REI INK

Increase in 3D Tour Adoption

SFR Owners and Investors Are Optimizing Operational Efficiencies and Leasing Their Properties Faster By Kori Covrigaru 3D tours have been around the real estate market for more than ten years at this point. However, it was not until the pandemic did we see the adoption of 3D tours take off within the Single-Family Rental industry. Owners, operators, investors and property managers needed a tool that would enable them to continue their business operations. Whether the focus was onsite punch list checks during renovations or virtually marketing to a future resident, Zillow 3D and Matterport tours, in particular, began to pop up on rental listings across the nation. At PlanOmatic, the leading provider of quality photos, floor plans, and 3D tours to the SFR industry with speed and at scale nationwide, we increased our number of 3D virtual tours for SFR properties across the country by 270% from 2020 to 2021, and increased the number of SFR homes we photographed by 187% during the same time period. Our most in-demand markets for 3D virtual tours and photography of SFR properties in 2021 were Charlotte, Dallas, Orlando and Tampa. Charlotte, NC  •         3D tours | 1,571% increase from 2020 to 2021 •          Photography | 253% increase from 2020 to 2021 Dallas, TX •          3D tours | 608% increase from 2020 to 2021 •          Photography | 234% increase from 2020 to 2021 Orlando, FL •          3D tours | 139% increase from 2020 to 2021 •          Photography | 180% increase from 2020 to 2021 Tampa, FL •          3D tours | 77% increase from 2020 to 2021 •          Photography | 171% increase from 2020 to 2021 As the SFR market continues to thrive and become even more competitive, property owners, investors and management firms are taking advantage of 3D virtual tours and professional photography to attract and capture the interest of consumers online, resulting in faster leasing activity. Essentially, all home searches start online today, and this has fundamentally changed the way SFR properties are marketed. Our clients are trying to get as much property information in front of the consumer as possible, and a 3D tour stands out online allowing future residents to walk through the house imagining themselves there without visiting it in person. We anticipate even greater adoption of 3D tours in 2022 as SFR owners and investors look to optimize operational efficiencies and lease their properties faster. What the Research Shows We conducted a study last year that measured the impact of 3D tours on SFR property marketing on the Zillow Rentals platform, which includes Zillow, Trulia, and Hotpads. The 3D tour study was conducted in partnership with a national provider of well-maintained SFR homes and revealed that SFR property leads increased by 40%, and days on market decreased by 30%, when a 3D tour was published on the Zillow Rentals platform. At PlanOmatic, we have captured and created thousands of 3D tours on behalf of our SFR clients and according to them, 3D tours have resulted not only in more views per property, but in fewer lease opt-outs because the leads are more qualified. In fact, PlanOmatic measured the impact of 3D tours on SFR property marketing and found that property leads increased by 25 percent, and days on market decreased by 23 percent when a 3D tour was used to market a property, compared with only using professional photography. A 3D virtual tour is like a buy-one-get-one-free deal and something every investor should be thinking about leveraging in 2022. It is an easy way to ensure your SFR properties stand out against the competition when they are marketed to consumers, and it is a great way for your operations team to get the dimensions of the property to better inform renovation decisions. 3D tours also allow future residents to explore the home in a real-life way and get a clear visualization of the space, creating more qualified leads. Our 3D tour studies are conducted by PlanOlabs, the research, data, and consulting hub at PlanOmatic that analyzes and optimizes the property lifecycle for SFR investors, owners and operators. With PlanOlabs, we analyze SFR investors’ current state and use our industry experience to optimize their operational and marketing processes to scale and meet their portfolio growth goals.

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Selecting a Property Preservation Partner

Technology is No Longer a “Nice to Have” — It’s a “Need to Have” By Anthony Scotese A property preservation partner can be the difference-maker for investors who are juggling a growing number of properties in their portfolio. From repairs and rehabilitation to grass cutting and snow removal, many have come to rely on these services to keep defaulted, vacant or occupied properties in great condition. However, not all providers are created equal. There are several factors to consider when selecting a property preservation partner. Here are five things to keep-in-mind when beginning to shop around: 1. Experience and expertise Choosing a partner who can perform inspection, landscape and rehab services for your properties is a big undertaking and requires a certain level of trust. Do not put your properties in the hands of just anyone. To ensure your investments are secure, ask the following questions when interviewing potential partners: »          How long have you been doing property preservation work? »          How many clients do you work with? »          Would I have a dedicated relationship manager working with me if I select you as my provider? »          What sets you apart from your competitors in this space? Do not be afraid to ask the hard questions to ensure you are selecting the right partner for you. 2. Nationwide footprint This should go without saying, but if you have properties spanning various states/regions, you want to ensure your property preservation partner operates in your footprint. Regardless if you have properties in multiple states, if you are an investor planning to scale in the future, it is important to select a partner that can help you and not hinder you in those endeavors. Make sure to ask potential partners about their coverage area before signing on the dotted line. 3. Reporting capabilities Reporting capabilities should be top-of-mind when considering a property preservation partner. Understanding the standard and custom reporting options available to you, which can help you make sound decisions regarding services you may need to order for particular properties, is of the upmost importance. You may not think reporting is a necessity but making informed decisions by leveraging data is the best way to ensure your assets are safe and secure. 4. Technology and innovation What technology is available to you that can make your life easier? Nowadays, technology is infused into all aspects of the origination lifecycle. If a provider does not have a focus on technology, you could risk missing out on opportunities to scale or refine your portfolio. For example, investors have benefited from automated decision-making technology to quickly adapt to real-time industry changes to achieve their performance goals and minimize risk. From managing client objectives to placement and order delivery to vendor management, technology is changing the face of investing. Technology is no longer a “nice to have” – it’s a “need to have” if you wish to remain competitive in this challenging landscape. 5. Disaster planning The hurricane seasons over the past two years have been above normal in terms of severity and number of named storms. And it is not just locations that are in FEMA-designated Special Flood Hazard Areas (SFHAs) that are at risk as a weather-related disaster can happen anywhere, at any time. You need to ensure your property preservation partner can quickly aggregate damage information and target impacted areas quickly after weather events. From there, you will need their support with ordering needed inspections of properties, filing hazard claims and facilitating needed repairs due to roof damage, flooding, electrical and plumbing issues, and more. Quick remediation of any issues related to weather damage to properties is critical to protecting assets and ensuring no further damage is sustained due to neglect.

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The Future of Technology

Incorporating Technology at Every Stage Can Have Significant Benefits By Patrick Burns SFR is a burgeoning sector set to outpace multifamily, office, retail, storage and hospitality growth in 2022. Most sectors of real estate have been a historically local and offline business, with investors specializing in specific markets and only utilizing neighborhood providers to facilitate transactions from start to finish. This means that there is a huge opportunity to introduce centralization and scale. Increasingly, SFR investors are not only looking to break out of local markets, but also buy multiple properties per month. This move from local to regional–or even national–brings with it a need to find a predictable, consistent, and scalable process to buy multiple properties at the same time. We have witnessed the power of technology-driven solutions to delight customers and increase efficiency across the mortgage industry. Now, SFR investors are faced with challenges of scale, centralization, and transparency. Technology can enable a level of simplicity that has never been seen before within the industry–and the benefits are seen throughout the entire end-to-end process. There are many ways technology can impact the real estate industry. But for now, let’s focus on the three key areas that can have a big impact in the world of SFR: sourcing, inspections, and title and closing. Sourcing Traditionally, sourcing meant finding an agent in each new market, and then providing that agent with parameters and a buybox for the types of properties an investor would want to acquire. While this method works to an extent, it can be laborious, as it requires the investor to commit significant relationship management with many individual agents across different markets. Today, there are new alternatives that enable the ability to buy entire portfolios and offer key insights. For example, marketplaces like Sundae and Roofstock act as aggregate sources of available properties across the country, and give investors access to valuable data. This data includes information on current leases, tenant details, and payment history, along with things like interior/exterior photos, 3D tours, floor plans, disclosures, inspection reports, title reports, and more. Access to this type of information allows investors to make confident buying decisions in multiple markets at once. In a hot purchase environment, this ability to move quickly and accurately forecast return on investment can give investors a key competitive edge. Inspections Until recently, inspections have also been heavily localized. The need to coordinate hundreds of inspections each month creates not only tedious labor, but also a fractured experience instead of a seamless process. New methods, such as those offered by Inspectify, offer a marketplace of inspections. Oftentimes, these tech-forward companies work in tandem with acquisition marketplaces. As a result, investors have access to structured, customizable data, along with a level of consistency typically unseen within the inspection process. Tech-based solutions to inspections introduce more consistency. Inspectify, for example, offers reports via API that can directly exchange information and inputs into your transaction process and pricing models–which can take weeks off the acquisition process. They also allow their customers to build custom templates, resulting in more accurate data and less risk. The SFR sector specifically can benefit from the national scale and cost savings this new type of technology can offer. Title and Closing One of the biggest challenges within the ecosystem of real estate transactions is the offline and localized nature of title and closing, which can be prohibitive to efficiency and scale. Companies like Spruce work closely with investors across model types–including rent-to-owns, sale leasebacks, and iBuyers–to centralize operations and unlock efficiency. By combining national accessibility, local expertise, and proprietary technology, Spruce empowers investors to accomplish multi-state strategies, or remote acquisitions, with a consultative approach. A particular issue for investors who are buying 50-100+ homes per month (in multiple markets) is easily keeping track of their closing pipeline. Receiving automated, accurate updates on file status––from search to post-closing––can be a gamechanger if you are used to chasing down this information from various local providers via email (or even phones). While real-time data is incredibly powerful, there is also the added benefit of historical reporting on how quickly deals are closing. Tech-enabled partners that offer nationwide accessibility can give your teams hyper-localized data, like title search turn times, in a particular county. For example, you generally cannot write an offer with closing in less than 21 days in Oklahoma because searches take more time there than average. Having this type of unique data at the outset allows you to forecast out your acquisition strategy and keep on top of cash management concerns. As large-scale investors start to build their own transaction management software, or track their deals in a CRM like Salesforce, working with a title and closing provider that offers a direct API integration can rapidly unlock efficiencies at scale. Kick off the title process with the click of a button, receive automated status updates, leave comments, and automate workflows all within your own system. 2022 is bringing an increasingly crowded SFR investment environment, with everyone from major capital providers to property management companies jumping into the market. This uptick in competition is coupled with a housing market that is historically low on supply. Continuing to incorporate technology at every stage of your acquisition lifecycle can have significant benefits, including a competitive advantage and faster scale.

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Mistakes in Manual Mode

Why Excel is Killing Your Lending Business By Erica Sikoski When just starting out in the private lending industry, it takes time to build up your portfolio of clients, partners, and service providers. Spending money right out of the gate on a new software solution seems like a far off goal. So, when new private lenders are starting and have limited resources, Microsoft Excel seems like the perfect software solution for all aspects of your business. At first glance, Excel is a well-known tool among employees and appears capable of managing your customer data, creating formulas for quick calculations, and keeping all information in one simple spot. Plus, it’s free! Perfect, right? It’s not that simple. When your pipeline grows, you will start seeing holes in this solution, your business will require more scalable tools, and there will be roadblocks where you should be seeing tremendous growth. If you are already at the point where Excel is no longer working for your organization or you’re a new private lender just getting started, consider this your push to find the perfect software solution now.  Here are three reasons why you should switch from Excel to a proper Loan Origination System. Common Excel Drawbacks Lack of Team Collaboration & Sharing Capabilities The ability for private lending teams to collaborate in Excel is very limited. Of course, the Excel file can be emailed back and forth, saved, and reopened by different users, but there is no real-time collaboration, as you cannot have more than one team member in the file at the same time. This also enables the Excel file to become outdated very quickly resulting in team members working off outdated information. Additionally, it becomes difficult to divvy up leads and clients when you’re working in Excel, as there can be overlapping messaging and missed lead opportunities. As hard as Excel spreadsheets are difficult to share internally, they are too easy to share externally. As opposed to a secure software that requires users to log in to gain access and only allow certain members to view full client information, Excel spreadsheets can generally be circulated to anyone by simply clicking the send button of an email. As private lenders are typically storing client and deal information in these Excel spreadsheets, this can leave your entire pipeline and leads list open for misuse.  It’s important to keep your clients as you’ve put in the work to earn them. Manual Data Entry Allows for Errors Excel can be used for a wide range of formulas and calculations, but all this data must be entered manually. Just entering and updating customer data becomes incredibly time-consuming and you’re opening the door to human errors. This human error can lead to costly mistakes. In 2012, JP Morgan lost over $6 billion in what’s known as the “London Whale” incident due to Excel spreadsheet errors. In this case an employee copied and pasted data from one Excel sheet to another but with notable errors that were not caught until it was too late. Don’t let your private lending business become another statistic like this. Scalability Once your business starts to grow, the Excel spreadsheets will need to grow as well. However, the bigger and more cumbersome the spreadsheets, the more likely they are to contain errors. Also, as your client base grows, it will become difficult, if not impossible, to track, make notes on, and conduct appropriate follow-up with these clients. This can lead to missed opportunities and dead files. You might have heard the expression “What got you here, won’t get you there” and running your private lending business on just Excel is the perfect analogy. With so many “all encompassing” software solutions and platforms readily available to the private lending industry, it’s important to consider which software features of Loan Origination Systems and CRMs (Customer Relationship Management) are crucial for your business to succeed in the long run. Important Software Features to Consider Cost & Implementation When purchasing any software, it needs to be viewed as an investment. Especially going from the free cost of Excel, the upfront pricing and subscription fees will be offset by the improved efficiency, productivity, and organization your private lending business will achieve. Compare the software solutions and make sure the cost of the service not only fits into your budget but will work with the size of your team and current workflow. Keep an eye on the differences between the number of users and features to ensure you’re getting the most for your team at a reasonable price.  In addition to start-up and subscription costs, consider the implementation and training costs as well. New software solutions always have a learning curve. Spending months learning a new software, even for the right price, can bring your business to a grinding halt. The missed months of business may not be worth the time spent onboarding your lending team. Remember, that software is an investment, and needs to be evaluated like one. Cloud-based & Integration Options Cloud-based software applications make life and business much easier, as everything is accessible to the entire team. When working on a loan file, instead of storing each document on different computer desktops, store the documents in the software itself which enables multiple people to work on the same loan file and share documents, client info, and lending terms all in the same platform. Additionally, keep an eye on which of the software providers makes their Application Programming Interface (API) public, which allows for the expansion of your possibilities to integrate with service providers, marketing platforms, and more.  Ask about the current providers each software solution is already partnered with and the process of integrating with any partners your business is currently working with. This includes credit and background solutions, appraisal management companies, referral marketplaces, etc.  Integrating disjointed software solutions is one of the most common challenges businesses are currently facing. Most applications are not connected with each other, resulting in little islands of data not easily

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Houston, Texas

“Space City” Real Estate Still Reaching for the Stars By Carole VanSickle Ellis After setting record after record for home sales volumes and prices in 2021, the Houston, Texas, housing market barreled into 2022 at top speed. While home prices in many of the country’s hottest markets “fell” to single-digit appreciation in early 2022, Space City real estate kicked off the New Year with 19.1% year-over-year gains in value. While many analysts predict price gains will slow dramatically over the remainder of the year and possibly reach an annual rate of about 3.8% by the start of 2023, an influx of buyers flush with cash from the sale of homes in places like Silicon Valley could delay that relative cooling. Local agent and chair of the Houston Association of Realtors (HAR) Jennifer Wauhob described the situation, saying, “There simply are not enough homes out there for consumers to buy right now, and the steady rise in home prices plus increasing mortgage rates create a perfect storm in terms of affordability.” Tightening Inventory Across the Board Inventory is particularly tight in the lower and middle ranges of the market, making first-home purchases particularly difficult for would-be buyers. Sales volumes of homes priced between $150,000 and $249,000 fell by 34% between January 2021 and January 2022; sales volumes on homes priced $150,000 and lower fell by more than 40%. Local buyers have reacted by shifting purchasing to condominium units and townhomes, which sold more than 130,000 units in 2021. Sales in this asset class have exceeded 100,000 units annually just three times. “Consumers’ demand for housing [in Houston] has never waned, and they have paid more for it as the supply of housing has shrunk,” said Norada Real Estate Investments CEO Marco Santarelli, citing low mortgage rates for the ongoing boom in the city. Santarelli recommended investors considering buying properties in Houston keep a close watch on oil prices, since the city’s property values tend to rise with the cost of oil. However, he added, the city’s “extremely diversified economy” makes it “one of the country’s top job creators…and lets you stretch a paycheck farther than anywhere else in the country.” For real estate investors ready to acquire property, the biggest concern will be how close to market value they should pay. For several years now, many investors have been willing to pay market value or even slightly over market value in order to acquire properties that will cash flow over the long term either as short-term vacation rentals or long-term residential properties. With inflation showing every sign of shooting skyward in the near future, many high-volume investors say they are willing to forego the classic “buy low, sell high” mentality in favor of acquisition. “When you acquire a property at a fixed rate and hold it, you continue to pay that rate until the property is paid off,” explained Mike McMullen, CEO of Global Real Estate Services, one of the earliest pioneers of build-to-rent development in the industry. He continued, “On the other hand, your rents go up with inflation, so you are essentially getting a raise each year. Right now, hard assets are the quickest way to wealth.”  Houston’s Diversified Economy is Well on Its Way to Recovery One of the most powerful arguments for investing in Houston is the local economy, which has proved highly resilient to the global pandemic. In fact, the Greater Houston Partnership (GHP), the largest chamber of commerce in the Houston area, reported in January of this year that the city had recovered “roughly 70% of the jobs lost in the pandemic by fall 2021.” The GHP estimated the region would net 75,500 new jobs in 2022, which will place Houston “extremely close to a full recovery.” Houston’s economy has long been oil- and gas-driven, with Phillips 66, ConocoPhillips, Occidental Petroleum, Halliburton, and ExxonMobil all choosing to locate their headquarters in the area. While the economy still benefits from the presence of these companies, they are just one component of the bigger economic picture in 2022. Today, Houston boasts thriving energy, life science, manufacturing, and aerospace industries. It received its official nickname, “Space City,” in 1967, thanks to the opening of NASA’s Manned Spacecraft Center, and has continued to lead the country in this sector. Today, Houston is home to more than 500 space, aviation, and aerospace-related businesses as well as the NASA Lyndon B. Johnson Space Center (JSC) and the Houston Spaceport, which offers laboratory office space, technology incubator space, and large-scale production facilities in addition to being an FAA-licensed, urban commercial spaceport. In addition to aerospace-related industry, Houston’s digital technology sector extends throughout a variety of subsectors including software development, programming, and database management. With more than 8,200 tech-related firms and 500 venture-backed startups, the city is certainly contributing to speculation that it could be the “new Silicon Valley.” Yang Tang, a former Silicon Valley resident and current chief technology officer at digital supply chain and data analytics company GoExpedi, a former Silicon Valley company now headquartered in Houston, explained his company’s decision to leave California for the Houston area. “It’s cheaper to operate a business; there is no state income tax; there is an abundance of land, pro-business policies, lower cost of living, significant talent pool for hiring; and the list goes on and on,” he wrote in an op-ed column for Insider in August 2021. Tang continued, “Like many other tech executives, I think Texas is positioned to outpace California due to its proximity to the world’s top companies in energy, healthcare, and aerospace, to name a few, and its willingness to innovate with technology in those industries.” He concluded, “I chose Houston as my new hometown for its diversity of people and thought…the city’s major port, healthcare systems, and energy sector…. If folks looking still don’t see Houston and Texas as the next technology mecca, they soon will.” Houston is not just a tech mecca, however; it boasts a thriving medical community as well. The Texas Medical Center (TMC)

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Casting a Wider Net

Technology Has Made It Easier to Surface Auction Properties By Kathleen Lappe When you hear the term real estate auction, it is not surprising that your thoughts likely turn to desperate sellers or bank-owned properties, and rightfully so. During the 2007 housing crisis, auctions were an effective way to unload thousands of foreclosed properties, and real estate investors were able to snap them up at a significant discount. Today, as property values soar and technology has enabled people to shop for homes online and in a growing number of instances purchase them sight unseen, more sellers are turning to auctions as an efficient way to sell their home for the best price. Outside the U.S., auctions are a very common and accepted way to sell a home. Auctions create competition, they attract serious buyers and they provide certainty that the transaction will close on a specific date. With more owner-occupants choosing to go the auction route, auctions should be given the same attention in competitive markets as they are during a slow market. The difference is that rather than bidding on a distressed or bank-owned property, you are likely to see a wide variety of homes that fit your investment criteria. Many of the homes for sale via auction today are “conventional product” in the price range of $300,000 to $600,000, typically three- or four-bedroom homes in good school districts that would be easy to rent — i.e., the types of homes desirable to first-time home buyers or single-family home renters. Until now, auction listings were not easily accessible. Surfacing them required visiting multiple auction websites, connecting with industry professionals and searching real estate classified listings or county courthouses records. Today, they are available on DirectOffer.com, a real estate search website where you can find the broadest selection of traditional for sale listings along with listings from AuctionLook.com, the nation’s largest aggregator of auction properties, as well as a growing number of leading auction companies, such as Williams & Williams. The DirectOffer app is available to download in the App Store or Google Play so you can see new listings as they come available. How to compete in today’s auction market Just as technology is making it easier to surface properties being sold at auction, it also has influenced how auctions are conducted. Although live auctions still take place, virtual auctions have been growing in popularity for several years and accelerated after COVID-19’s stay at home and social distancing mandates put a halt to live auctions. Hybrid auctions, which combine a live auction with online participation, also are becoming more common. Online auctions take place in real-time like a live auction or span over a period of days or even weeks and start with a minimum price. In these multi-day auctions, participants have the opportunity to bid 24 hours a day, seven days a week, until the auction listing closes. Real-time auctions operate on a bidding countdown clock. When the clock expires, the property is sold to the highest bidder. But often, it is not that cut and dried. If no one bids after the time on the clock expires, the seller can then decide to take the traditional route to sell. This also gives the seller an indication that the price point of sale might be too high. However, if there are multiple bids within the last few minutes, often the sale will go into extended bidding. Extended bidding can be done in a timeframe that the seller picks, so if one person clicks to bid and another one does it within a minute, the auction remains open and bidding continues. For example, if an auction is set to end at 10 a.m., it actually might not end until 10:30 a.m., if many people are still bidding. The time schedule of one minute between bids before closing the sale needs to stay open until there is only one bidder within that time frame. This allows for a clear and defined winner. Whether you are buying in a real-time or multi-day online auction, the majority of the bids often come in the last two hours and sometimes down to the last 10 minutes, so being very diligent on watching the sale is important when participating online or via simulcast. You must have your finger on the button (think eBay). One way to avoid competition and losing a property in the final seconds at auction is to make a direct pre-offer. At the end of the day, the seller is looking for a certain price. The selling agent/auctioneer is required to present direct offers to the seller as part of their fiduciary responsibility as an agent of the seller. If you pursue this strategy, keep in mind sellers will not take pre-offers that are less than what a comparable market pricing analysis is suggesting. Read the fine print and go in prepared A real estate auction listing contains information on the property and starting or reserve bid price as well as important details about the auction itself, including required deposit, registration requirements, date of auction, appraisal, and more. Live, virtual and hybrid auctions require that all potential buyers register for the auction, and many will require a deposit prior to being allowed to bid and or a prequalification from the bank. Auctions require the buyer to do their own due diligence. Most auctions allow potential buyers to tour the property during a designated time period before bidding starts. Plan to arrive early if you are attending in person. It also is critical to talk with planning and zoning and do discovery on HOA rules in accordance with what is allowed before bidding, especially if the plan is to rent the property or to build. Most auction properties have ironclad contracts and when you start bidding you are agreeing to this contract. Therefore, doing your diligence upfront becomes extremely important. This is also the case when it comes to determining the value of the property. The bidding process generally quantifies the

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