working order on the inside, listing brokers should turn their attention to winterization and consider some of these best practices:  Electrical and heating services should be up and running and must remain on. The temperature within the home should be set at a reasonable temperature to prevent interior freezing (usually above 50 degrees).  If the property requires significant plumbing repairs or when a boiler is involved, a general contractor, licensed plumber or an accredited entity with the professional expertise should complete the winterization. If the property was winterized prior to your adding it to your inventory, it should be re-winterized to ensure that every step has been taken properly.  If the property is frozen when it comes into inventory, obtain bids to thaw the pipes prior to winterizing. The year 2020 has been a roller coaster for all of us. The pandemic and the responses to it have contributed to distortions in the real estate market. In our industry we’ve seen glutted real estate markets suddenly heat up and clear in a matter of weeks. But until conditions improve, the market for real estate will continue to experience extraordinary market-to-market fluctuations. Taking basic tried-and-true winterization steps will protect homes well into the cold winter months and bring a level of certainty into uncertain times.

Read More

Acquisition and Asset Management Strategies for Bulk SFR Portfolios

The maturing of the SFR asset class by Russell Schmidt The Single Family Rental industry continues to mature into a standalone subsector of the commercial real estate space. As the space gets more crowded and competitive, SFR investors will need to adapt and develop advanced acquisition and asset management strategies compared to the previous “buy everything and figure out operations later” strategy. Early movers such as Invitation Homes and American Homes 4 Rent were able to amass large portfolios of SFR’s at steep discounts beginning in 2012 due to a massive supply of distressed properties. Homes were repaired and turned into cash flowing assets and investors saw huge gains as housing values steadily rebounded over the following years. Today’s SFR landscape is shifting into the next phase, as the initial entrants that (correctly) bet on a sharp and quick rebound in values are now being joined by new capital willing to acquire at elevated price levels, sometimes even matching ‘market’ prices, to satisfy their yield and capital deployment requirements. The original SFR operators successfully demonstrated that capital can be deployed into the space at institutional-quality scale and efficiency, bringing in other institutional investors eager to match the strong historical proven returns the space can offer. Simultaneously, the rapid growth of SFR-specific debt lenders and tech-smart service providers have made it easier for new investors of any size to gain exposure to the asset class. Couple this with record-low mortgage rates, strong home buying demand from owner-occupants, and an already-constrained supply of houses, and the result is a strong downward pressure on cap rates and a lack of deals appealing to investors. Moving Forward What does this mean for SFR operators going forward? Those who bought 5+ years ago were able to acquire at such significant discounts that any operational inefficiencies had little effect in their total returns; asset appreciation has been so significant that marginal differences in collected rent or reduced operating expenses were dwarfed by approximately 300% increases in asset value. But as the SFR industry transitions from being a simple trade on undervalued assets into a long term buy-and-hold investment, investors looking to acquire today don’t have the same luxury of buying anything and letting appreciation cover up potential flaws in their acquisition and management systems. New and more nuanced strategies must be implemented in order to succeed in today’s more crowded and competitive SFR landscape. As one example, there is more attention on implementing consistent rent increases, even if nominal. A common school of thought among mom-and-pop landlords is that aggressively pushing rents leads to vacancies and costly turns, so therefore it’s financially smarter (and less of a hassle) to simply not increase rents and keep tenants for as long as possible. However, issues arise when after several years of no rent increases, landlords then attempt to increase rents now that they are 20% or 30% below market levels. The probability of having a tenant accept such a steep increase is slim, so the landlord is faced with either accepting a vacancy (which they were trying to avoid in the first place) or keeping the tenant and continuing to lag market rents at a significant discount. In contrast, large institutional operators have explicitly stated their intent to consistently increase rents, not only to continue growing cash flows but also to instill an expectation that rent increases are a normal and regular event. Acquisition Channels From an acquisitions standpoint, the state of the housing market has made it significantly more difficult to acquire properties with attractive yields on the MLS, especially in scale. Institutional investors have responded to this by looking elsewhere for volume. These new acquisition channels require new ways of thinking when it comes to stabilization and asset management strategies. One increasingly prominent acquisition channel is sourcing off-market portfolios directly from mom-and-pop landlords. While these deals offer immediate scale and pricing typically below market, they also present challenges of their own compared with MLS acquisitions. Unlike the acquisition of a multifamily building with 100 relatively homogeneous units, bulk SFR portfolios typically have a wide range of assets in different neighborhoods and with different styles and finishes. Owners usually aren’t interested in only selling a portion of their portfolios, so the buyer must be equipped to repair, stabilize, and manage the entire bulk even if some or most of the assets don’t fit within their typical management or buy-box strategy. As bulk acquisitions become a more important piece of the SFR space, it is important that buyers can optimize different strategies within one bulk rather than the singular viewpoint applied to MLS transactions. Implementing a multi-faceted acquisition and asset management strategy will result in more efficient management and greater total returns. Varying Strategies As an example, assume a portfolio of SFRs evenly distributed between Class A, B, and C. Rather than applying a single strategy for repairs (e.g. granite countertops in all units) and asset management (e.g. aggressively increase rents in order to maximize pro forma NOI prior to a sale to an investor in 5 years), applying several different strategies across the different buckets can result in a more optimized approach:  Class A: Definition: Higher end homes all located in gentrifying neighborhoods with low existing cap rates Strategy: Continued appreciation / cap rate compression likely means that it will become too expensive for an investor to acquire in the future, so the likely exit will be to an owner-occupant. Less emphasis is needed on maximizing NOI growth, so focus can instead be placed on maximizing occupancy until value has appreciated enough for a sale.  Class B: Definition: Institutional quality rental homes in neighborhoods where the rate of appreciation is unlikely to significantly outpace NOI growth, resulting in the asset remaining an attractive target for another investor Strategy: Optimize as a rental asset with focus towards maximizing NOI growth prior to selling as a package to another investor  Class C: Definition: Lower end assets and/or outside of the typical institutional buy box Strategy: Optimize as a

Read More

Always Looking for Ways to Reinvent

I remember it like it was yesterday. My business partner and I were in the process of closing a construction loan to continue developing a 19-acre retail center in Arizona. It was 2008 and the financial and real estate collapse of the Great Recession was upon us. Capital dried up immediately, deals fell through and panic ensued. What followed were years of struggle for most in real estate as the subprime crisis led to the bursting of the housing bubble. I had worked in the real estate industry since graduating from business school in 2002. In Las Vegas in March of 2011, I met with Wayne Hughes, the founder of Public Storage, and two members of his executive team—Marvin Lotz and David Singelyn. They wanted to look at houses and evaluate the potential of single-family rentals. Wayne not only recognized the great opportunity that resulted from the bursting of the housing bubble, but he also understood the need to move forward quickly and boldly to achieve the goal of creating a new paradigm in residential real estate. He realized that the key would be in execution, and that the real challenge would revolve around scale and building an operational platform to efficiently manage assets spread across the nation. Wayne’s vision to institutionalize this historically mom-and-pop industry would change SFR forever. The Start As part of our Las Vegas meeting, I drove them all over the city, scouting properties, evaluating neighborhoods and discussing the model. The idea for American Homes 4 Rent (AH4R), a real estate investment trust focused on SFR, was solidified shortly after this house-hunting trip, and I joined this exciting new start-up in September 2011. Today, AH4R has built, acquired, renovated, leased and now manages a portfolio of 53,000 high quality single-family homes throughout the U.S.  After high school, I went to UCLA to study Business Economics and subsequently earned my MBA. UCLA to Real World Upon graduation, I started my career in real estate acquisitions for an owner/manager of multifamily and commercial properties in California. Here I applied what I had learned in business school to real world deals including underwriting, fundraising and management. Most importantly, I was taught how to look for value opportunities. After a few other opportunities I came across a company that controlled the apartment leasing market of West Los Angeles. Their subscription-based model leveraged the digital marketplace to connect landlords and renters, creating a convenient and efficient leasing experience. I then relocated to Las Vegas, where I experienced firsthand the difficulty in renting an apartment. While this experience was awful, renting a single-family home was even worse. The creative entrepreneur in me longed to design a rental experience with the customer in mind—where technology was even more broadly implemented to eliminate inefficiencies and create a vastly improved customer experience. Beginning with AH4R From my early discussions with Wayne Hughes, I could see that we were about to pioneer the new concept of the institutional SFR owner/operator, and I was hooked. I joined AH4R in acquisitions and began selecting markets and building out our acquisition platform. Over the first year, the company expanded its footprint across the country. We pioneered the use of directed technology solutions to remove friction from the touring and leasing process. At each step of the property lifecycle, we developed and deployed new tools to create a significant advantage over our competitors, while we efficiently scaled up operations and attracted the necessary capital to fuel and manage this exceptional growth. A Better Way of Doing Business We created a technology-driven platform that allows our current and prospective residents to manage their entire rental experience online. Through our proprietary Let Yourself In mobile leasing technology, prospective renters can drive to a home, tour the property, apply, get approved and sign a lease in a matter of hours. After move-in, residents can pay rent, request maintenance and communicate with their property managers seamlessly online. One of our latest innovations focuses on another area of inefficiency in the industry: home maintenance. Initially, we utilized third-party vendors for all our maintenance and turn work. However, we soon realized that we could apply technology here as well. So, we established a national maintenance team and developed a logistics system to manage their work orders, schedules, and routes. The result is a more effective and cost-efficient way to serve our residents.  Our strategy stems from an unrelenting focus on the resident that has shaped our modern operating platform and continues to deliver solutions that are changing the industry. Very few companies have mastered scale, complexity and geography in such a short time. I am proud to be a part of AH4R and the reinvention of the SFR industry over the last nine years. 

Read More

Scott Kelly

  • by
  • Comment Off
  • 1,051 views

President | CONREX I entered military service immediately following high school graduation having watched too many John Wayne movies. Little did I realize that path would take me on an incredible journey not only of personal growth but being a part of some of the most secretive missions in our nation’s history. At the beginning, however, I was just a private, which is a great place to start! No matter what level of responsibility you are given in an organization, the ability to understand and empathize with those at every rung of the ladder is invaluable. Listen to them, connect with them, feel their struggles; it helps you really know the company which ultimately, helps you make better decisions. Seeing yourself is difficult and seeing your organization is even more difficult. As leaders, we should be purposeful about doing both. There is no better opportunity to become self-aware than in attending a selection and assessment course for Army special operations. The experience was invaluable for me with everything you could ask for; complete ambiguity, extreme physical and mental stress, and a humbling collection of the most talented people in the world! While I do not tend to wish that experience on anyone, I do encourage leaders to do hard things. Put yourself in uncomfortable situations that test you and strengthen you; physically, intellectually, spiritually, emotionally. We should be constant learners. As a leader, testing and strengthening your team can be even more important. Shared hardships bind men and you need to capitalize on the opportunities that present themselves to do just that. Combat is historically the central crucible for forging deep connections among soldiers and I experienced plenty, having deployed nearly a dozen times for operations and intelligence activities, alongside some of the finest Americans I know. With demanding and focused preparation, teams will rise to meet ‘game time’. Like any sports coach, knowing when to achieve optimal performance can be more art than science and requires constant awareness of your people and the battlefield environment. Time for a Change After 20+ years in the military, I knew that I did not want to do anything related to national security and about one-year out from retirement, a good friend gave me the opportunity to consult for his firm which did Single Family Rentals. I got hooked and two weeks after my last day in uniform, the company had me come in and start running operations. It was a wonderful move for me and my family to Charleston, SC where we already had a solid church that we loved and a good group of very close friends. It made for a smooth transition from the military, though, as to be expected, there were several points of struggle that had to be managed. Real Estate, like the Army, has an encyclopedia of acronyms and essentially, its own language, so I spent time reading and speaking with people to improve my knowledge of the industry’s vernacular. Additionally, because of the structure of Conrex, capital raising, REIT structures, financing and investor engagement are essential functions to our organization’s success and, as expected, areas of weakness for me. So, while I take various courses to improve my competency, I will never have the expertise of many others. Fortunately, the military is full of situations for leaders where you are not the expert! During my career, I was given the responsibility to lead the finest commandos in the world. They are absolute masters of the requisite skills for such a profession; shooting, parachuting, diving, grappling, etc. They have nerves of steel, unending courage, and the ability to think clearly and deeply under incredible duress; the proverbial, ‘PhDs that can win a bar fight’! Unfortunately for them, I was but a pale shadow of these men and their tremendous competence and experience. I was grateful, however, to be told early on by one of the most seasoned of these warriors, “you are not here to be one of them, but to lead them.”  The ROI for leadership is facilitating optimized performance from individuals and achieving exponential performance from a collective group. This requires a tailored touch to people and organizations whether executing clandestine raids or buying, renovating, and renting single family homes! The most compelling commonality between leading a real estate company and leading a military unit is purpose. All individuals and therefore all organizations need a raison d’etre and great leaders provide this! While my military career was rewarding and challenging, my personal purpose remains the same, Soli Deo Gloria! This purpose has made the transition from soldier to corporate leader generally seamless and serves me in all aspects of my life as husband, father, friend. I am very fortunate to be in a sector of the real estate market experiencing tremendous growth with still lots of runway ahead. Hopefully, my military experience from the Army will serve Conrex well as we continue to scale across the country! 

Read More

Trent Ferris

  • by
  • Comment Off
  • 1,475 views

SVP Auction Events | Auction.com Inspired by my uncle, Calvin “Cal” Ferris, who flew 200 types of aircrafts, I enlisted in the United States Marine Corps in June 1985. Originally, I enlisted as an E-1 and rose to E-5, and I was then commissioned as an Officer of Marines attaining my final rank at retirement in 2005 from the Corps as a Major. During my tenure with the Marine Corps, I had some truly diverse positions, both during peacetime as well as wartime. And in each position, the two things I learned most was the importance of mission accomplishment and troop welfare. One must always have a clearly defined mission and the right people around you to succeed. And, this is such a bigger topic, however. It comes down to perseverance, adaptability, acceptance of other ideas, and working towards a common goal. One of the positions I held was as an Aviation Ordnanceman. In fact, I was the first U.S. Marine selected as the Ordnanceman of the Year. I also served as an Air Traffic Control Detachment Commander and led a team of Marines focused on training and readiness for remote ATC operations. As a Facility Watch Officer for ATC Deployment I served in Support of Operation Restore Hope in Somalia, Mogadishu. Senior Positions Later, I was selected as a team Member for OAG (Operational Advisory Group) Command and Control Systems planning for future conflicts and events. As is often required in an officer’s career, I was also a Recruiting Station Operations Officer, Executive Officer and on a second recruiting tour, the Western Region Operations Officer. After my recruiting tour, I became the Air Traffic Control Facility Officer at MCAS Miramar and served as the COMCABWEST Operations Officer for Airfield Inspection and Licensure as a dual role. All military veterans have memorable events that occurred during their careers. Mine was participating in Operation Restore Hope. Operation Restore Hope was a combat mission. “I’m Not in Kansas Anymore” Leaving the U.S. for the first time to an unknown part of the world, Somalia, only a few weeks from Christmas, was quite memorable. As one of the senior officers, I was responsible for the well-being of 39 fellow Marines and most of the deployment equipment. Delays in Dover, Delaware, coupled with landings in several other countries enroute and then landing at Mogadishu in the early hours was dynamic. What made it more dynamic was that later that morning, less than 72 hours after leaving my family at home, I was in a Humvee with several other Marines headed to the former U.S. Embassy compound when a “Technical” vehicle pulled in front of us.  We were in the basic, un-armored Humvee and there we were, staring down a mounted machine gun in the back of some tribe’s Nissan pick-up. That was really my, “I’m not in Kansas anymore, am I?!” moment. The Rules Of Engagement at the time did not allow any action and as we approached the embassy compound, the technical turned off the main road and we went our own way. Beginning with Auction.com When I retired in 2005 as a Major, I went looking for a job that could utilize my military lessons and skills. I obtained my start at Auction.com largely on the faith of one of my military peers, Walter Skrzynski. Walter told me to go see him after my retirement before I accepted any other position. As it turned out, Walter, who had retired nearly a year earlier, had been in a key position at the original company that eventually founded Auction.com.  I recall going in to meet with Walter and the CEO, Jeff Frieden, and within 5 minutes, based largely off Walter’s recommendation and Jeff’s faith in the work ethic of U. S. Marines, I had an offer. I also recall that the next 55 minutes were spent with Jeff telling Walter how I would not be working for him, but on the auction side of the company at the time. My first year with the Company we conducted 18 auctions; we did 15,500 auctions last year; and in total over 85,000 auctions in my time with the Company. I am currently the SVP of Live Auctions. I lead a team of approximately 400 associate members with the goal of bringing buyers and sellers together through the auction sales model pioneered by Jeff Frieden and Rob Freidman, our original founders. Foundationally, I have the responsibility to ensure that all my team members are executing auctions within theapplicable compliance standards. However, beyond that we are a sales team. My goals with the company are to expand our technology resources and grow our overall presence as the nation’s leading foreclosure auction company through data-driven, customer-focused resources.  Finally, in real estate, there are multiple aspects of a process in flight at any one time. My ATC background really helps me understand how to prioritize and manage multiple tasks while never losing site of the goal. And while being deployed to such far away distant places such as Okinawa, Saudi Arabia, Bahrain, and Kuwait, I realized that the lifestyle we have in the United States is something that I will always appreciate. It is from these past events that I passionately believe that our country, the U.S.A., is the best place to live. 

Read More

Tanice & Paul Myers

  • by
  • Comment Off
  • 939 views

Turning Their Passions Into a Thriving Operation Tanice and Paul Myers began their HomeVestors careers in February 2018. They bought their first franchise in the Seattle area, called Fobes Hill, LLC. After that, they bought a second franchise in Crawfordsville, Indiana called Northern Point and own thirty rental properties in that area. Tanice was born in California, the daughter of a United States Army combat soldier, Pete Hjellen, who served during the Vietnam War. At two years of age the family moved to Anchorage, Alaska where she is considering buying another HomeVestors franchise. Tanice worked at Microsoft for over ten years and as she said, “Microsoft will always have a special place in my heart, and I will cherish my memories forever. And I am so very thankful for everything that Microsoft has provided me over the last 10 years.” She also felt very empowered the day she resigned in December of 2018. Tanice gave up a W-2 income and great benefits so she could join her husband in their new real estate business. She loves being in control and wanted to spend more time with her family and “have time to play.” Paul, on the other hand, had worked with real estate investors for the last fifteen years. Prior to becoming a HomeVestors franchisee, he worked as a real estate broker, general contractor, and investment specialist. Tanice and Paul have turned their passions for family, technology, and real estate into a thriving operation. Not only do they currently own two franchises, and looking at a third, but they are also building their own portfolio with five rental properties in the Seattle area and thirty in Indiana. They attribute HomeVestors with their portfolio expansion. HomeVestors provides training, networking opportunities, mentorship, and financing. Tanice and Paul are also Development Agents in Washington state, helping new franchisees and providing mentorship. HomeVestors also formed the Franchise Advisory Council (FAC) of which Tanice is the Chairperson. There are fourteen HomeVestors regions nationwide, and HomeVestors welcomes feedback from “the field”. This feedback allows HomeVestors to adjust their training and marketing programs. Owning a real estate business is life changing and naturally comes with risks. At HomeVestors, their priority is to limit those risks through training, tools, mentorship, leads, and financing resources. For any questions, Tanice can be reached at Tanice.Myers@homevestors.com and Paul can be reached at Paul.Myers@homevestors.com 

Read More