REI INK

Design Tips: Accent Walls

Renovating a Room With Just a Little Bit of Work by Alyssa Sprague Accent walls have become an increasingly popular way to give your home a unique and 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 that elevates a room to a more upscale feel that fits into any budget. The designs homeowners use can be individually tailored from subtle to bold. So, if you are not quite ready to take a big leap, you can always start small and add into it as your style changes! The easiest way to add an accent wall is as simple as applying a coat of paint. Paint one wall in a room a different color and consider using a different finish on the paint to really make it stand out. This color can be just a couple shades darker (or lighter) than the remaining walls in the room. Or you can go as far as using a bright bold color like yellow to brighten the space and make the room feel bigger. Since an accent wall is meant to be different, consider using a dark color like navy blue or black on a single wall. When combined with lighter colors through the rest of the room, a dark accent wall can add depth without overpowering the entire room. While wallpapering your entire home (or a whole room) is definitely a thing of the past, homeowners have been impressed by the ability of a single wall of wallpaper used as an accent wall. The right wallpaper will give a space a more interesting design without having to fill the wall with décor. Especially with a temporary wallpaper (no long-term commitment) that can be easily removed, this is a huge opportunity to add in personal touches with a design that could be subtle or quirky—completely dependent on your personality! If you are looking to take on a bigger project, there are many ways to personally design and create an accent wall using varying wood materials— reclaimed wood, shiplap, or even using 1″x2″s to give a textured design without using paneling. While this will be more time consuming, with additional planning the final product is more than worthwhile. This type of project also allows for many pattern options: square/rectangle, herringbone, or even any pattern you create yourself! The wood design will naturally add more texture to the wall and painting it semi-gloss white can give it the same feel as upgraded chair rail or wainscoting. You can also consider painting this designed wall a bold color! When combined with a bold color, the wall will really pop and have a more glamorous outcome. Overall, adding an accent wall to your space can 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 dining room. The possibilities are endless! 

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The Single-Family Rental Market Has Become a Search for Supply

Investors Are Exploring New Ways to Expand Supply by Greg Godderidge The durability and stability of the Single-Family Rental (SFR) market is one of the few real estate investment bright spots of the past year. If the 2020 trend continues, the SFR asset class is positioned to be one of the biggest stories of 2021. With the backdrop of a national housing supply/demand imbalance, the SFR growth trend is so strong that a new Build-to-Rent (BTR) micro-SFR market has been created by enterprising and forward-looking market participants for the purposes of creating additional rental housing stock. Build-to-Rent single-family homes coupled with traditional single-family properties are forming the backbone for a vibrant SFR industry. What is driving this demand for tenants, builders, and investors? And is there a role for evaluation service providers? According to the Census Bureau, occupancy rates across all single-family rentals averaged 95.3 percent in the third quarter of 2020, holding steady from the second quarter, following a 100-basis points spike from the first quarter. That is the highest reading for the SFR market since 1994. From their 2007 lows, occupancy rates for all SFR properties are up by 5.6 percent. What’s driving occupancy rates skyward is a combination of relentless demand and evaporating supply. Increasing numbers of Millennials have been fueling demand as they have formed families and moved out of multifamily properties. The COVID crisis accelerated demand for SFR 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 getting increasingly difficult to find mom-and-pop property owners seeking to sell. Creating New Supply Together, those pressures have spurred home builders to create additional supply. Build-to-rent properties have been on an upward trend for the last two decades but have skyrocketed in the past year. There were more than 14,000 BTR starts in the third quarter of 2020, representing a 27 percent pop over the previous year, according to the National Association of Home Builders. Investors have taken notice, attracted not only to the steady cash flow of rental properties but also its stability. The most attractive element is opportunity. The SFR market is still small and fragmented with the 20 biggest single-family rental operators controlling only about 300,000 units. That leaves roughly 16 million rental units nationwide that have not yet been aggregated and securitized. Expansion into this vast untapped sector of the market is dependent on the ability to review and evaluate properties at scale. This has been a challenge during a public health crisis when in-person and on-site inspections are limited. Radian offers a range of services to facilitate securitization of SFR and BTR properties. 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 securitization transaction to date. Professional due diligence services allow buyers to have more control over their acquisitions and at the same time give lenders an extra level of confidence in the quality of the transactions they underwrite. SFR Market Being Driven to New Heights Currently, approximately 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 be undersupplied over the next decade, despite the increased attention the segment is currently receiving. A historic confluence of economic, demographic, and public health trends is driving the SFR market to new heights. As the market matures and earns more recognition as its own asset class, new investors including institutional players, will explore new ways to expand supply, either by aggregating existing properties or building new ones. One prediction seems certain: The industry will continue to rely on professional collateral review and diligence services to make that search for supply more profitable.

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Charlotte, North Carolina

Queen City Real Estate Ramps Up in 2021 by Carole VanSickle Ellis Charlotte, North Carolina, is probably best known for banking. Despite trailing 21 other U.S. cities in size and falling firmly into the “second-tier” or 18-hour city categories in economic parlance, the Queen City is the second-largest banking center in the United States (behind only New York City) and has been successfully luring major employers, including Fortune 500 behemoths like Honeywell, into the metro area for years. The results of this dedicated, pro-business approach in Charlotte kept the local economy on solid ground during much of the 2020 COVID-19 lockdowns and appear quite likely to solidify the city’s standing as a thriving, recession-insulated market in 2021. “Charlotte is a hot market for investors whether they want to renovate and flip, buy to hold and rent, or invest in multifamily properties,” said Marco Santarelli, founder and CEO of Norada Real Estate Investments. “Even with the short-term impact of the ongoing global pandemic that impeded real estate sales activity in the entire nation, in the long term, the Charlotte real estate market remains strong.” Santarelli added he expects housing demand in Charlotte to continue to outpace supply thanks to strong demographic 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 Combination for Sustained Growth The Charlotte metro boasts the unique combination of being an attractive place to live, an 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 PriceWaterhouseCooper’s “U.S. Markets to Watch 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 sixth-place 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. “At the top of this year’s Best Places to Live rankings, we see a combination of metro areas that…offer a balance between cost and quality of living,” explained Devon Thorsby, real estate editor at U.S. News & World Report. Regarding the city’s sixth-place ranking on her publication’s “25 Best Places 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 millennial population. Investors should note that although the ongoing COVID-19 global pandemic and associated health policies have affected Charlotte’s retail and restaurant scene, the city has made notable efforts to keep retail and restaurants open, albeit at limited capacity. The state 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 one Charlotte restaurant owner after Cooper extended phase 3 restrictions for a third time at the end of December 2020. The owner admitted gross revenues are down for his restaurant by 30 percent since he reopened in June 2020, but noted that weekends have been especially busy since he reopened. Charlotte’s relatively short winter season and humid, subtropical climate are conducive to outdoor eating and entertainment, a boon during a period when consumers are encouraged to socially distance and gather outside or not at all. Strong Fundamentals in the Queen City 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 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 “progressive banking culture,” Charlotte is now home to Wells Fargo and Bank of America headquarters. BB&T and Suntrust (now Truist) moved their combined headquarters to the city in 2020. “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 is perfectly positioned for 2021. While other areas of the country lost employers, jobs, and population, Charlotte welcomed two new Fortune 500 companies (Honeywell and Truist), retained 18 Fortune 1000 companies in the area, kept unemployment in the mid-range single digits (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 valued the ability to work productively from home, making it an extremely attractive market in the pandemic and post-pandemic economies. The Charlotte economy is rounded out with a variety of other sectors, including energy-oriented industries that have earned the city the nickname, “The New Energy Capital”. Charlotte also serves as a major distribution hub for the east coast and is home to the NASCAR Hall of Fame. Although NASCAR’s corporate headquarters are located in Daytona Beach, Florida, nine in 10 NASCAR teams operate within 75 miles of Charlotte. Dedicated Support for Local Employers Large & Small Charlotte’s determined support of local businesses, both large and small, has played a huge role in the city’s ability to

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Paving the Way for Investor Success

DLP’s Company Culture Creates Laser Focus on Productivity & Returns by Carole VanSickle Ellis After Don Wenner, founder and CEO of DLP Real Estate Capital, attended his eighth-grade career day, he plotted his career path as a financial advisor based on a salary chart that showed financial advisors made more money than doctors, lawyers, and accountants. “I was good at math, entrepreneurial, and driven. I thought, ‘Hey, I could do really well at that,’” Wenner recalled. As it turned out, he was right, but the journey ultimately led him to something much bigger than financial advisory. Instead, he became the founder and CEO of a multifaceted organization dedicated to “leading and inspiring the building of wealth and prosperity through the execution of innovative real estate solutions,” the DLP family of companies. Before Wenner could imagine and ultimately found DLP, however, he had to encounter the vast potential of real estate investing firsthand. This happened thanks to a surprising series of events. Throughout college, he worked at big firms like BlackRock and McGladrey & Pullen [now RSM] and waited tables on the weekends. One evening, a frequent patron of the restaurant, Nathan Robinson, recruited him to sell alarm systems. “He convinced me that if I came to work for him, I would make $2,000 per week. At 19 years old, that sounded really great,” Wenner recalled. His first weekend, he earned more than twice that, and the numbers climbed from there. Soon, Robinson, who was also a real estate agent at Keller Williams, had recruited Wenner to sell real estate as well. “I was still determined to become a financial advisor, but I quickly obtained my real estate license,” Wenner said. By October 2006, the young financial advisor was applying his practical, pragmatic strategies to the housing market, using a guaranteed sales program that would be the template for many of the numerous, similar programs agents often offer today. “From day one as a real estate agent, my message was, ‘Your home sold in 68 days, 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 belief in the importance of having a clear plan and vision. “If you can see it, you can do it, as long as you have the vision, a plan, and disciplined people [ready to take] action,” he explained. 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 (DLP Lending), innovation solutions for homebuyers and sellers (DLP Realty), property, asset, and construction management (DLP Real Estate Management), loan servicing (Alliance Servicing), and title services (Alliance Property Transfer). Jumping in with both feet 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 be driven and curious, and who had ‘can-do’ attitudes,” Wenner explained. His first employee, a part-time assistant, is still with the company, and so are many others who came to work with DLP in those early years. “I always hire people who understand how the organization operates and who are willing to support our culture,” Wenner explained. “That is why so many from my original team are still with us today.” A Foundation in Learning, Self-Improvement & Growth Part of understanding the company culture involves understanding and embracing Wenner’s 10 core values—and being excited about participating in a workplace that embraces each of these multifaceted goals and characteristics in an industry that conventionally recommends keeping the core values at three or fewer. “We started with six, which is arguably too many according to some people, but over the years we just had to add four more,” Wenner laughed. “We evaluate them every year to make sure they are representative of us, and they really are the values that drive our organization.” Those core values (see sidebar) drive every aspect of DLP’s organization and form the foundation of a company that has grown exponentially since its founding. “I understood from very early on that there is only so much that one person can do and took steps from the beginning to bring on great people with incredible skill sets to help me build and expand what became the DLP family of businesses,” said Wenner. “I never wanted to be a ‘time-teller’ who was always personally needed when a challenge arose in my business. I wanted to be a clock-builder, investing in leaders and organizations that would take control and ownership within DLP.” The expansion of DLP was fast and, Wenner says, organic. As the housing market headed into a full-blown crash in 2007 and 2008, Wenner’s sell-your-home-guaranteed program took off. As he began buying and holding his own real estate during that time, other investors began asking how they could be involved and build their own portfolios. “Things moved fast from there,” Wenner said. By 2012, DLP had a real estate portfolio, was building a management company, running a construction company, and starting a brokerage. “We were investing capital, buying and flipping homes and apartment communities, and beginning to raise capital,” Wenner recalled. “That was the most challenging part of all.” By 2014, however, his reputation for solid, dependable, and impressive returns and asset management had taken hold and the company was thriving. In fact, in the first eight years in operation, DLP grew its annual revenues by at least 60 percent, Wenner said. That consistent, significant growth indicated to him that it was time for the next step. “We started to think about where we wanted to go next, and we decided to

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Risk Reward

Do Your Diligence on Foreclosure Homes by Rick Sharga Buying a property always comes with some degree of risk. That is true when buying a brand-new home or buying a property that is a century old. The trick, for real estate investors and homebuyers alike, is to do the due diligence necessary to minimize that risk. Foreclosure Properties: Higher Risk, Potentially Higher Returns 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 understand that, but are willing to take on that added risk due to the larger potential profits they often realize. There are three different types of foreclosure properties investors can purchase. First, there are pre-foreclosure properties. These are homes in the earliest stages of the foreclosure process, called a Notice of Default in states that practice non-judicial foreclosures and Lis Pendens in judicial states. In this stage, the homeowner is typically 90-120 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 a foreclosure auction. If the default isn’t cured during this initial notice period, the lender sends a Notice of Sale, which informs the homeowner that the property is going to be put up for auction, either via a Trustee Sale or a Sheriff’s Sale, depending on the state laws. Properties at this stage of foreclosure are generally referred to as auction properties. At the auction, one of 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 or bank-owned homes. Those three types of homes—pre-foreclosure properties, auction properties, and bank-owned properties—all fall under the general heading of “foreclosure properties.” But there are significant differences in how to purchase them, the potential savings, and the respective risks involved in purchasing them. Navigating the Foreclosure Risk/Reward Spectrum 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 either with or without the assistance of a real estate agent, and usually purchase the property using traditional mortgage financing. An investor can typically buy the property at a modest discount compared to similar properties, since the owner generally needs to close a deal quickly and with a high degree of certainty in order to avoid losing 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 stages of a foreclosure. But investors need to take a few extra steps before buying a pre-foreclosure home. First, they need to find out how much is actually owed to the lender before agreeing to a sale—there are often fees and fines that have accumulated during the default period and those 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 property, like a second mortgage, tax liens and mechanics liens – if the owner wasn’t making mortgage payments, there’s a good chance some other payments weren’t being made as well, and some of those past due amounts could be attached to the house. Finally, never buy a pre-foreclosure property without having a thorough property inspection done. 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 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 almost always investors, and investors need to buy at a below-market price that allows them to make a profit. Property condition is probably the biggest risk with auction properties. There are no internal inspections available on these properties, since they’re occupied, and the residents aren’t generally inclined to be cooperative. Seasoned investors can get an idea about the interior by taking a look at the exterior, but there are often surprises and hidden issues to account for when estimating repair costs. There’s a risk of the occupant resisting the eviction order after the foreclosure sale, so it’s helpful to know how the local sheriff’s office handles those situations. Some investors set aside some “cash for keys,” where they offer the occupant a payment to entice them to leave without being physically removed (and hopefully without them damaging the property). A very unique risk when purchasing this type of property is the auction itself. More than a few investors have found themselves caught up in the excitement of a bidding war on a property they ABSOLUTELY MUST HAVE! And over-paying significantly. So, doing research on local property values, then having the discipline to set—and stick to—a “not-to-exceed” bid, is extremely important. And the note above about doing a preliminary title search is even more important for these properties than for pre-foreclosures. Plan to attend a few auctions before you bid at one, just to see how the process works, and familiarize

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Additional Investors Flock to Single Family Rental

Will diligence standards degrade based on competition and lack of inventory? by Jennifer McGuinness Currently, there are approximately 49 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 presents fundamentals that could lead investors to be uncertain about how investments could perform, but even in a time of uncertainty, Single Family Rental Investors continue 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 Rental REITS (Real Estate Investment Trusts), as they generally outperformed the broader REIT Market in 2020 by 23%, thus exceeding other real estate sectors by significant margins (i.e., exceeding multi-housing by 9%, office by 22% and shopping centers by 33%). Additional Investors and New Capital 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 than 2% of the total units. According to Amherst Capital Management, there are more than 25 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 announcements include, a $375MM joint venture between Rockpoint Group and Invitation Homes, a $625MM joint venture between JP Morgan Asset Management and American Homes 4 Rent, and 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 Amherst of 4.4MM shares of common stock, at the initial offering price of $12.50 ($55MM invested). They also provided a $20MM committed two year unsecured and committed financing facility to the company. Fast forward to October 2020, just 5 months later, when Pretium and Ares Management Corp. partnered 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. Supply and Demand The big questions in my mind and I am sure many market participants are: Is 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 able deploy their capital? If this should occur, does this mean that the due diligence of the properties (and/or of the tenants that reside in them) could be “relaxed” to be competitive and thus increase the risk profile of the investments driving a change in the stable cash flow curve the 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, coupled with the demand of the Institutional investor, continues to drive home 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. This, hand in hand with record low mortgage rates, has well positioned home buyers to make better purchase offers which could result in lower investment returns for investors, should they have to increase “buy prices” to acquire additional real estate. What the market is not looking at as closely however, is how many of the homebuilders have now either entered joint ventures with investors to “build for rent” communities or have started rental community divisions of their own. Single Family housing 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 number of housing starts since before the financial crisis. While a lot of the new construction will go to owner occupants, this significant addition of new homes will begin to equalize the lack of supply for investors. Also, with the release of the COVD vaccine, if the country begins to truly open again, we believe we will see

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