Sarah Paynter


StartEngine, which claims to be the largest equity crowdfunding platform in the U.S., is about to start offering real estate investment opportunities, in addition to its startup and early-stage company investment offerings.

The crowdfunding giant, which has facilitated over $150 million in investments since 2015, will partner with Atlanta-based real estate investment firm Jamestown Invest to offer private equity real estate. Investors with at least $2,500 can claim a stake in Jamestown Invest’s portfolio of urban properties, including Southern Dairies, a historic five-building, 79,000-square-foot office campus in Atlanta.

“We are connecting ordinary people to opportunities they wouldn’t have otherwise,” said Howard Marks, co-founder and CEO of StartEngine, explaining that the traditional vehicle for real estate investment, REITs (Real Estate Investment Trusts), don’t offer the asset classes wealthy investors have access to in the private equity market.

The collaboration is part of a larger trend toward micro-investment in private equity real estate, especially among millennials. Other crowdfunding apps like Compound also facilitate investments in private equity, but the StartEngine-Jamestown collaboration is the biggest real estate crowdfunding opportunity yet, the companies said.

“Millennials and Gen Z are maturing into active investors. They’re digitally native and proficient in ways that create opportunities — and require investment vehicles, managers and platforms to become more calibrated to the way they [young people] want to invest,” said Michael Phillips, principal and president of Jamestown, the parent company of Jamestown Invest.

The collaboration also takes advantage of a wave of new investors during the pandemic. In the second quarter, StartEngine more than doubled the value of investments on its platform, adding 30,000 new investors, said Marks. The rising interest mirrors the rise of Robinhood, a California-based democratized investment app, which gained over 3 million funded accounts in 2020, according to its most recent blog post on May 4.

“You could argue it’s the worst time to be investing, but it turns out it’s not — it’s one of the best times. During the pandemic, people are making investments and diversifying,” said Phillips. “The coronavirus has accelerated the use of technology in the choices we make today… All of this is an acceleration of trends that were happening already.”

Author: Sarah Paynter

Source: Finance. Yahoo: Now average Americans can invest in real estate through this new partnership

As states reopen after coronavirus lockdowns, the homebuilding market is starting to bounce back.

A measure of homebuilder confidence has ticked back up into the positive range, according to the National Association of Homebuilders/Wells Fargo Housing Market Index.

“I gotta tell you, our economists predicted that we would have a V-shaped recovery in housing, and it sure looks like we’re well on our way right now,” said National Association of Homebuilders (NAHB) CEO Jerry Howard. “We were headed to a very very strong year before COVID, and it looks like we’re bouncing back and we’re going to be leading the economy out of this recession.”

Homebuilder sentiment in June reached 58 points out of 100, up from 37 points a month earlier — the largest monthly increase ever recorded since the Housing Market Index began in 2009. A score over 50 is considered positive. The recovery comes after the Housing Market Index plunged 42 points to 30 in April and rose only 7 points in May.

But pent-up demand from the spring homebuying season is bumping up summer sales, and mortgage rates are set to stay low through next year, incentivizing buyers into the market.

“Couple that [pent-up demand and low mortgage rates] with the fact that a lot of people have had to suffer through quarantines in very tight quarters. People are looking to, some of them, get into their first single-family house, [and] others [want] a bigger house,” added Howard.

In fact, housing demand was 25% above pre-pandemic levels in the first week of June, according to Redfin. Home purchase mortgage applications rose 8% the week of June 8 to its highest level in 11 years, and refinance applications rose 10% from the week prior, and up 106% from the same time last year, according to the Mortgage Bankers Association.

The Southeast, Texas and the Rocky Mountains are leading in homebuilding sentiment, but even areas where homebuilding has been weak recorded an improvement in June, according to the Housing Market Index. The Northeast jumped to a score of 48 from only 17 points in May, which is very close to a positive market score.

“The Northeastern states are among the most difficult to build in for any number of reasons, so we’re very very bullish right now,” said Howard.

‘The more hammers we put to work, the more homes we can expect to build’

While sentiment has skyrocketed, actual construction data missed estimates — but still show the beginning of a slow rebound, say economists. Construction began on 4.3% more homes in May after the dip in April, and building permits jumped 14.4%, according to the U.S. Census Bureau Wednesday morning.

“Unless additional housing inventory is available, this increase in demand cannot be matched by the expected robust increase in home sales,” said MBA senior vice president and Chief Economist Mike Fratantoni in a statement.

Construction began on 4.3% more homes in May after the dip in April. By the U.S. Commerce Department.

U.S. homebuilders still face a few threats in the coming months, like supply chain disruptions. Some 28% of construction workers said they had a shortage of construction materials, equipment or parts, according to a survey of 742 construction workers the week of May 18 by the Associated General Contractors of America.

“If we get locked down for several months and the supply chain truly gets disrupted, what we’d be most worried about is how it will impact us going into next spring’s building season,” because business slows down during the winter months regardless, said Howard, who said the supply chain is holding up better than he originally anticipated.

Labor became an industry-defining problem for the construction industry after the Great Recession, and the shortage was exacerbated in May, when 995,000 construction employees lost their jobs. Some 25% of contractors said a shortage of craftworkers had delayed or disrupted projects, according to the AGC.

But rising employment is alleviating labor shortages seen in March. In May, the construction industry recovered almost half of the jobs lost in April, the Commerce Department said Wednesday. And 16% of construction workers said their firm plans to add employees in the next four weeks, the AGC survey found.

“Another sign that builders are ramping up construction of new homes is the May increase in residential construction employment,” said Odeta Kushi, chief economist of First American Financial Corporation, a California-based financial services company. “The more hammers we put to work, the more homes we can expect to build.”

Author: Sarah Paynter

Source: Finance. Yahoo: We are headed to a V-shaped housing recovery: expert

The novel coronavirus pandemic forced offices and retailers to shift operations online over the past three months — leading some to speculate that demand for commercial real estate will drop, sending prices plummeting.

But most commercial properties will not be selling for massive discounts, according to Hessam Nadji, CEO of Marcus & Millichap, a California-based national commercial real estate brokerage.

“There’s a broad brush sentiment that commercial real estate is going to get distressed pricing across the board and that is just not the case,” Nadji told Yahoo Finance. Apartments and warehouses, in particular, are performing “very well.”

As Americans shelter in place, demand for apartments and condos have remained stable. Some 41.4% of investors reported multifamily acquisitions in their market in May compared to 33.6% in April, according to a monthly survey of almost 500 members in the NAIOP (National Association of Industrial and Office Properties) Commercial Real Estate Development Association conducted May 18-20.

And a surge in online shopping during the pandemic has upped warehouse demand for last-mile delivery. Warehouse acquisitions increased to 58.7% in May from 54% in April, according to the NAIOP.

Commercial real estate has a history of resilience, said Nadji. The commercial market suffered for 18-24 months after September 11, 2001, as employers feared bringing employees into central business locations. But within a few years, office leasing behavior returned to normal, said Nadji, who expects the same resilience within two to three years, depending on the degree of economic growth.

“We’ve seen from many companies, including IBM, that experimented heavily with telecommuting, that they eventually want to bring people back at least a few times a week to work in groups and be in person and have collaborative functions that bring people together in office locations,” said Nadji.

Hospitality and retail underperform

But properties that house hospitality or retail are a “whole different story,” he said, and could offer some “opportunistic investment situations.” Led by a few of these underperforming asset classes, commercial real estate properties had a 2.29% delinquency rate on mortgage loans in April, up from 2.07% March — its largest jump in three years, according to New York-based Trepp Research’s CMBS Delinquency Rate, which measures mortgage ayments that are late for more than 30 days.

With the country under lockdown, traveling virtually ceased during the pandemic. Hotel demand was down 42% in April compared to last year, prompting some 2.71% of hotels and motels to default on their loans in April, compared to only 1.53% in March. Commercial real estate suffered its highest jump in delinquencies in three years, but lodging had the highest uptick of all property types, according to Trepp Research.

The cities where commercial real estate will take the biggest hit are service-based hospitality economies, including Atlantic City, N.J., Myrtle Beach, S.C., Las Vegas, Nev., Fort Walton Beach, Fla. and Wilmington, N.C., according to MillionAcres, a real estate investing branch of the Motley Fool, an investing advice company based in Alexandria, Va.

With less investor demand for retail space, opportunistic investors could also find deals on vacant storefronts. Some 13.4% of NAIOP members said they had witnessed retail deal activity in May, unchanged from activity in April but significantly down from before the pandemic, according to the NAIOP. Notably, retail spaces with grocery stores are proving resilient, according to CrowdStreet, a Portland, Ore.-based investing platform.

While there will also be a short-term reduction in interest in city-based offices, suburban satellite offices may become more popular, said Nadji. Long-term, experts expect the office to remain an attractive investment.

“Those kinds of things [a shift toward decentralized locations], I think, will last, and will have a residual effect, but the demise of office space used as kind of a broad statement, I think, is over-exaggerated,” said Nadji.

Author: Sarah Paynter

Source: Finance. Yahoo: Commercial real estate won’t be a distressed asset: Marcus & Millichap CEO

As the novel coronavirus slows the U.S. economy, many renters — now unemployed — wondered how they would pay April rent. New data shows that one-third of Americans did not pay April rent before the due date.

As the novel coronavirus pandemic causes mass layoffs and financial disruption, 31% of U.S. renters did not pay April rent on time, up from 19% a month earlier and 18% in April 2019, according to a new report by the National Multifamily Housing Council (NMHC) based on 13.4 million rentals. Among U.S. renters, only 69% paid April rent on time.

“I started worrying when restaurants and public spaces started shutting down. I know it was necessary, but, man, it’s painful… When our tenants started getting laid off, I knew we had a huge problem,” said Granger MacDonald, a Kerrville, Texas landlord with over 4,500 units.

Renters are particularly exposed to financial risk during the pandemic. Renters tend to have lower income and less stable jobs than homeowners, contributing to some 35% who have lost income due to COVID-19, according to a March 31 survey of 500 renters by St. Louis-based listing website Clever. Forty-five percent of renters do not have enough savings to cover rent payment for a single month.

Landlords struggling to make it work

Most landlords are doing everything they can to keep tenants in their apartments, offering flexible payment plans and waiving late fees.

About one in 10 renters have secured rent forgiveness or reduction plans in response to COVID-19-related job loss, said the study by Clever, which found that 23% of renters surveyed did not pay April rent on time.

When Avail, a tenant management platform based in Chicago, asked what renters would do if they could not pay rent, 35% of renters said they would borrow the money, 6% said they would use a credit card, and 6% said they would take out a loan, according to a sample of 20,000 rental units nationwide.

But some 32% said if they couldn’t afford rent, they would simply stop making payments, according to Avail in a separate survey of 7,379 renters. Tenants who have not communicated with their landlords will be the most at risk, experts say.

“Landlords need to know that there’s a problem. Tenants need to contact their landlord to talk about their issues,” said David Howard, executive director of the National Rental Home Council, a Washington, D.C.-based advocacy group.

According to Avail, 35% of renters who were laid off proactively told their landlord.

As of April 3, MacDonald in Texas had 120 flexible payment agreements worked out with tenants. Still, about 30% of MacDonald’s tenants are past due and had not asked for a flexible payment agreement or communicated with MacDonald.

MacDonald said he did not know how he would pay his bills, which include mortgage, property taxes, insurance, employee salaries, management fees, utilities, maintenance items and other expenses like pest control.

“We’re all a little bit tattered right now,” said MacDonald, whose tenants mainly work in the hard-hit service industry. His staff has worked “untold hours” to help make this situation work for his tenants, he said. “We got on a video conference call, and I could just see the worry lines on their faces. It’s usually a pretty jovial group, and I didn’t see a smile in the crowd,” he said.

Only 4% of landlords have rent default insurance, and 58% do not have credit options to float expenses in an emergency, according to Avail. In fact, most landlords do not have enough cash to fund flexible payment plans for more than a month, say experts.

“If tenants just stop paying their rents, can landlords absorb that? Most work on thin margins, and there is not a lot of room to backstop. They may have capacity to get through April, but past April, that ability is probably very limited,” said Howard.

CARES is a half-baked solution

Landlords have called on Congress to expand the U.S. relief package for pandemic-related economic distress via the Coronavirus Aid, Relief, and Economic Security (CARES) Act. So far, relief measures on a national and local level have focused on rent relief for tenants, landlords say.

“We are happy to be part of the solution, but we can’t be all of the solution. The way the CARES Act is written, it’s very unbalanced,” said Andrew Chaban, CEO of Princeton Properties, a Lowell, Mass.-based property management company with 7,000 apartments.

The NMHC sent a letter to Congress on April 7, asking the government to delay all standard mortgage loan payments. Currently, the mortgage forbearance program allows pauses only on federally-backed mortgages.

“As more residents face job loss or furloughs and are unable to fulfill rent obligations, many owners/operators fear they, too, will not be able to satisfy their own financial obligations required to operate their properties,” said the NMHC in a statement.

The letter also requested a variety of financial assistance programs and further clarity on eviction moratoriums.

“If the landlord has to put off mortgage payments, they might never get the money from their renters, but the mortgage payment never goes away,” said Chaban. “That puts the landlord in a quandary. We want to do the right thing as an industry, but putting that anvil on our shoulders, it’s just shifting the burden from society onto landlords.”

Author: Sarah Paynter

Source: Finance. Yahoo: Coronavirus fallout: One-third of Americans missed rent payments in April

Real estate investment is now in reach for people who never thought they could afford it.

Fintech company Roofstock lets investors buy and then rent out single-family homes on its online marketplace, giving them access to low-cost homes —often less than $100,000 — in the U.S.

“What we have done is broken down the geographic barriers, so you don’t have to own where you live,” said Roofstock CEO Gary Beasley. “Millennials [are] buying multiple homes on the site and having them managed for them, so you could actually own the properties without living in the homes.”

The company manages the investment end-to-end, performing due diligence on the property, including inspections, neighborhood research and title searches, before an investor buys it. Investors never even have to see the property. To build trust with remote buyers, the company provides a 30-day money back guarantee, said Beasley.

Some 93% of Roofstock’s customers buy from out-of-state, with most buyers coming from expensive coastal markets. The popular markets where customers buy are lower-priced with an established rental market, he said, with top markets including Atlanta, Indianapolis, Birmingham, Houston and San Antonio.

“You could actually get on the investment bandwagon in other parts of the country where you could actually afford to buy,” said Beasley. “People looking for more flexibility and optionality in their investment strategy and where they live.”

Beasley said that its typical buyers finance 70% of the purchase through government-subsidized loans through Fannie Mae and Freddie Mac. “You can build a nice portfolio using that government-backed financing,” he said. “It’s quite attractive.”

Roofstock has closed $2 billion worth of transactions since it was founded less than four years ago.

Author: Sarah Paynter

Source: Finance. Yahoo: This startup helps make real estate investing affordable

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