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Analysts at LendingOne looked over the latest inventory data to better understand what could await real estate investors over the coming year. LendingOne’s top-line findings:  Inventory for sale on a national level is still limited, which sets a floor on prices and keeps existing investor portfolios at high levels.  In early 2024, active listings levels are rising faster than in previous years, indicating that there are more opportunities out there for savvy investors.  Active listings remain tightest across markets in the Northeast and Midwest markets, while there’s greater softening happening in parts of Texas and Florida. In May 2024, there were 787,722 active listings on Realtor.com, showing a 64% increase from May 2022 levels (479,462 listings) and up 35% from May 2023 582,441 listings). However, active listings in May 2024 were still 33% lower than the pre-pandemic levels of May 2019 (1,180,920 listings). That lack of active listings is a core reason that strained affordability and spiked mortgage rates haven’t translated into a greater pullback in home prices.     While active listings on a national basis remain well below pre-pandemic levels, some pockets of the country, including San Antonio and Austin, have bounced back above pre-pandemic inventory levels. Among the 100 largest metros 5 metros where active listings in May 2024 were up the most since May 2019: Lakeland, FL: +43% Austin-Round, TX: +35% Colorado Springs, CO: +30% San Antonio, TX: +20% McAllen, TX: +17% 5 metros where active listings in May 2024 were down the most since May 2019: Hartford, CT: -79% Bridgeport, CT: -79% New Haven, CT: -73% Albany, NY: -71% Allentown, PA: -69% For now, at least, the markets that have returned to pre-pandemic levels remain in the minority.   How does LendingOne interpret active listing data? If inventory begins to rise quickly, in theory, it signals a softening market. If inventory begins to fall quickly, in theory, it signals a strengthening housing market.  U.S. housing markets where inventory has returned to pre-pandemic levels, like Austin, have experienced softer home price growth over the past two years. Conversely, housing markets where inventory remains far below pre-pandemic levels have, generally speaking, experienced stronger home price growth over the past two years. Big picture: While national inventory is still rising a bit as mortgage rates remain elevated, it still remains well below pre-pandemic levels. That suggests that in the short term, home prices in a lot of markets could hold firm or even go higher.  

While spiked mortgage rates haven’t deterred housing investors from the market, there has been a notable shift in the locations they are targeting.  Analysts at LendingOne embarked on a study to identify which housing markets investors are flocking to and which ones they are pulling back from.    LendingOne’s key findings: Investors are retreating from high-cost, slower population growth housing markets such as San Francisco, San Jose, San Diego, and Los Angeles.  Investors are now turning their attention to markets characterized by affordability, such as Pittsburgh and Louisville, or those with promising long-term population and rent growth, such as Denver and Charlotte.  The exurb areas surrounding New York City, which are benefiting from the stickiness of hybrid work, continue to attract significant investor interest. To conduct our analysis, LendingOne utilized Parcl Labs’ “Investor Purchase to Sale Ratio,” which is designed to calculate where investors are collectively purchasing more single-family homes than they are selling, and vice versa.     The reason single-family investors are pulling back from markets like San Francisco and San Diego boils down to cash flow: While spiked mortgage rates have made it challenging to find cash-flowing properties across much of the country, it’s even more pronounced in high-cost markets where finding cash-flowing properties was already difficult before rates increased. The primary way to make markets like San Diego attractive again would either be a pullback in mortgage rates or a substantial increase in rents.  On the flip side, markets like St. Louis and Indianapolis have kept investors’ attention given it’s easier in those markets to find single-family rentals that can still cash flow even at 6% and 7% mortgage rates.

Build-to-Rent (BTR) has emerged as a popular acquisition model in the single-family rental market. According to the article BTR is Proving It’s Built to Last, the lack of homes for sale combined with a growing demand for SFRs has captured the attention of investors in the institutional space looking for new potential investment opportunities. We delve into the article’s report with these top 5 key takeaways:  1. Addressing the Housing Supply Crisis:  The persistent lack of existing homes for sale, coupled with the growing demand for single-family rentals, has created an urgent need for housing supply. The BTR model has emerged as a solution to this crisis, attracting attention from large institutional investors who recognize its potential in creating much-needed housing supply and providing high-quality living options for families. 2. Market Dynamics and Demand:  Economic factors, including surging mortgage rates and home prices, have shifted market dynamics in favor of renting over buying. This economic reality has driven increased demand for single-family rentals, particularly from millennials and the emerging Gen Z population. The desire for more space, flexibility, and lifestyle amenities has propelled the demand for BTR communities, leading to their rapid growth and expansion. 3. Builders’ Response to Market Trends:  Homebuilders have responded to the changing market landscape by shifting their projects toward BTR communities. The increase in BTR construction starts and completions reflects builders’ efforts to meet the surging demand for single-family rentals. Luxury single-family rental communities with amenities like pools, fitness centers, and playgrounds have become particularly attractive to modern millennial families. 4. Institutional Investor Interest:  The scarcity of resale supply has bolstered the demand for new homes, attracting the attention of institutional investors to the BTR market. Large institutional players have entered the BTR sector through acquisitions and joint ventures, indicating confidence in its long-term potential and strong returns. 5. Outlook for Future Growth: Multiple trends, including the persistent housing shortage, sustained demand for rentals, and continued investment inflow into the BTR market, point towards long-term growth and stability. BTRs offer investors a differentiated product with strong operating features and potential exit optionality, making them an attractive asset class in the real estate market. The rise of BTR as a dominant acquisition model in the SFR sector presents investors with compelling opportunities to address the housing supply crisis, capitalize on shifting market dynamics, and achieve strong returns in the long term.

If you’re a real estate investor looking to expand your portfolio, leveraging your first investment property to finance the second can be a strategic approach to accelerate your growth in the real estate market. Here’s how you can effectively use the equity and cash flow from your first property to step into additional investments. Understand the Value of Equity Equity is the value of ownership built up in a property, calculated by the difference between the property’s current market value and the amount still owed on the mortgage. Over time, as you pay down the mortgage and if the property appreciates in value, your equity increases. This equity can be a powerful tool for financing additional properties. Ways to Tap into Your Equity Home Equity Loan: A home equity loan provides you a lump sum, using your existing property as collateral. This can be used for down payments on a second property. It’s a separate loan with its own fixed interest rate and payment schedule. Home Equity Line of Credit (HELOC): A HELOC works like a credit card, giving you a credit limit based on your home’s equity, which you can draw from as needed. This flexibility is beneficial if you encounter unexpected expenses or if you’re investing in a property that needs renovations. Cash-Out Refinance: This involves refinancing your first property for a higher amount than you owe and taking the difference in cash. This method can potentially secure a lower interest rate and provide substantial capital, depending on the amount of equity you’ve built up. Evaluate Cash Flow Before leveraging your first property, it’s essential to evaluate its cash flow — the net amount of cash being transferred in and out, particularly from rental income minus expenses. A positive cash flow can cover the costs of equity loans or additional mortgages, making your investment self-sustaining. Consider the Risks Leveraging increases your debt load and can amplify both gains and losses. Ensure that you can manage the additional debt, even in scenarios like tenant vacancies or unexpected property expenses. Always have a contingency plan. Tips for Using Leverage Wisely Market Research: Invest time in researching the market where you plan to buy your second property. Look for areas with strong rental demand and potential for property value appreciation. Investment Property Analysis: Conduct thorough analyses of potential properties to ensure they have good prospects for rental income and appreciation. Utilize metrics such as cap rate and cash-on-cash return to evaluate investment performance. Keep Reserves: Always maintain adequate cash reserves to cover mortgage payments and property expenses in case of unexpected financial downturns or vacancies. Consult Professionals: Seek advice from financial advisors, mortgage brokers, and real estate experts. Professional advice is crucial in making informed decisions that align with your long-term investment goals. Strategic Growth Using your first investment property to finance your second can significantly accelerate your portfolio’s growth. This strategy not only allows you to expand more quickly but also diversifies your investments and spreads risk across different properties. Leveraging your first investment property provides a viable pathway to not just grow your real estate portfolio but also to build wealth over the long term. With organized planning, a clear understanding of the market, and careful financial management, you can potentially unlock new investment opportunities and achieve greater financial success in real estate.

After fixing and flipping your first couple of properties, you’ve mastered the basics. It is time to explore and scale your business beyond just a few projects. Scaling requires a comprehensive approach, combining strategic planning, financial acumen, and market savviness. In this blog, we’ll delve deeper into actionable strategies to help you expand your fix and flip business with confidence. Build a Robust Infrastructure Scaling your fix and flip business begins with building a strong foundation. Invest in creating a reliable infrastructure that can support multiple projects simultaneously. This includes: Establishing Efficient Processes: Develop streamlined workflows and standardized processes for property acquisition, renovation, and sale. Implement project management tools and software to track progress, manage timelines, and monitor expenses effectively. Building a Trusted Network: Cultivate relationships with reputable contractors, architects, designers, real estate agents, and other industry professionals. Having a reliable network of partners who share your commitment to quality and integrity is essential for executing projects smoothly and efficiently. Secure Flexible Financing Options Access to capital is crucial for scaling your fix and flip business. Explore financing options that will suit your specific strategy and the financing options you need to fund your projects successfully.  Private money lenders are an ideal partner for investors looking for fast capital to finance their fix and flips. These short-term loan options offer quick approvals, flexible terms, and a faster closing process than traditional sources of financing such as banks. Working with a private lender is an optimal choice for investors in a fast-paced market where seizing opportunities can be time-sensitive and competitive.  Strategically Diversify Your Portfolio Diversification is key to mitigating risk and maximizing returns in fix and flip investing. Consider diversifying your portfolio by: Exploring Different Property Types: While single-family homes are a popular choice for fix and flip investors, don’t overlook opportunities in other property types such as townhomes, 2-4 unit residential properties, and condos. Each property type offers unique advantages and profit potential, allowing you to diversify your investment portfolio and capture a broader range of opportunities. Targeting Multiple Markets: Expand your reach by exploring investment opportunities in diverse geographic markets. Conduct thorough market research to identify emerging markets with strong demand for renovated properties, favorable economic indicators, and robust growth potential. By diversifying your geographic footprint, you can reduce exposure to market-specific risks and capitalize on opportunities in different regions. Optimize Project Management Efficiency Efficient project management is critical for scaling your fix and flip business. Implement strategies to optimize efficiency and streamline operations, including: Standardizing Renovation Processes: Develop standardized renovation plans and specifications for common project types to streamline the renovation process and minimize decision-making delays. By establishing clear guidelines and protocols, you can ensure consistency and quality across multiple projects while reducing the risk of costly errors or oversights. Utilizing Technology Solutions: Leverage technology tools and software platforms to automate repetitive tasks, streamline communication, and track project progress in real-time. Project management software, scheduling tools, and cloud-based collaboration platforms can improve efficiency, enhance transparency, and facilitate seamless coordination among team members, contractors, and stakeholders. Continuously Refine Your Strategy Scaling your fix and flip business is an ongoing process that requires continuous refinement and adaptation. Stay agile and responsive to market dynamics by: Monitoring Market Trends: Stay aware of market trends, economic indicators, and industry developments to identify emerging opportunities and anticipate potential challenges. Regularly analyze market data, comparable sales, and demographic trends to inform your investment decisions and refine your strategy accordingly. Evaluating Performance Metrics: Track key performance indicators (KPIs) such as project ROI, time-to-sale, and renovation costs to evaluate the effectiveness of your strategies and identify areas for improvement. Conduct post-project reviews and debriefings to identify lessons learned and incorporate feedback into future projects. Conclusion Scaling your fix and flip business beyond one project requires a strategic approach and a commitment to continuous improvement. By building a robust infrastructure, securing flexible financing options, strategically diversifying your portfolio, optimizing project management efficiency, and continuously refining your strategy, you can position yourself for long-term success and unlock new opportunities for growth and profitability in the competitive fix and flip market. With dedication, perseverance, and a clear vision for the future, the possibilities for scaling your fix and flip business are limitless.

In the ever-evolving landscape of real estate, the quest for favorable deals has intensified, particularly as home prices and mortgage rates reach unprecedented levels. However, amidst this prevailing climate, certain housing markets are showcasing declines in home prices that offer potentially promising opportunities for discerning investors. For investors attuned to market shifts and poised to seize strategic opportunities, these declines in home prices offer a compelling proposition amidst an otherwise challenging landscape.  Recent data from Realtor.com® reveals a nuanced picture of the housing market, with national home prices experiencing a modest 0.3% year-over-year increase in February. Yet, there are notable exceptions where home prices are on a downward trajectory, spanning regions from the costly West Coast to the more budget-friendly South and Midwest. Realtor.com Chief Economist Danielle Hale underscores the significance of the growing inventory of affordable housing in driving these declines. With an influx of diverse options for buyers, these markets are witnessing a stabilization in prices, defying broader market trends. One such standout is Miami, once a COVID-19 pandemic hotspot, where the median home list price has seen an 8.2% year-over-year decrease. This shift reflects a reversal from the city’s previous price surges, fueled by a wave of migration from other parts of the country. Similarly, Midwestern markets like Oklahoma City, Cincinnati, and Kansas City, MO, are experiencing declines attributed to an uptick in smaller, more affordable homes entering the market. Even high-priced metros on the West Coast, including San Jose and San Francisco, are not immune, with prices slipping amidst shifts in the technology industry and remote work dynamics. These findings underscore the localized nature of today’s real estate market, where opportunities for investment are abundant amidst broader economic trends. As investors navigate these fluctuations, staying informed and adaptable will be key to capitalizing on emerging opportunities and achieving long-term success in the dynamic world of real estate.

What are the sentiments among real estate investors in the current market conditions? What plans and strategies can we expect to see? CBRE released their 2024 U.S. Investor Intentions Survey outlining what the investment activity outlook is for the new year. Below we highlight some of our key takeaways from the report.   Concerns Over Market Conditions The CBRE survey for 2024 points to persistent worries about prolonged high interest rates and tighter credit environments, coupled with the differences in expectations between buyers and sellers, as the main issues for real estate investors.   Easing of Recession Worries Investors are showing less apprehension about a potential recession this year compared to the previous one.   Growth in Investment Plans A significant shift is observed with more than 60% of respondents indicating their plans to increase their real estate investments in 2024 over 2023, a marked rise from the mere 16% who intended to buy more from 2022 to 2023.   Attractive Markets for Investing The large Sun Belt cities and some high-performing secondary markets continue to remain attractive locations for investors to consider such as Dallas, Miami, Raleigh and Nashville. Other top-performing markets include some large gateway cities such as Boston, New York City, and Washington D.C. Check out the full list of cities below. Source: U.S. Investor Intentions Survey, CBRE Research, January 2024.   Varied Investor Strategies Developers, private equity funds, real estate funds, and REITs are showcasing a higher percentage of plans to buy more assets in 2024 compared to other investors.   Plans to Sell Assets Increase Even with a decline in property values, 40% of those surveyed show an intention to sell more properties in 2024 than in 2023.   Anticipation of Transaction Activity Recovery Around half of the investors are hopeful for a revival in both their personal transaction activities and the broader market by the latter half of 2024, possibly sooner if the 10-year Treasury yield decreases more rapidly than forecasted.   Source: 2024 U.S. Investor Intentions Survey

In the ever-evolving landscape of real estate investment, landlords are finding cause for optimism as rising rents outpace home prices in numerous markets across the country. According to ATTOM’s Q1 2024 Single-Family Rental Market Report, this trend is driving up investment returns and presenting lucrative opportunities for real estate investors seeking strategic deals in today’s dynamic market conditions. The report highlights a notable uptick in rental demand, fueled by a combination of factors including historically limited housing supply and a deceleration in home price appreciation. Between 2023 and 2024, median three-bedroom rents surpassed median single-family home prices in 63% of the markets analyzed, leading to incremental increases in rental yields. Anticipated average annual gross rental yields for three-bedroom properties are projected to reach 7.55% in 2024, representing a slight uptick from the previous year’s figures. This marks the second consecutive year of rising projections following a period of declines, signaling a resurgence in rental market performance. Noteworthy growth in rental returns is observed across most regions, with potential annual gross rental yields for three-bedroom properties increasing in 216 out of 341 counties analyzed. Leading this surge are markets such as Taylor County (Abilene), TX, Jefferson County (Birmingham), AL, and Richmond County (Augusta), GA, where yields have seen significant gains. Furthermore, ATTOM’s report identifies the top 28 single-family rental growth markets, where average wages have risen, and potential rental yields surpass 10%. Notable inclusions on this list are Chicago, Detroit, and Cleveland, underscoring the breadth of opportunities available to investors across diverse markets. Below are the top counties experiencing the highest rental growth:  Source: ATTOM, Top 10 Counties for Buying Single Family Rentals in 2024 For real estate investors seeking strategic investment opportunities, ATTOM’s latest findings offer invaluable insights into the evolving dynamics of the single-family rental market. With rising rental yields and promising growth prospects, these trends provide a roadmap for navigating the current market landscape and unlocking lucrative investment opportunities.

As the real estate landscape undergoes continuous shifts, the recent findings from ATTOM’s Q3 2023 U.S. Home Flipping Report present a nuanced perspective for savvy investors. In this article, we delve into the key insights, exploring the dynamics of home flipping, profit margins, and the top-performing counties for fix and flip returns in Q3 2023.  Top 10 Counties with Highest Annual Increases in Flips from Q3 2022 vs Q3 2023 The article unveils the top 10 U.S. counties with the highest annual increases in home flipping returns in Q3 2023. This information can be invaluable for investors looking to target specific counties with the greatest potential for profitable real estate ventures. Source: ATTOM. Top 10 U.S. Counties with Highest Annual Increases in Home Flipping Returns in Q3 2023 National Flipping Trends The Q3 2023 U.S. Home Flipping Report highlights that 72,543 single-family homes and condos were flipped, constituting 7.2 percent of nationwide home sales. Although this percentage is a decrease from the previous quarter and the same period last year, it showcases a significant presence of flipping activity in the market. Profitability Resilience  Despite a decline in flipping rates, the report emphasizes an encouraging trend for real estate investors — rising profits. Investor returns increased for the third consecutive quarter, rebounding from a prolonged slump that had severely impacted profit margins from early 2021 to late 2022. Record-Breaking Margins Q3 2023 witnessed profit margins and raw profits reaching their highest levels since the middle of the previous year. This suggests that even in the face of fluctuating market dynamics, investors have successfully navigated challenges, resulting in improved financial outcomes. Profit Margin Metrics The typical profit margin for Q3 2023 was 29.8 percent nationwide. While this remains below the peaks seen in 2021, it reflects a positive trajectory compared to Q2 2023, marking a seven-percentage-point increase from the low observed in Q4 2022. Regional Variations  The report underscores regional variations in profit margins, with some areas experiencing more substantial increases than others. Understanding these regional nuances is crucial for investors seeking to capitalize on the most lucrative opportunities in the diverse U.S. real estate market. Metro Area Performance  The report indicates that profit margins increased from Q2 to Q3 2023 in 51 percent of the metro areas analyzed and were up annually in 61 percent. This suggests that certain metropolitan areas are exhibiting consistent growth in profitability for real estate investors. Standout Locations  The report identifies specific locations that have seen remarkable year-over-year increases in profit margins. Notable examples include “Akron, OH (ROI up from 50 percent in Q3 2022 to 114.1 percent in Q3 2023), Flint, MI (up from 61.6 percent to 113.8 percent), Canton, OH (up from 17.8 percent to 69.6 percent), Augusta, GA (up from 44.8 percent to 93.5 percent), and York, PA (up from 61.5 percent to 107.5 percent).” Investment Strategy Shifts  The report’s findings suggest that investors should remain agile and adapt their strategies to capitalize on emerging trends. Understanding the ever-changing landscape is essential for making informed decisions and maximizing returns. Population and Home Flip Volume Criteria  The criteria of counties with a population greater than 100,000 and 25 or more home flips in the third quarter for inclusion in the top 10 list underscores the importance of considering both population density and transaction volume when assessing investment opportunities. Source: ATTOM. Top 10 U.S. Counties with Highest Annual Increases in Home Flipping Returns in Q3 2023. Read the Full Article Here.