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Smaller investors now have the opportunity to invest in single-family rental properties on a more level playing field with the institutional heavy-weights. HomeUnion, an Irvine, California-based company, wants to help smaller investors identify bargain-priced properties, then buy and manage them without setting foot in them.
Institutional investors buy up undervalued homes and rent them out; but it’s harder for smaller investors to do this if they don’t live in close proximity to the markets with the best deals or if they don’t want to be landlords.
MarketWatch reported that Lawrence Yun, Chief Economist for the National Association of Realtors (NAR) said that the current housing market suggests it’s a “landlord’s market.” He also said that there’s been an increase in the number of renters and homeownership rates have stagnated and that there are areas of the country more profitable than others.
Investors may buy real estate in fifteen markets that HomeUnion has determined to be favorable for single-family rentals and will soon expand into ten more markets. They use algorithms and traditional research in this determination. Investors may buy properties in cash or use financing from HomeUnion or a lender. HomeUnion is a broker in each of its investment markets. They employ salaried real estate agents to search for and bid on properties when an investor is ready to purchase.
Don Ganguly, CEO of HomeUnion says his company is out “to characterize and profile real estate as you’re used to seeing other assets in the stock market.”
If HomeUnion is given the go-ahead by an investor to purchase a home, but the home is sold to another buyer; the company will bid for a similar home. With HomeUnion handling the management of the property after the purchase, the client can relax as monthly revenue and performance reports come in.
“We’re actually staying on the hook for the management of that asset,” Ganguly said.
HomeUnion handles selling the property when the investor is ready. As of now, its agents will list and market the properties, but eventually the intention is to build a marketplace where HomeUnion clients can purchase properties from each other. Ganguly says, “When the marketplace is up and running, a client who purchased a home for $100,000 to earn a 7 percent return after expenses might be able to sell that property for $110,000 to another HomeUnion client comfortable with earning a 6 percent return.”
This concept is somewhat similar to a platform which crowdfunder PRIMARQ is planning, which would allow investors to buy and sell stakes in homes. Ganguly said that HomeUnion has had some talks with PRIMARQ. HomeUnion will eventually go the crowdfunding route and as financing method rules become clearer, the company will bundle single-family rental properties into portfolios; selling stakes in those portfolios to investors.
HomeUnion’s crowdfunding model will differ from other real estate crowdfunders in that it plans to sell pieces of home packages, rather than pieces of individual homes. HomeUnion will also continue managing the properties rather than passing this responsibility on to a sponsor.
Inman News. “Buying and selling homes could soon be as easy as trading stocks” 28 August 2014. http://www.inman.com/2014/08/26/buying-and-selling-homes-could-soon-be-as-easy-as-trading-stocks/?utm_source=20140826&utm_medium=email&utm_campaign=dailyheadlinesam