March 2022 – Page 5

WORD OF THE DAY: Otiose

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[ō-shē-ˌōs] Part of speech: Adjective Definitions: Having no real purpose; useless; pointless Examples of Otiose in a sentence “With the invention of the iPod, my CD collection has been rendered otiose.” “The shed was filled with otiose tools that should have been thrown away long ago.” About Otiose One of literature’s most otiose characters is Bartleby, from Herman Melville’s “Bartleby the Scrivener.” In this tale, Bartleby becomes so lazy that he won’t leave his office and, eventually, won’t even eat, resulting in his death. Did you Know? Otiose has had an interesting, serpentine evolution. Its Latin source otiosus meant “at leisure,” but it first came to English meaning “useless or superfluous.” Then, only recently, it began to regain some of its original Latin meaning relating to leisure.

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Experienced direct lender returns to the market to help investors meet the need for housing Archwest Capital, a California-based direct lender specializing in real estate loan solutions, has added bridge financing for single-family residential investments to its diverse portfolio of lending products. Calling upon the leadership team’s experience partnering with the nation’s leading housing developers and financial institutions over the past 20 years, the founders launched Archwest Capital last year to help real estate investors meet the need for housing across the nation. While initially focusing on multifamily and mixed-use properties, Archwest’s latest product now offers single-family residential bridge loans for experienced investors focused on fix-and-flip programs as well as ground-up construction projects. As the U.S. housing shortage reaches nearly 5 million units, the real estate industry is faced with rapidly aging inventory and stagnant development. The median age of homes now sits at roughly 40 years, and more than one-third of these occupied housing units requires repair. What’s more, new construction for single-family homes is currently at the slowest pace in nearly 30 years. This expansive demand for housing is coupled with a pandemic-era remote workforce that has made space and privacy paramount for prospective homebuyers. Given this demand, creating and maintaining new housing inventory while rehabilitating current inventory has become critical to the recovery of the housing market. With the rise in construction costs and labor shortages, investors are relying heavily on financing partners with competitive terms, experience and certainty of execution. Archwest Capital’s lending strategy is designed to fill these shortfalls, with business purpose financing at lower rates, higher LTVs and a swift funding turnaround process for experienced investors to acquire, rehabilitate and develop single-family homes. “Flexibility and agility are the keys to success in real estate today, as the industry faces a steep climb to catch up with the needs of the housing market,” said Shawn Miller, CEO of Archwest Capital. “More than ever, investors need an experienced partner to provide creative and structured underwriting in an ever-evolving market with certainty that the deal cut will be executed seamlessly. Our team is proud to return with business purpose financing focused on fix and flip loans and home construction financing to support single-family residential investors.” Archwest’s leadership team holds a history of selling and repositioning three financial companies in the last 20 years with the founders behind some of the nation’s largest lending and asset management companies, most recently under the 5 Arch Funding Corp. brand. The Archwest team has managed more than $8 billion of assets and originated more than $3 billion of business purpose loans. The addition of single-family residential bridge loans marks an expanded breadth and depth of Archwest’s offerings. Archwest also provides bridge and permanent financing for multifamily, mixed-use and commercial properties. About Archwest Capital Archwest Capital is a direct lender focused on providing business purpose financing secured by residential, multifamily, mixed-use and commercial properties. Building on their experience as bankers, lawyers and entrepreneurs, the founders of Archwest have created and operated multiple firms in the past two decades that have managed more than $8 billion of assets and originated more than $3 billion of business purpose loans including single-family residential, multifamily and construction (more than 5,000 assets). With their collective 70+ years of experience, Archwest specializes in helping investors who are meeting the need for housing across the nation. Archwest provides direct capital solutions throughout the development process, from ground-up to light/heavy rehab to stabilization, in addition to offering flexible permanent financing alternatives to agency commercial products. For more information, please visit www.archwestcapital.com.

Americans Say Yards Are One of the Most Important Parts of Their Homes

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More than three quarters of Americans who have a yard (76%) say the family yard space is one of the most important parts of their home, according to a new poll commissioned by the TurfMutt Foundation and conducted online by The Harris Poll. Nearly three quarters of Americans overall (72%) say a spacious yard would be at the top of their wish list if they were looking for a new home. That desire reflects a cultural shift in how Americans view their yards. Even more so, they’re willing to invest in their yards, and are using them more for everyday activities, including as work-from-home office space. “What we are seeing with Americans is greater reliance on the backyard as an extension of the home. It’s not just a place that looks pretty – it’s a place to live and do daily activities such as working, dining and relaxing,” said Kris Kiser, President and CEO of the TurfMutt Foundation. “They’ve discovered that ‘backyarding’ is a better way to live and there’s no turning back. They are also willing to hire professionals and invest money into yard improvements.” People are enjoying extra time outside, too. Nearly a quarter of Americans who have a yard (24%) are spending more time in their yards now than before the COVID-19 pandemic. And they are really enjoying the extra time outside. Over 3 in 5 Americans who have a yard (63%) say they have enjoyed doing more activities in their yard since the pandemic began. Younger adults (68% age 18-54 vs. 52% age 65+) and parents of kids under 18 (73% vs. 58% who are not parents of kids under 18) are more apt to feel this way. Who’s spending all that time outside? Older millennials – 32% of adults ages 35-44 who have a yard are the spending more time in their yard now compared to pre-pandemic. Parents – 30% of those with a yard who are parents of kids under 18 are spending more time out in their yard now compared to pre-pandemic and are more likely than those without kids under 18 to say they are doing so (21%). How Americans use their yard has likely changed. For one, the outdoor office trend is here to stay with many Americans using their yards as makeshift offices for their jobs. Stats show: Nearly 2 in 5 Americans who have a yard (58%) say they have spent time doing work for their job in their yard during the pandemic. Men are more likely to use their yards while doing work for their jobs, with 63% of men compared to 53% of women with yards saying they worked outdoors in their yard during the pandemic. Among those with a yard, parents of kids under 18 are also more likely (71%) than their counterparts without kids under 18 (52%) to have used the yard to get work done during the pandemic. The yard has also become a place to de-stress, with more than two thirds of Americans who have a yard (69%) saying doing yard work, such as mowing, trimming or planting, is one of the ways they like to de-stress these days. This is especially true among parents of kids under 18 as they are more likely than their counterparts without kids under 18 to cite this (76% vs. 65%). A vast majority of Americans who have a yard (84%) plan to invest in their yard in 2022, including: 67% say they’ll purchase plants/trees/flowers/vegetables to plant themselves 39% report they will purchase items to maintain or improve their grassy areas 23 % say they will install or update hardscaping themselves. And the outlook looks bright for the landscaping industry. About a third (33%) of those with a yard plan to hire a professional to do landscaping or hardscaping in 2022. Other yard improvements planned for 2022 include installing a fence (19%) or a shed (15%) and adding a swimming pool (10%). Among those with a yard: Adults ages 18-44 are more likely than those ages 45+ to say they plan to invest in their yard in 2022 by hiring a professional to do landscaping or hardscaping, 43% compared to 26% of those age 45+. Nearly a third of those ages 18-44 (31%) will install or update hardscaping themselves, 27% will install a fence, 21% will install a shed and 18% plan to put in a swimming pool. Parents of kids under 18 (73%) are more likely than their counterparts (63%) to say they plan to invest in their yard in 2022 by purchasing plants, trees, flowers, or vegetables to plant themselves. Parents of kids under 18 are also more likely than those without kids under 18 to purchase items to maintain or improve grassy areas on the lawn (44% vs. 36%), and more likely to hire a professional to do landscaping or hardscaping (47% vs. 26%). Given the unprecedented return to the outdoors, the available outdoor power equipment also has kept in step with products for every need and individual scenario, says the TurfMutt Foundation, and powered in a variety of ways including battery/electric, gasoline, propane, solar and hybrids. This survey was conducted online within the United States by The Harris Poll on behalf of the TurfMutt Foundation from February 1-3, 2022 among 2,012 U.S. adults ages 18 and older, among whom 1,728 have a yard. This online survey is not based on a probability sample and therefore no estimate of theoretical sampling error can be calculated. For complete survey methodology, including weighting variables and subgroup sample sizes, please contact Ami Neiberger, ami@fourleafpr.com. About TurfMuttTurfMutt was created by the Outdoor Power Equipment Institute’s (OPEI) TurfMutt Foundation and has reached more than 70 million children, educators and families since 2009. Through classroom materials developed with Scholastic, TurfMutt teaches students and teachers how to “save the planet, one yard at a time.” TurfMutt is an official USGBC® Education Partner and part of their global LEARNING LAB. TurfMutt is an education resource at the U.S. Department of Education’s Green Ribbon Schools, the U.S. Department of Energy, the U.S.

Affordable Properties at Auction

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An Urban Institute Report in Partnership with Auction.com by Jung Hyun Choi, Laurie Goodman and Liam Reynolds Distressed sales have declined significantly during the COVID-19 pandemic, reflecting the ease with which homeowners could access forbearance and the presence of the foreclosure moratorium (GAO 2021). This is about to change: the foreclosure moratorium expired in August 2021, and most homeowners remaining in forbearance are expected to exit by early 2022. Most of these borrowers have equity and will opt for a deferral, opt for a modification, or sell the property themselves, but some borrowers do not have sufficient equity to cover the transaction costs of selling plus the deferred principal and interest payments. Many of these properties will be put into the market as distressed sales. Distressed sales often flow into the auction market. Auction.com launched in 2007, during the early stages of the foreclosure crisis, and has provided a platform for distressed home transactions. The company has since expanded its market share and is now the nation’s largest online auction site for foreclosure and bank-owned sales, having sold more than 460,000 properties since it was launched. All states require a public auction for any foreclosed property, and Auction.com accounts for close to 50% of these foreclosure auctions nationwide. If a property does not sell to a third-party buyer at the foreclosure auction, it reverts to the foreclosing lender as real estate owned (REO). Auction.com estimates that 20-30% of REO properties are sold via online auction, with most of the remainder sold on the multiple listing service. The overwhelming majority of these properties needed substantial renovations, and the properties sold at a fraction of the automated valuation model (AVM) price. In 2021, the Urban Institute partnered with Auction.com and obtained data on foreclosure and REO sales. Because distressed properties may offer access to very affordable homeownership, we were interested in the share of properties homeowners purchased and whether there are ways to increase that share. We found that most properties are initially sold to mom-and-pop investors, while a smaller share went to owner-occupants who had sufficient cash. Key Excerpts (Bold Added) “Distressed sales could provide a cost-effective way for owner occupants to buy a home. But few distressed homes that trade at auction initially trade to owner-occupants; most trade to mom-and-pop investors. The properties often trade to owner-occupants at resale because distressed properties tend to require major renovations, and most owner-occupants do not have the expertise or inclination to undertake major renovations. And potential owner-occupants who can handle major renovations will find two additional obstacles: financing issues and a lack of access to the properties to estimate repair costs. Neither of these dimensions has an easy solution.” “But even within the present framework, policy actions could make these properties more accessible to owner-occupants at initial sale. States can make small but valuable changes to the existing foreclosure auction system. Most foreclosure auctions require potential buyers to be physically present at the auction; transferring this process online would make it easier for individuals, including owner-occupants, to attend and would encourage the owner-occupant base to buy. Second, requiring broad marketing of properties before auction would help. These actions could increase the share of owner-occupant purchases at foreclosure auctions.” “In addition, one could envision a first-look REO auction for properties that do not sell at foreclosure auction. The first-look auction would give owner-occupants—along with mission-driven nonprofits and mom-and-pop investors who agree to provide high-quality affordable housing for low- and moderate-income families—the ability to bid on a home before it is available to other potential bidders. Nonprofits and mom-and-pop investors would go through a certification process to qualify as local community developers who can bid during the first-look auction. This would likely increase the share of homes owner-occupants could purchase directly, or indirectly through a nonprofit or local community developer.” Additional Key Findings Auction Sales to Owner-Occupants Are Low but Increase for Resale Properties A quarter of Auction.com sales were sold to owner-occupants, with a higher share of foreclosure sales (30.1% ) than REO sales (20.5%) sold directly to owner-occupants, according to public tax assessor data. Nearly all owner-occupant buyers used cash rather than financing for their purchase. On average, REO properties are older and are likely to require more repair, which is a burden for homeowners, especially with a lack of financing options for rehabilitation. Additionally, about half of all REO properties brought to auction during the pandemic were occupied, compared with 45% in 2019, before the pandemic. This requires owner-occupant buyers to navigate the current occupant’s exit from the property, which can sometimes entail a long and complex eviction proceeding. About 46% of properties sold on the Auction platform from January 2019 to December 2020 were resold by September 2021. The original buyers, overwhelmingly mom-and-pop investors, renovated the properties before resale. Resale rates vary by state: in Arizona, California, and Nevada, more than 65% of properties were resold, but in Kansas, Missouri, and West Virginia, less than 20% were resold. In general, states that have experienced faster home price growth have a higher resale rate. Additionally, the resale rate is higher for properties sold on Auction in 2019 (49.3%) than in 2020 (38.9%), which is to be expected, given the time it takes to renovate properties before resale. Owner-occupants purchased 68.8% of the resold properties. Again, foreclosure sale properties had a higher share that were resold to owner-occupants (71.3%) compared with REO sale properties (65.1%). Properties Sold to Owner-Occupants Are Larger and Are Newer Than Those Sold to Investors Properties sold at auction to both owner-occupants and non-owner-occupants—who are mostly mom and-pop investors—are substantially older than the median home in the United States (built in 1978) and tend to require considerable repairs. As a result, the distressed sales price is substantially below the AVM price. “No matter what I’m buying on Auction.com, that thing ain’t pretty,” said one real estate appraiser and investor who owns 11 rental properties in the St. Louis area. “Whenever I fix something, I want it fixed for

An Industry Icon

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How Numerous Shifts Finally Led to Career Fulfillment If you have been to a real estate investment conference in the past 15 years, chances are you have heard Dennis Cisterna on stage speaking about everything from the history of the housing market to the future of the economy and everything in between. He has been a leading voice in this industry since the Great Recession and his insights have made a lot of firms a lot of money over the past 20+ years. Since the beginning of his career in 2000, Cisterna has completed more than $3.7 billion in real estate transactions in the US and Europe, but he only ended up in real estate due to a chance meeting in college. On His Way As an undergraduate at San Diego State University, Cisterna had his eyes set for another field entirely — politics. While interning for a mayoral candidate in San Diego, he met the campaign’s fundraising chief and was given a quick tutorial on what drives elections (money) and what many of the candidate’s largest donors had in common — real estate. Cisterna noted, “When I was in college, the most popular path to elected office was to begin your career as an attorney, but I saw the writing on the wall — your network could matter just as much as your net worth and since I wasn’t truly excited about practicing law and I had always found real estate intriguing, I made a career shift before actually starting my career.” Cisterna was able to land an internship at real estate market research firm The Meyers Group (now Zonda), where he was mentored by some of the industry’s sharpest minds such as John Burns and Tim Sullivan. Like most in their first real job, Cisterna said he was “absolutely clueless but worked extremely hard and asked a million questions” and was offered a full-time role as an analyst a couple months before graduating college.” After four years of writing research reports and traveling all over the country performing feasibility studies for new development projects, Cisterna wanted to make a switch to learn other aspects of the investment and development industry. He took management positions with iconic homebuilders Lennar and Toll Brothers to help expand each company’s footprint in Southern California. Lemonade Out of Lemons He achieved immediate success with both firms, but the housing crisis took his career on a detour he never expected. “I went from an emerging leader with a Fortune 500 company to collecting unemployment checks,” he recalled, adding that his division at Toll Brothers went from 160 employees to 16 during the Great Recession. As the world worked itself through the housing crash, Cisterna scrambled to survive in an industry he had grown to love. Shortly after being laid off, he started an advisory firm that had him take on every type of assignment under the sun and broadened his skill set immensely. He consulted dozens of the biggest financial industry players, including several of the largest banks in the country, about how to manage their swelling book of foreclosed homes, commercial properties, and large tracts of land. On the other side of the coin, Cisterna also advised large private equity firms and hedge funds how to capitalize on the distress in the market. A Passion for Evolution After making a name for himself among some of Wall Street’s biggest names, Cisterna transitioned to real estate investment banking and lending with executive positions at several firms including Johnson Capital and FirstKey, where he was recognized as a leader in bringing new equity and debt to the then burgeoning asset class. “I found I had a great knack for raising capital and understood the momentum for SFR investing was trending in the right direction. It was pretty exciting being on the ground floor of the SFR investment space and being a major part of how the capital markets evolved.” In 2016, he moved to Investability as the company’s Chief Revenue Officer and was selected to serve as the CEO of the company barely a year later. But he still felt unfulfilled. “I always had this vision in my mind that once I became a CEO, I would be satisfied, but achieving that left me more frustrated than I had been before. It dawned on me that even as CEO, I did not own the company. I still had a board of directors to report to, there was a corporate culture that preceded me, and it was not nearly as appealing as it seemed on the road up the corporate ladder, so I got off the ladder. It was surreal to spend nearly 20 years working towards a goal, achieving that goal, and realizing that isn’t what you really want.” From Zero to $600 Million With a little nudging from some industry colleagues, Cisterna did take that chance on himself. He launched his own investment firm, Guardian Residential, in 2018. The firm focuses on niche off-balance sheet financing opportunities with homebuilders. Guardian has deployed nearly $50MM with several builders across the country. Six months later, he co-founded build-for-rent operator, Lafayette Communities, with industry veteran, Thibault Adrien. The firm is backed by private equity giant, Carlyle Group, and has more than 2,000 units either built or under development in the southeastern United States. In late 2019, he co-founded Sentinel Net Lease with another longtime industry colleague, Fred Lewis. Sentinel acquired stable cash-flowing commercial real estate across the country. Their roster of blue-chip tenants includes Amazon, AT&T, JP Morgan, and Tesla. The firm currently owns 15 assets totaling over $225 million with an eye on crossing $500 million by the middle of 2023. When pressed to explain the meteoric rise of his entrepreneurial efforts – Cisterna isn’t shy in his explanation. “I’d love to tell you I am the smartest guy in the room, but it is really a combination of luck and timing. My collective experience over the past 22 years has helped me identify investment

Celebrating 12 Years

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How a Chance Meeting in a Hospital Changed Their Lives Forever While sitting in his office at a hospital in Massachusetts, Stephen Bowen, Nurse Practitioner, was paid a sales call by Michael Falotico, a partner in an oxygen medical supply company. The medical discussion soon turned to real estate, and six months later the two formed a partnership and began their journey to becoming successful real estate entrepreneurs. The Prelude Bowen, 61, and Falotico, 45, came from diverse backgrounds and life experiences. But their common denominator were the changes happening in the healthcare industry. Bowen needed additional income because he lost his pension at the hospital he was working at, and Falotico’s medical supply company was being adversely affected by new government regulations and reforms. At the time of their initial meeting back in 2010, Bowen was already dabbling in real estate. Then, he was introduced to HomeVestors by Aaron Katz, a HomeVestors Development Agent (DA). Working full-time as a Nurse Practitioner on a hospitalist team, Bowen knew that he would need a partner if he were to buy a HomeVestors franchise and become an independent business owner. Falotico, a 15-year veteran of the medical supply industry, was the right guy at the right time. The Beginnings In March of 2010, while the country was recovering from the recession, the new partners bought their first HomeVestors franchise. Immediately, they began implementing the HomeVestors proven systems and never deviated. Falotico really did not know much about real estate, even though he grew up in a real estate family, so he had no choice but to follow the systems. Bowen said, “I’m a science guy. I did the research, the systems worked, so I did what the systems said to do.” And it paid off. In the first year, their new company, Constitution Properties LLC, bought four homes. Seeing their initial success, they invested more money in advertising and in their second year they bought eight homes. They increased their advertising budget again, and in the third year bought sixteen homes…and every year thereafter they bought more homes than the previous year. They achieved this rapid growth by utilizing the financing provided by HomeVestors. In their first ten years as HomeVestors independent business owners, they grew their business every single year, the first franchisee to ever do so. In 2019, they were the #5 franchise in the country; #4 in 2020; and #11 in 2021. The Present Day Bowen and Falotico now own four HomeVestors franchises covering Boston, Worcester County, Manchester, New Hampshire and Hartford, Connecticut. They are also Development Agents for all New England, a role they have had since their fifth year as a franchisee. The partners also started a brokerage firm, Moor Realty Group, and a rental holding company, New Year Holdings. They have a team comprised of three buyers (one of which is Bowen’s oldest son), a lawyer who handles contracts and listings and serves as the office manager, a bookkeeper, and two administrative assistants. Besides building their own personal portfolios, they focus on fix and flip (80% of their business), buy and hold (10%) and wholesaling (10%). Bowen and Falotico celebrated their 12-year business anniversary this March. The day Bowen was interviewed for this story was the same day he retired from his medical career after 22 years. Bowen’s former motto was “I heal houses and I heal people.” Falotico summed it up by saying, “What I love about HomeVestors is that they let you build your business as big or as small as you want. And, there is wonderful camaraderie and friendship between our franchisees. There is no competition within HomeVestors, we all work together.” Bowen added, “As long as you follow the system, have the desire and the dream, you can succeed.” Homevestors What exactly does it mean to be a HomeVestors® business owner? Owning a real estate business is life changing and naturally comes with risks! When you become a HomeVestors business owner, you get immediate access to motivated seller leads, financing resources for qualifying purchases and repairs, one-on-one coaching with your local Development Agent, proprietary software for analyzing properties and deals, and access to a nationwide network of coaches and peers. Your house-buying business is yours and you run it as your own venture with a focus toward your individual business goals. If you are interested in a franchise, call 855-454-4578. Each franchise office is independently owned and operated.