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Foreclosure Starts Decrease 4%

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Completed Foreclosures Also Decrease 5% from Last Month By ATTOM Staff ATTOM, a leading curator of real estate data nationwide for land and property data, released its July 2022 U.S. Foreclosure Market Report, which shows there were a total of 30,358 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions — down 4% from a month ago but up 143% from a year ago. “While it’s encouraging to see both foreclosure starts and completions drop off a bit in July, it’s also worth noting that there may be some seasonality impacting the numbers,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “In eight of the last 10 years Q3 foreclosure activity has been lower than the previous quarter, so we might just be seeing a return to a more normal seasonal pattern of delinquencies and defaults.” Delaware, Illinois and New Jersey had the highest foreclosure rates Nationwide one in every 4,628 housing units had a foreclosure filing in July 2022. States with the highest foreclosure rates were: »          Delaware (one in every 2,127 housing units with a foreclosure filing) »          Illinois (one in every 2,334 housing units) »          New Jersey (one in every 2,564 housing units) »          Nevada (one in every 2,609 housing units) »          South Carolina (one in every 2,976 housing units) Among the 223 metropolitan statistical areas with a population of at least 200,000, those with the highest foreclosure rates in July 2022 were: »          Elkhart, IN (one in every 1,592 housing units with a foreclosure filing) »          Davenport, IA (one in every 1,626 housing units) »          Fayetteville, NC (one in every 1,673 housing units) »          Cleveland, OH (one in every 1,757 housing units) »          Atlantic City, NJ (one in every 1,886 housing units) Those metropolitan areas with a population greater than 1 million, with the worst foreclosure rates in July 2022 including Cleveland, OH were: »          Chicago, IL (one in every 2,082 housing units) »          Las Vegas, NV (one in every 2,190 housing units) »          Riverside, CA (one in every 2,431 housing units) »          Philadelphia, PA (one in every 2,519 housing units) Foreclosure starts increase monthly in 21 states nationwide Lenders started the foreclosure process on 21,428 U.S. properties in July 2022, down 4% from last month but up 226% from a year ago. States that had at least 100 foreclosure starts in July 2022 and saw a monthly increase in foreclosure starts included: »          Michigan (up 42%) »          Massachusetts (up 39%) »          Iowa (up 26%) »          Wisconsin (up 25%) »          Indiana (up 22%) “It appears that a few states are still catching up on processing foreclosures on loans that were seriously delinquent prior to the pandemic, which accounts for the year-over-year spike in foreclosure starts,” Sharga added. “But early-stage delinquencies continue to be lower than normal, so once these older loans have re-entered the foreclosure process, it will be interesting to see if foreclosure starts fall off significantly.” Those major metropolitan areas with a population greater than 200,000 that had the greatest number of foreclosures starts in July 2022 included: »          New York, NY (1,380 foreclosure starts) »          Chicago, IL (1,247 foreclosure starts) »          Los Angeles, CA (678 foreclosure starts) »          Miami, FL (666 foreclosure starts) »          Philadelphia, PA (652 foreclosure starts) Foreclosure completion numbers decrease 5 percent from last month Lenders repossessed 3,068 U.S. properties through completed foreclosures (REOs) in July 2022, down 5% from last month but up 27% from last year. Counter to the national trend, those states that saw a monthly increase in REOs in July 2022, included: »          Maryland (up 147%) »          Hawaii (up 58%) »          North Dakota (up 38%) »          Massachusetts (up 38%) »          Michigan (up 27%) States that saw the greatest number of REOs in July 2022, included »          Illinois (359 REOs) »          Pennsylvania (185 REOs) »          Ohio (184 REOs) »          Michigan (182 REOs) »          New York (167 REOs) Those major metropolitan statistical areas (MSAs) with a population greater than 1 million that saw the greatest number of REOs in July 2022 included: »          Chicago, IL (270 REOs) »          New York, NY (90 REOs) »          Philadelphia, PA (89 REOs) »          Detroit, MI (82 REOs) »          Birmingham, AL (66 REOs)

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Racing Full-Speed

RCN Capital’s Jeffrey Tesch is Pushing the Limits and Staying in the Fast Lane By Carole VanSickle Ellis If Jeffrey Tesch, CEO at private direct lender RCN Capital, were not involved in the private lending industry, he would probably be zooming at top speed around an asphalt track in Daytona or Talladega. “My wife might not agree, but I think if I put a helmet on and really worked at it, I could be a truly great NASCAR auto racer,” he laughed. Fortunately for the world of private lending, Tesch has elected to stay out of the fast lane — at least where driving is concerned. When it comes to business and lending, however, it is a completely different story. Tesch has spent his entire career pushing the limits and creating solutions in two very different industries. “I started out in business with a single Subway franchise,” he recalled. At 22, Tesch bought the business using a loan co-signed by his father, and for nearly 20 years he focused on growing his business, buying more franchise locations, and raising his family. Of course, this was all conducted at top speed, with little time to slow down between one responsibility and the next. Nights, he would mop the floors of any shop where the closers did not show up, and in the morning he would do the prep work if the early crew did not make it in. “There was no job I did not do,” he recalled. “I never really liked mopping floors at 10 o’clock at night, but it had to be done because I cared about the business. I always remember that.” Not an Easy Business Over the 20 years he was expanding his Subway franchise business and raising a family, Tesch invested in real estate. He preferred to buy rentals, and did so throughout the 1990s until about 2010. “I did not have time for flipping because I was so busy running the sandwich business,” he said. “At that time, Subways were popping up everywhere. If I was going to buy real estate, I was going to rent it out and keep it simple.” He recalled getting started with RCN in 2010 and expecting lending to be relatively easy compared to his experiences in the restaurant business. He soon learned the lessons from Subway would be highly applicable in his new role at a lender trying to forge a niche for itself providing capital to real estate investors who were acquiring distressed homes, fixing them up, and putting them back into the marketplace. At that time, the types of loans Tesch and his partners envisioned making were largely unprecedented. “There was no good solution,” he said, “and the industry, the housing market, and the economy needed one,” he said. “Of course, that was 2010. There was a horrible recession, and the marketplace was extremely fragmented,” Tesch continued. “I knew that we could build a company that would provide a true service to the industry, but it was not easy — not even compared to food service!” RCN Capital began providing time-sensitive bridge financing to real estate investors in 2010, creating much-needed solutions for investors who needed faster-paced, more flexible lending solutions than the traditional banking industry could provide. There was no time to slow down, however; the next solution needed, Tesch saw clearly, was the need for transparency in a burgeoning industry with very few rules. “Back in 2010, there was not really an industry for real estate investment loans,” he said. “It was mainly investors just looking for money with no good way to find it. It was a mess.” Tesch and RCN implemented a series of internal standards to help the lender and borrowers know where things stood with a loan, to uphold standards for customer interactions, and to maintain clarity throughout the transaction. “It was common stuff you would expect in a residential loan, but at that time it was not standardized for the commercial world of private lending,” Tesch explained. “It was as simple as mandating that once you had spoken with a customer and come to terms, you issued a commitment letter. We were very above-board, and it had a lasting impact on our business and on the industry.” “Nothing Without the Team” Not surprisingly for a man who daydreams about being a professional race car driver, Tesch places an extremely high value on his crew at RCN. Today, that crew numbers nearly 250, and he emphasized that the RCN infrastructure and his extended team are the key to the company’s success and the success of clients. “Lending money is not an easy business, and you have to work with people who are truthful, honest, and hardworking. What can be even harder on the lender’s side is that you need people willing to have difficult, honest conversations with customers about loan approvals and denials when necessary,” he explained. “We have a really, really deep bench of people who do exactly that. They care about the company and making a difference as well as their paycheck.” Tesch hires with this type of mindset as his goal, noting, “We want people who are fired up to make a difference.” He described one of his earliest hires, a young employee who had been working at a car dealership answering phones. Despite the mundanity of the position, “she came in with the attitude that she was going to do an amazing job,” Tesch said. “In fact, she did such an amazing job we moved her into a position as a loan processor, where she wrote a manual for all the other processors we have ever hired. Then, she moved into underwriting, and now she is a loan officer. She could have come in with no expectations, but instead she helped build up the entire company and our customers as well. That kind of fire is what we are all about.” In addition to direct, private lending, RCN operates a proprietary system dedicated to supporting real

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A Father and Son Partnership

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How the Mayhews Became a Real Estate Success Story Richard and Nathan Mayhew are a father-and-son team in the real estate investment industry. As partners in the Virginia-based Maycor Real Estate Services, LLC, they own and operate one of the most successful HomeVestors® franchises in the country, focusing primarily on the Richmond and Norfolk Metropolitan Statistical Areas. Richard had a very successful career in the mortgage and commercial banking industry prior to becoming a lucrative real estate investor. He worked as an executive officer and director of a public company and owned his own mortgage company. His career path took a detour when he was approached by one of his banking customers (and friend) to buy his Richmond Homevestors franchise due to a decision to retire. Richard bought the franchise in 2006 at the ripe young age of 56. For 13 years, Nathan also had a very successful career as the owner of a high-end design and remodeling company primarily focusing on kitchen and bath renovations. Then came the “Great Recession” of 2008 which caused him to shut down operations and let go of his 15 employees. Not one to sit idle, he then formed a property preservation company which he eventually sold to join forces with his father in 2014. The Father-Son Partnership Together, Richard and Nathan have built a strong and respected real estate investment company focusing primarily on fix-and-flips, but also active in wholesaling and buy-and-hold properties. While Richard manages the lending and accounting side of the business, Nathan jokingly quipped, “I do everything else,” before adding that he focuses on acquisitions and dispositions. The partnership has worked so well that they bought another franchise in Norfolk, VA in 2022. In addition, Richard and Nathan are also the Development Agents (DA) for Virginia, West Virginia, Maryland, and Delaware. Nathan also served as the President of the Richmond Advertising Council for two years. In their roles as DA, Richard and Nathan coach and mentor other franchisees about the local markets and how best to utilize the various programs and business systems that HomeVestors provides. As a mentor, Richard’s advice to new business owners is, “Work the Model…The Model Works.” When Richard first became a HomeVestors independent business owner in 2006, there was not a formal DA program in place, so he had to rely on corporate staff for assistance. The Business Model The Mayhew team has always stayed true to the HomeVestors systems, fully taking advantage of the advertising, financing, and training programs made available to them. Today, the Mayhew team enjoys the lifestyle their business provides and the fact that HomeVestors lets them totally control their business and destinies. They also consider themselves, first and foremost, problem solvers. As Nathan explains, “We really help people get out of their ‘ugly’ situations. We are provided the tools to do just that, and we do it on a personal level and not by sitting in front of a computer screen making ‘instant’ offers.” Regarding the current real estate market, father and son agree that they can do well in any market and economy by being flexible and adjusting their strategies accordingly. 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 855-454-4518, email Sales@homevestorsfranchise.com or visit www.homevestorsfranchise.com. Each franchise office is independently owned and operated.

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The Future of Rental Listings

How to Stay Ahead of the Competition By Kori Covrigaru As a single-family rental (SFR) investor, you have likely seen an increase in competition. The demand for SFRs is up, but with demand up, more investors are adding SFRs to their portfolios. As a result, investors need a way for their listings to stand out. According to Realtor.com’s 2022 Housing Marketing Prediction Report, there will be a higher demand for rentals. In addition, the ever-increasing competition in homebuying makes an SFR look even more appealing, especially to those who cannot compete with the all-cash, quick-close, over-asking offers that home sellers receive in today’s environment. The report also noted that renters are looking for larger units. With more remote workers and families pursuing rental homes, SFRs are having a moment. Today’s renter wants outdoor space, storage, a work-from-home (WFH) area, and enough room for their families. According to the CoreLogic Single-Family Rent Index, SFR growth has consistently grown for the past ten years and increased by 12.6% in 2022. With the increase in demand for SFRs and expected rent growth, more property investors are focusing on this market. So, how do you maximize your investment and ensure your rental properties spend less time sitting on the market? 3D Tours Today’s renter is tech-savvy and wants convenience. They crave online payment options, amenities, and digital communication options. With 3D Tours, you give a great first impression to this type of renter. 3D Tours show that you value a potential renter’s time. In addition, they can make more informed decisions because you provided more information up-front. PlanOmatic recently ran a pilot program with a national property investor to test the effectiveness of 3D Tours on their listings. These were the results (averaged across markets): •          Decreased days on the market by 15.25 days •          Increased listing impressions by 34% •          Increased leads by 6.5% Sites like Zillow, Redfin, and Apartments.com spotlight listings with 3D tours with a special icon, highlighting these listings over standard listings with photos only. When you add a 3D Tour to your listing, you show potential renters the essential characteristics of your brand. •          You understand their time is valuable, so you offer a time-efficient option to tour the home. •          You are tech-savvy and may offer the convenience of online payments, maintenance ticket submissions, and simple online application and lease signing options. •          You are professional, and your renters will not experience the landlord-tenant relationship where personal feelings come into play. Add Floor Plans to Your Listings The typical SFR renter is pursuing a lifestyle where they do not want to maintain a home, but they do want all of the benefits of one: outdoor space, room to grow, good school district, and a WFH area. This renter has a high education, promising career, and roots. They stay in their rental long-term, which is excellent for investors. With a long-term tenant, investors spend less money on turnover, renovations, and marketing. Dori Nolan, SVP of national client services at Berkadia, was quoted by GlobeSt.com as saying, “These renters are looking for a home feel. They want flexibility, and they do not want the burden of owning a home. The turnover of these homes is less prominent as well. I think what we have found is it’s less than 50%. They are living in these build-for-rent homes longer. Apartment renters tend to jump around more than single-family renters.” Because this type of renter is looking for a long-term home, they need more information up-front. So, be sure to add floor plans to your rental listings. Floor plans allow renters to visualize their family in the home and how to lay out their new home. When you work with PlanOmatic, you get floor plans, photography, and 3D tours all done in just one appointment. The PlanOmatic process is efficient: •          Our PlanOtechs measure each space in the home. •          Then, they photograph each area for the 3D tour and rental photography. •          Assets are delivered within 48 hours. You can receive them via email or with a straightforward API that automates the entire process. How to Capture Today’s Single Family Renter’s Attention Single-family renters are different from multi-family renters. They want a long-term commitment (without the stress of buying), flexible spaces, convenient technology, and up-front information. Make it easy for potential renters to decide on your SFR with 3D walking tours and floor plans. Visit www.PlanOmatic.com/our-services/pricing/ to learn about our all-in-one photography services.

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Affordable Housing

Better Affordable Housing Options Improve Quality of Life By John Beacham Inflation, rising interest rates and soaring housing prices—with demand for property widely outstripping supply—continue to endure as features of America’s post-pandemic recovery. While each trend is likely to normalize over time, families and communities today are desperate for reasonable housing options that serve low- and middle-income earners. Particularly as population concentration continues to shift and become more urbanized, the spotlight on the ongoing struggle surrounding access to affordable housing burns brighter. This need represents a massive opportunity for development and investment, yet it has proven an extremely challenging one to realize, with traditional banks and agencies often not structured to effectively address this segment in a timely manner—or only able to do so narrowly. Indeed, affordable housing has passed through waves of fits and starts, new theories and models, and creeping restrictions and regulations over many decades. But often the result is the same: projects take too long to get built, politics win over reason, financing is unavailable or unreliable. As a result, far too little inventory is created. This is where private investment comes in — filling the gap and helping to push through the inertia that keeps these projects from becoming reality. With the right expertise and partners, private capital can play a central role in bridging this gap, building the relationships and momentum required to solve the critical shortage of affordable housing. Required Foundation Affordable housing is empowering. It provides families with stability, creates ready access to economic opportunity, is a proven onramp to home ownership, and helps diversify and enrich communities and workforces alike. In many ways, it is the foundation for a better life and much of America’s social fabric. What we love about our cities and towns today is owed to the availability of affordable places to live in earlier eras. Today, there simply is not enough of it. Despite steady population growth, the National Association of Realtors reports that new housing construction in the U.S. over the past 20 years fell 5.5 million units below historical levels. Within that shortfall, 2 million are single family homes, 1.1 million are units in buildings of two to four units, and 2.4 million are in buildings with at least five units. Between 2010 and 2020, new home construction fell 6.8 million units short of what is needed to meet household formation growth with normal reductions to housing inventory. Affordable housing supply has been hit especially hard by these wrong-way trends. Today, for every 100 low-income households, there are only 37 affordable and available rental homes, and these numbers are even more pronounced in densely populated cities and states. As a result, many families pay half or more of their income in rent, and some cannot afford to stay in their own homes. There is a pressing need for updates to outdated housing stock; conversions of industrial, commercial office and retail properties into residential units; conversions of single-family properties into multifamily properties; and construction of multifamily buildings from the ground up. A Virtuous Cycle In many cases, there is sufficient local enthusiasm and space available to meet this need, but navigating these projects is no easy task. Successful affordable housing delivery requires good timing, on-the-ground knowledge of the market, and financing for local borrowers who have the networks of builders, entrepreneurs, civic leaders and other community stakeholders to get these projects over the finish line. This is happening today across two important dimensions. The first is offering residential bridge lending that is flexible and put in local hands quickly to buy, fix up and make available newly renovated stock when it is most needed. One of the primary issues faced in affordable housing is the unpredictability of process, both in approvals and the building or renovation of property. Private capital can be more nimble, quick, and strategic, bringing needed resources and perspective, and readjusting along the way. A second but equally crucial element is the creation of a virtuous financing cycle that more consistently solves for the issue of newly available housing volume. An attractive market has developed for private capital providers to purchase residential bridge loans after the capital has been deployed and affordable housing projects are complete. This frees up credit at the local level, allowing for greater turnover in the capital available for loans, which are used to make increased housing inventory available. Driving Social Impact A more sustainable flow of capital into affordable housing also engenders significant benefits and social impact for both residents and neighborhoods. Having funded over $9.1 billion of loans to renovate, stabilize, or make available for rent over 40,000 units for families since 2016, we have seen this firsthand at Toorak Capital Partners. With the vast majority valued at $270,000 or lower and rented at $1,600 or lower, the majority of these units are considered affordable, and we prioritize these opportunities because of the added social impact we can achieve with these investments. Better affordable housing options improve quality of life in underserved communities, support local entrepreneurs who are driving these projects, and provide community-based employment for workers who often live in these same neighborhoods. Flexible capital is also being deployed to help make repairs and reduce unsafe housing conditions in existing units. This strategy is aligned with the United Nations Sustainable Development Goals, including promoting good health and well-being, financial planning education, and sustainable cities and communities. As the U.S. continues to recover from the pandemic, institutions of all stripes are moving toward strategies that not only provide solid investment returns but reflect intention and purpose. Certainly, new fronts are opening for this kind of impact investment every day. But none is clearer, as genuine, or as urgent as affordable housing. Private investment can be deployed together with local stakeholders and developers to creatively address this age-old and—by almost every measure—worsening problem for our country.

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Durham, North Carolina

There are Lots of Reasons to be Bullish on the “Bull City” By Carole VanSickle Ellis When Google announced in March 2021 that it would create its next “engineering hub” in Durham, North Carolina, many investors in the area were not particularly surprised. After all, Durham, also known as the “Bull City” due to the longstanding presence of Bull Durham Tobacco, the first nationally marketed tobacco brand in the United States, is better known today for its place as one of the vertices of North Carolina’s vaulted “Research Triangle” thanks to the presence of Duke University, Duke University Hospital, and North Carolina Central University. “We are fortunate…because we have a longstanding relationship with Google in many facets of their business,” observed Greg Victory, executive director at the Duke Career Center. Durham mayor Steve Schewel chimed in, noting smugly, “I would say, ‘Welcome, Google,’ but Google already has a strong presence in Durham.” Local real estate developer Jessica Brock summed up local sentiment, observing “What is most important is that they are here, and they are in our community, and they are going to be hiring our talent and making this one of their major hubs.” Google itself promised the new center would create about 1,000 jobs for the area and cited Durham’s “best and brightest engineers in the world” as one of the primary reasons the company selected the city for the hub. Google sublet space from Duke University in downtown Durham and began moving people and equipment into the city in May 2021. Just 18 months later, the company announced it would be expanding its downtown footprint and debuted a program designed to certify teachers in the use of Google digital tools designed to “support student learning, better manage coursework, and improve student outcomes.” For real estate investors, this type of economic development and expansion is simply par for the course in Durham. Even in the midst of COVID-19-related shutdowns in April 2020, the city focused on growth. In fact, Durham County supported the creation of 14 economic development projects and 6,900 new jobs in the area starting that very month. The issue moving forward would be one that investors definitely can help resolve: a lack of available housing. “Durham is going to see heavy population growth over the next decade, and the relatively young population is helping drive demand for rented houses and property purchases,” observed Norada Real Estate Investments CEO Marco Santarelli. He added that the “limited inventory and strong demand” has already led to increases in home prices in Durham and called the city “one of the fastest-growing communities in the nation, [which could] indicate the city’s future real estate investment potential.” A Natural Hot Spot in the Triangle Region The Research Triangle, also known as “The Triangle,” is the nickname for the area of North Carolina anchored by the cities of Raleigh, Durham, and Chapel Hill (see graphic on p.44). Although some definitions place as many as 16 counties in the extended Triangle area, the core counties are Wake, Durham, and Orange. The city of Durham, North Carolina, is located in Wake and Durham Counties. Durham itself is home to Research Triangle Park (RTP), which was created at the behest of Duke University, the University of North Carolina in Chapel Hill, and North Carolina State University in the 1950s when the institutions encouraged the state legislature to purchase a large tract of land in Durham County and set up a “science park.” Today, RTP is among the most prominent high-tech research and development parks in the country, in large part thanks to its early inception and a steady flow of highly trained in-state graduates. The influx of well-paid science professionals into the RTP area has affected housing affordability for decades, but 2022 brought some of the worst metrics in this regard that the area has seen. However, local professionals reported in July that buyers who are “ready, willing, and able to make an offer on a property” may find themselves in a position to pay a little below asking price and, as one broker put it, “get a few dollars or a little closing cost help” in the bargain as the market cools. Wake County properties tend to be relatively more affordable than Durham County properties, with Wake homes posting median sales prices around $317,000 compared to Durham’s $426,000. For investors, a fast, convenient sale could be the key to getting deals done with sellers afraid of missing the last gasps of the housing boom in the Triangle area. For homeowners accustomed to seeing bidding wars with more than a dozen participants, today’s “slowdown” could indicate that buyers might soon have the upper hand – however unlikely that scenario may actually be. Offering to acquire properties as-is, for cash, or with a short window for closing could be the key to success. “Overpopulation” Means Something Different in Durham In most growing tech hubs, the term overpopulation has more to do with how many new households are forming and how short on housing units the market may be. However, in Durham, some real estate professionals are using it to describe the population of real estate agents and other real estate professionals in the local market. In March of this year, there were roughly 2,000 listings in the Durham market and 13,500 realtors active in the area according to the Durham Regional Association of Realtors (DRAR). According to Shawn Hays, DRAR president, the hot market and the pandemic both contributed to the influx of active realtors and agents. “More people have had time to get their license because the education has changed to online from in-person. It became more accessible,” he explained. Local North Carolina State University economist Mike Walden observed at the time, “The labor market in any area will seek its own balance…[but] it is probably going to be over-populated with agents this year.” As of the start of Q3 2022, there were just under 800 listings in the area (down 3.9% month-over-month according

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