2024 – Page 23

Cornerstone Building Brands

by Carole VanSickle Ellis
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Bringing Relentless Customer Focus to Investors Everywhere By Carole VanSickle Ellis When Cornerstone Building Brands director of retail sales Jorge Castro talks to a potential or current client about their door-and-window needs for a project, he tends to ask a lot of questions. However, they are not always the questions his customers expect from their suppliers. That is the key, Castro says, to Cornerstone’s history of satisfied, repeat clients. “The thing I always ask first is, ‘What drives you?’” Castro said. “That helps me really understand the need they have for the project. It is far more effective than just telling someone about every single product right off the bat. I want to know the biggest things they want to do and why they are investing in the property so we can give them the best products that will fit that need.” As the largest manufacturer of exterior building products in North America, Cornerstone can usually offer an array of products that fit the bill. Mike Castillo, Cornerstone’s national account manager on the company’s Retail Pro business, explained. “Our company offers consumers big things because our brand and portfolio extend across the country. Whether you are in Florida or Washington, we can help you.” Castillo, a former marine who has been with the company more than eight years, noted that one his team’s top priorities is making sure customers have all the information they need and the support Cornerstone can offer in order to make sure they choose the right product for an asset. “We view every relationship with a client not just as a point of sale but as a partnership,” Castro said. “If there are issues, then we get someone dedicated to going to a job site with the customer to figure it out. There have even been times we rebuilt windows and delivered them next-day because when it comes to that partnership, we will do what is necessary to help our customers get the job done.” Diagnosing Problems, Asking Questions & Implementing Solutions Sometimes, helping get the job done involves identifying places where the customer is missing vital information. For example, Castro noted many new Cornerstone clients struggle with understanding how to make sure they are meeting all code requirements when they install windows and doors. For many investors, in particular, who may own assets in multiple markets across the country and deal with myriad variations on common code requirements, the line between energy efficiency (often oversimplified to simply mean any product meeting federal ENERGY STAR certifications) and local code regulations becomes blurred. Then, Castro said, an owner can end up with a building that does not meet code requirements even if it has environmentally supportive windows, doors, and other appliances. “We have to know the requirements everywhere, whether you are in the Pacific Northwest, Florida, Texas, or California. Building codes are standards to which a builder must build the property, and those vary from place to place, whereas ENERGY STAR goes by region, and there are only four regions,” Castro explained. “However, a lot of property owners end up going by ENERGY STAR because they think that will take their building to code, which can end up being a very costly mistake. They are not the same thing. You have to go with the code first.” Castro recalled an experience with one customer who had not replaced windows in a multifamily building before. Some of the units had burned in a fire, so a large number of windows and doors needed to be completely replaced and dramatically updated. “They were kind of at a loss because it was their first time; the building had been built in the 70s so it was not an easy swap, and they were not sure exactly what they needed to do,” Castro said. Ultimately, the customer and Cornerstone worked together to entirely outfit one unit with the new windows Castro recommended so they could see how they worked out, and this helped them understand the process and tackle the larger project with confidence. “They were calling us and sending pictures, and then we would get them products. We ended up delivering more than 1,500 windows.” Castro said. “That was 10 years ago, and they are still working with us because they left that project feeling confident and satisfied. I feel so comfortable knowing that is the kind of company I work for: where we are encouraged to treat our customers that way.” “The number one thing our teams do is know the vital details: what kind of latches you need on a window, how to factor in what types of things are close to the project that might affect the product you choose, and the best way to get those things delivered the best way possible,” Castillo chimed in. “We make sure we have those answers up front so transactions are smooth and clients get the right products.” A Focus on the Community: Helping Families Come Home for Good Sometimes, getting the right products to the right places involves more than just helping out clients with projects. Cornerstone also dedicates large volumes of resources to helping families struggling to find stable housing secure a safe place to land — permanently. Cornerstone Building Brands “Home for Good Project” partners with Habitat for Humanity and the LadyAID Fund of the Community Foundation of Middle Tennessee to help build affordable housing for families in need. Cornerstone donates products, facilitates house builds, and works with Grammy-winning trio Lady A (founders of LadyAID) to “use music to strengthen and inspire our communities,” according to the project website. So far, the Home for Good Project has: » Participated in building or remodeling more than 720 homes » Impacted 135 communities via these projects » Donated $3.4 million in products and resources These projects have helped families that were living in unstable housing situations or facing homelessness access a “forever place they can always come back to.” For example, Kentucky resident Sallie and her son, Casey,

Maximizing Returns on Fix-and-Flip Investments

by Mitchell Zagrodnik
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Using All Available Data to Your Advantage By Mitchell Zagrodnik The real estate market has been in a state of flux in recent years. Since the middle of 2022, the higher rate environment combined with an overall lack of inventory throughout the U.S. has left many prospective buyers and sellers to navigate an extremely challenging real estate market. One of the most popular investment strategies utilized today is fix-and-flip investing. What makes this strategy so attractive is the ability to make quick returns, and, at the end of the day, what makes an investment worth your time and money is the overall return on investment. In an ever-changing housing market, savvy investors are always looking for advantages to stay ahead of the curve and find the best possible scenarios for their portfolio. In order to ensure a profitable fix-and-flip investment, it is crucial to understand that being selective in your property choices is necessary, as not all projects are good fits for these types of scenarios. Location is an immense factor. Doing the research to understand the current market, where it is headed in the future, and what areas throughout the U.S. are profitable and which to avoid, can give you a huge advantage in the space when it comes to maximizing your returns. The Current Landscape of the Fix-and-Flip Market Rehabbing homes for sale has only continued to grow in popularity over the years, with more and more people looking for financial independence wanting to capitalize on these opportunities. That said, it is important to recognize that along with the overall housing market, the fix-and-flip industry has had its fair share of challenges in recent memory. According to recent data provided by ATTOM, in 2023 there were 308,922 single family homes and condos flipped, making up 8.1% of all home sales. Meanwhile, 2022 was record-setting, with roughly 437,000 houses flipped, making up 8.4% of all home sales. Another point to make note of is that since 2016, gross profit on flips has been consistently between $60,000 and $70,000. But in that same timeframe, the average return on investment has been consistently dropping as well, from upwards of 51% returns in 2017 to nearly half that in 2023 at an average of 27.5%. What has been a great sign of optimism as well, is that as of June 2024, house flipping activity has increased nationwide for two consecutive quarters, with that average ROI jumping back up to 30% for the first time in a year (ATTOM). This is a positive sign for the flipping industry, but it is also important to recognize that there is still difficulty hitting higher profit margins in a majority of areas throughout the U.S., after expenses, when flipping a property. Keep in mind, a 25-30% return on investment is still a great return, so this data should not sway you away from pursuing these deals. But the reasons for these dwindling returns can be attributed to several factors. Rising median home prices, rising material costs, and a higher rate environment leading to less interest from potential buyers are all valid claims to that notion. However, there are some measures you can take to make the most on your investments. Maximizing your Returns The ideal scenario for a fix-and-flip is to finish the rehab quickly and efficiently, and then sell the property as soon as possible. Most investors will go the avenue of securing financing through a lender, and these loans are often structured with no prepayment penalty. For example, this means that on a short-term fix-and-flip loan with a 12-month term, if the project is completed three months into the term and the property sells, then the borrower can pay off the loan without any penalty and maximize their ROI. A great way to make sure your property sells quickly is to not wait until the rehab is complete before finding a prospective buyer. Investors can give themselves an advantage by networking with buyers or even utilizing a realtor to search for buyers while the property is being renovated. It is not a difficult sell for those searching for a home when they have the opportunity to live in a newly renovated home, and on top of that you can secure a quick sell upon completion. Hot and Cold Areas for Flipping in the U.S Market The rise in popularity of fix-and-flips as well as an ever-expansive array of data grants you access to ample amounts of tools and information at your disposal to make the most of the opportunities throughout the country. It is no secret that many investors nowadays are investing in states outside of where they live thanks to this availability of information. So where in the United States are flippers making the most bang for their buck? Data provided by ATTOM from Q1 of 2024 shows the areas with the highest returns on investment as of 2024 are: » Buffalo, NY at 127.8% ROI » Reading, PA at 124.9% » Pittsburgh, PA at 120.6% ROI » Scranton, PA with an average return of 115.7% » Harrisburg, PA with 113.6% ROI It is clear that there is a major concentration in the Northeast region of the U.S., with Pennsylvania seeming to be the most noticeable. The reason for the higher returns can most likely be attributed to these locations having home values that are relatively lower in desirable areas where there are a plentiful number of buyers. Metro areas where we are seeing the lowest ROI are led by: » Austin, TX at 0.3% ROI » Honolulu, HI at 1.7% ROI » San Antonio, TX at 2% ROI » Dallas, TX at 5.3% ROI » Houston, TX at 8.4% ROI The trend to notice here is that these are cities that have experienced immense growth within the past five years, and four out of the five metro areas listed are in Texas. Even though these are desirable areas that people are moving to, the home values in these areas have skyrocketed.

The $638 Million Reason to Choose Your Title Company Wisely

by Radian Title Services
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What Savvy Real Estate Investors Should Look for in a Title Company By Radian Title Services As real estate investors, you are always on the lookout for the next great opportunity. But in building your asset portfolio, are you giving enough thought to the foundation of every transaction — the title company? This often-overlooked aspect of real estate investing may help make or break your success in the long run. The title landscape has seen a surge of innovation in recent years. While innovation is welcome, it is crucial to look beyond headlines that seem too good to be true. The real value of a title company lies in its ability to protect your investments when things go sideways — and in real estate, they often do. Consider this: According to the American Land Title Association (ALTA), title insurance companies paid out over $638 million in claims in 2023 alone. This staggering amount highlights the importance of choosing a financially stable title company. New title technologies often lack the financial backbone to weather significant claims. In the worst-case scenario, an underfunded title company facing multiple large claims could become insolvent, potentially leaving investors exposed to heavy losses. So, what should savvy real estate investors look for in a title company? Here are several factors to consider: » Financial Stability // Consider whether a title company is backed by a strong parent company or with a proven track record of financial health. This may indicate adequate resources to pay claims and continue operations even in challenging times. » Claims-Paying History // A reputable title company should be transparent about its claims-paying history. This may demonstrate their ability and willingness to stand behind their policies when issues arise. » Customer Service // Responsive, knowledgeable customer service can make all the difference when navigating complex transactions or addressing title issues. » Underwriting Knowledge // Experienced underwriters can spot potential issues before they become problems, helping to save you time and headaches down the line. » Industry Relationships // Established title companies often have strong relationships with local recording offices, and other key players, which can help expedite transactions and resolve issues more quickly. » Technology Balance // While technology can streamline processes, it should complement, not replace, a human counterpart. Look for companies that leverage tech wisely without sacrificing the personal touch. » Regulatory Compliance // A good title company is fully licensed and compliant with all relevant state and federal regulations. This helps protect you from potential legal issues down the road. If you rely heavily on your agent to select the title company, make sure you understand why they chose a particular title company. Often real estate agents are incentivized to choose certain title providers. Their brokerage may have an existing relationship with a title company, or the brokerage might receive financial incentive for referrals to an affiliated title company. Remember, the easiest option is not always the best when it comes to protecting your investments. As we wrap up this inaugural Title Talk column, we want to share about who we are: Radian Title Services (which includes Radian Title Insurance, a title insurance underwriter and Radian Settlement Services, a title agency offering settlement services). Backed by Radian Group, a trusted name in mortgage and real estate for over 47 years, Radian Title Services combines financial strength with exceptional customer service. With Radian Group’s impressive $5 billion market cap and over 1,100 employees, investors can rest assured that Radian Title Services has the resources and stability to help protect their investments for the long haul. This backing provides peace of mind that your title insurance and settlement services provider will be there when you need them most. In future columns, we will dive deeper into specific title issues, emerging trends, and strategies to help protect your real estate investments. Until then, remember: a strong foundation may start with a strong title company. Choose wisely, and happy investing. For licensing information please visit www.radian.com/licensing-disclosure

Leveraging Technology to Uncover Opportunities

by Radian Real Estate Management
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Drive Your Own Success and Uncover Opportunities By Radian Real Estate Management The Single-Family Rental and its adjacent Build-to-Rent, Rent-to-Own, I-buyer, and Residential Transition Lending markets have evolved from modest beginnings into a commanding asset class suite worth trillions of dollars. In recent years, the investor-owned real estate market has experienced major growth driven by shifting demand, inventory, home values, and consumer desires. Overall, the U.S. housing market has appreciated significantly since 2020, boosting portfolio value for investors who timed it right. However, we are now seeing variances across the country as certain markets thrive while others begin to falter. Some areas like Charlotte and Nashville, where median home prices are still below the national average, continue to appreciate. Meanwhile, of the approximate 900 U.S. cities tracked by Zillow, 105 of them saw a decrease in home values over the last year. Savvy investors are keeping a close eye on emerging opportunities and regions that may offer growth potential with more favorable entry points and are looking for easy to use valuations technology to order, monitor status and receive completed valuation products. Radian Real Estate Management can help you finetune and execute your investor-purchase strategies across diverse national markets. Our one-of-a-kind Capital Markets Dashboard for diligence and valuations, built in our award-winning Pyramid Platform, can help you manage all of your property valuation needs within one easy to use system. » Get fast, reliable, and accurate valuation estimates, including industry-leading Broker Price Opinions with Rental Addendums. » Submit single or bulk valuation orders and monitor the status in real time. » Easily communicate with the experienced valuation team directly in the dashboard. As the investor-owned market continues to shift, be sure you are prepared with the right technology to help you drive your own success and uncover opportunities. For licensing information please visit https://www.radian.com/licensing-disclosure

BPOs Help Evaluate Shifting Investment Markets

by Kade Clark
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A Trusted Valuation Strategy By Kade Clark The investment-purpose single-family residential purchase market in the U.S. has seen significant growth in recent years, with several key metropolitan areas emerging as top destinations for investors. In these markets, the ability to fairly estimate the value of investment properties efficiently can be the difference between profit and loss. Evaluating properties at scale locally, regionally, or nationally may be particularly difficult. With different valuation tools on the market, investors oftentimes look for the right combination of speed, accuracy, and reliability while balancing cost. That is why Broker Price Opinions (BPOs) remain the gold standard for accurately forecasting the final realized sales price of a property. Let’s explore some of the major SFR markets that are beginning to fluctuate before delving into how the BPO may fit into an investor’s strategy to evaluate the impact to their portfolio. The Sunbelt Continues to Shine, but Growth is Slowing Down For investors who purchase single-family rental properties, some of the hottest real estate markets share characteristics that make them attractive to tenants and investors, including robust population growth, strong job markets, and relatively affordable housing compared to coastal metros. This combination creates an excellent environment for rental demand as young professionals and families that may be priced out of purchasing a home seek more affordable quality housing options. Over the last four years, the sunbelt has flourished as a destination for SFRs, especially metro areas in Georgia, Arizona, Florida, Texas, North Carolina, and South Carolina. In fact, according to the National Association of REALTORS®, cities in these markets have experienced significant population growth and job market expansion, fueling demand for rental properties. However, in recent months some of those high growth areas have begun to slow. Five of the slowest-growing markets as of February 2024 were in Texas and Florida according to an analysis of Zillow data from Arbor Realty Trust. Likewise, in April 2024, Redfin reported that home prices in Florida and Texas were beginning to stagnate due to softening demand and heightened supply. For example, home prices dropped 4.6% in the North Port-Sarasota metro in March 2024. Of course, home valuations may play a crucial role in understanding the dynamics in these markets. As home prices have appreciated nationwide in recent years, real estate investors have realized appreciated value in their property portfolio. But as rental price growth and home price appreciation slows down in some areas, SFR owners and investors need to be aware of how that may impact their portfolios. While markets are shifting across the country, savvy investors are keeping a close eye on emerging opportunities in other regions that may offer similar growth potential with more favorable entry points. To do that, investors need a reliable means of evaluating properties in multiple locations. That is where the Broker Price Opinion (BPO) has proven itself to be an invaluable tool. What Makes a BPO so Useful for SFR Investors? Since the inception of the single-family rental asset class more than a decade ago, the Broker Price Opinion has been the go-to valuation solution for institutional investors due to the product’s pricing accuracy, cost, and boots-on-the-ground approach of local agents pricing real estate in their home markets. A BPO is an estimate of a property’s potential selling price, conducted by a local licensed real estate broker. Typically, a BPO involves a drive-by exterior inspection, though sometimes it may include a brief interior walkthrough. The agent or broker gathers basic information about the property and surrounding neighborhood and compares it to similar properties in the area to develop a price estimate. Though BPOs may seem akin to appraisals, they differ mainly in the qualifications of the person providing the valuation. A BPO offers the perspective of a real estate agent or broker, while an appraisal is carried out by a certified or licensed real estate appraiser. Additionally, BPOs generally involve less detailed inspections and are subject to different regulations. As a result, BPOs are usually more affordable and faster to complete than full or hybrid appraisals, with the added benefit of being less disruptive for tenant-occupied properties. Importantly, Moody’s Investors Service has given its stamp of approval on the BPO. Dating back to 2014, Moody’s rating methodology for assessing credit risks for SFR securitizations includes BPOs as a primary source of initial property valuations. According to their analysis, Moody’s concluded “broker price opinions (BPOs), on average, can provide fair assessments of single-family home values if BPO providers follow detailed and thorough processes and procedures.” Thorough Processes and Procedures are Key for Quality BPOs As Moody’s mentions, thorough processes and procedures are key. Moody’s will adjust the property values based on a qualitative assessment of the valuation provider and the method and scope of the valuation used. A valuation provider must follow rigorous protocols to meet the industry standards for BPOs: » Extensive Documentation // Brokers typically gather and submit detailed evidence supporting their price opinion. This could include taking multiple photographs of the property’s exterior from various angles (front and each side), as well as images of surrounding streets. They also report any visible exterior damage or needed repairs. Additionally, they usually document broader market conditions, such as housing prices, employment trends, and neighborhood characteristics that might impact property values, along with the local housing supply and demand. » Multiple Comparable Properties // Brokers performing BPOs generally use a minimum of six comparable properties in close proximity to the subject property, including three that have sold within the past year and three that are currently on the market. » Strict Comparable Property Guidelines // Exacting criteria for selecting comparable properties is typically used, so that comparables are similar in style, age, lot size, square footage, number of bedrooms and bathrooms, and overall condition. Additionally, these comparables are usually located within one mile in urban and suburban areas, and within five miles in rural areas. If brokers use comparables outside these guidelines, they will usually provide justification for their selection. » Quality Assurance

Essential Benefits of Managed Services for Your Property

by Fay Smith
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Why Investors are Using Managed Service Providers in 2024 By Fay Smith Modern property management cannot do without managed services. Investors compare managed service providers (MSPs) to dynamos, citing their ability to clear the way for resources, render assets “bulletproof,” and exponentially increase property values. MSPs are typically defined in real estate as third-party providers of services related to property and asset management. For example, MSPs may offer services like data entry, document management, some forms of accounting, lease implementation and management, rental management, and other boutique administrative functions. In many ways, the primary benefit of working with an MSP is freeing up time for professionals and specialists within a company to dedicate themselves more intensely to their most effective activities. For example, removing administrative duties from a top sales team could create an environment in which there is a potential for exponentially more deals each year because the team will be able to focus on converting leads instead of documenting and filing paperwork. Similarly, removing certain elements of data entry from a small company’s founder’s list of responsibilities gives that visionary more time to focus on client relations, strategy, and even marketing. The Top 5 Benefits of Working with MSPs Ultimately, MSPs positively affect business outcomes in five primary ways: 1 // Lower Total Cost of Ownership An effective MSP can help you reduce the total cost of ownership (TCO) by creating and implementing innovative budgeting solutions. Working with an experienced MSP can help business owners lower monthly expenses to create a financial situation that is predictable and allows for growth. 2 // Streamlining & Control of Operations Investors often work with MSPs to take control of their operations and eliminate unnecessary expenses and platforms. Integrated property management solutions make it easy to create and maintain a well-run business infrastructure. This applies to digital elements of your business as well as physical ones. Additionally, working with an MSP can give investors access to remote management capabilities and allow property managers to oversee multiple properties from a single platform. 3 // Enhanced Security and Compliance Managed Service Providers (MSPs) shield your properties from potential threats by implementing a multi-layered defense strategy that addresses both digital and physical vulnerabilities. 4 // Cybersecurity Property managers who prioritize cybersecurity to safeguard their investments are most likely to avoid the crippling financial blows that come with a security breach. MSPs leverage comprehensive IT management services to ensure that all aspects of your digital infrastructure are continuously monitored and optimized. With their cutting-edge cybersecurity services, you can rest easy knowing your digital fortress is constantly on the lookout for threats and receiving regular security check-ups to keep you compliant with regulatory standards. 5 // Physical Security Managed physical security measures like access control systems and video surveillance safeguard both physical properties and the people living and working in them. For example, comprehensive access control systems prevent unauthorized entry and boost tenant confidence. Focus on Property Values and Digital Benefits Outsourcing IT and security functions to a managed services provider allows property managers to focus on core objectives such as tenant satisfaction, property improvements, and business growth. Working with an experienced MSP can result in higher tenant satisfaction thanks to some very basic (but vitally important) benefits: convenient access to speedy internet and reassuring safety features that provide real peace of mind. This boost in property appeal directly translates to higher occupancy rates and a happier tenant base. Property values also may get a serious boost when you work with experienced MSPs, particularly those offering access to sleek energy-efficient systems and futuristic smart-building tech that transforms buildings into hubs of efficiency. Sustainability and cost savings go hand in hand. As you trim the fat from your operational expenses, you will watch your property value and ROI grow in tandem. Expanding with Solutions in Sight As properties expand, they need solutions that can keep up. Managed services deliver the flexibility property managers require to accommodate growing portfolios. MSPs offer customized plans that ensure seamless integration and consistent performance. Furthermore, as property portfolios grow, MSPs should be able to scale accordingly. Managing multiple properties and integrating new technologies can be a hassle. But MSPs are set up to accommodate your changing needs, keeping your management duties streamlined. Growing pains become a thing of the past with scalable solutions that expertly handle mergers and acquisitions, keeping operations running smoothly. Managed services convert capital expenses into operational expenses, avoiding unexpected costs associated with hardware failures or system upgrades. This financial stability is essential for effective long-term planning and resource allocation in property management. How to Know if Your MSP is Right for You The best MSPs function the same way having a top-notch property management tech expert on speed dial should: They are always ready to lend a helping hand, whether you need guidance on implementation or ongoing support. You cannot predict when technical issues will strike, but with an MSP, you can count on fast and effective support — any time, day or night, so your property stays running at its best. Staying ahead of the curve is a top priority for MSPs, so they regularly refresh their services with the hottest new technologies, enabling investors to offer residents access to cutting-edge technology. MSPs also may function as “expert guides” to new industry technology, helping clients separate the “nice-to-haves” from the “must-haves” when it comes to technology investments. Conclusion Let’s face it: You cannot do it all. Property managers who learn to prioritize and delegate can enjoy a refreshingly clear mind, ready to tackle the tasks that truly matter. Strategic infrastructure and service integration are key. Property managers who find a reliable managed services partner get a triple win: they streamline their workload, delight their tenants, and watch their property’s value soar.