While the single-family rental market becomes an increasingly more popular alternative to homeownership, B2R Finance, a lender for rental property investors, announced earlier this month that it has become an approved supplier for real estate giant RE/MAX. The goal of the partnership is for B2R Finance to offer more financing solutions for rental property investors through RE/MAX’s sales associates network. About one out of every five transactions conducted by RE/MAX are with investors in the single-family rental space. MReport recently talked with Fiona Simmonds, Chief Development and Administration Office for B2R Finance, and Mike Ryan, EVP for RE/MAX, to discuss the rental market, what investors need to know going in, and the role technology plays in the space.
MReport: What does the opportunity look like now for SFR investors?
Ryan: Twenty-five percent of transactions in the market are all-cash buyers, which is something that we’ve been monitoring in our membership. We dig in pretty deep on the data side. Our network works with thousands of investors and in fact many of our sales associates actually became investors during and after the Great Recession. So there’s a lot to look at on the opportunity side.
Simmonds: We were at the RE/MAX R4 Conference a few weeks ago, and it was really interesting to see the types of traction and questions that we were getting. But one thing that was so interesting is the number of owners and the number of agents who came by and spoke to us who are actually in the market and investing themselves. That was really surprising. From our perspective, it just creates additional opportunity on both sides.
MReport: What do investors need to know about the SFR market if they are just getting into the market?
Simmonds: The number one thing is having an education about financing options. We see a number of investors who come in with all cash, which is fairly inefficient if you actually want to get into this and build your portfolio. Having a very good understanding of the options available to you is very important. There are a number of different ways to apply for financing, everything from traditional banks and government entities all the way to the other end of the spectrum, hard money lenders. Each one of those comes with its own set of rules and regulations that may work for some investors and may not work for others. That also depends on the number of houses that you have as well, so those parameters may change as your portfolio grows. One thing that I’ve seen is that some investors shy away from the term “leverage,” or taking a loan to buy a house as opposed to paying all cash for it, but really being able to have a mortgage and make the cash that you have go further by buying additional properties is a great way to grow and generate more cash flow for the portfolio.
If someone is thinking about investing in the SFR market, you have to look at the basics: What kind of rental income would you get, what would the maintenance on the property be, and the purchase price, etc. But having a really good understanding of the finance options available, in my view, is one of the most important things that you need to get smart on before entering the space.
Ryan: From the RE/MAX side, we sell houses. We close deals. We’ve done it better than anybody else in the world for 16 or 17 years. We need expertise on our side when we start getting into other spaces like lending and mortgages. There’s a reason why 25 percent of the deals are cash—because it can be complicated. Their only options might be hard money loans, for example. We have a concierge service with B2R that can stand by our side as we try to close our deals—and not only close the deals, but reach out to people who might not understand that they have other options that they didn’t realize they had when they go out and look at unlocking equity or providing liquidity to themselves or investors.
Simmonds: As part of that, some of the things that we’re working on right now are creating specific, tailored marketing materials to various segments of the population. For instance, in certain geographies, cash-out refinances are very popular. In other areas, refis aren’t as important. Perhaps it’s international investors coming in, or others where they see opportunity with home prices. It really depends on the market, but the way we think about things is tailoring the marketing materials and the educational materials for the borrowers based on the particular locale, because every area is different.
MReport: How can technology enable the transition into the SFR space?
Simmonds: Historically, getting a mortgage has been one of the most difficult processes for anyone, whether it’s owner-occupied or otherwise. We want to help alleviate some of the pain points. This doesn’t indicate that there are lower requirements when it comes to borrower qualifications, but all things being equal, having technology helps facilitate the application process. We see that as a huge differentiator. For instance, with the tools that we have on our website, let’s say you have a RE/MAX agent that is working with a property investor, and they go see a house and it’s something that this investor is very interested in. That person could actually be in the front yard of the house, go to our website, input the information of the home into the tools that we have, get a quote, and rate-lock the quote online. You can do that from the front yard of the house—you don’t need to be in an office or in front of a computer.
The technology is going to continue to evolve and will continue to add enhancements and new steps and processes and tools that hopefully will only further enhance the experience for borrowers.
Ryan: Technology plays a huge role here, especially on the educational side. We proved that during the downturn when we educated our folks on short sales and distressed properties. We have a 24/7 on-demand system that we have here where we train people on changing markets—in this case, it will be the investor market. It will play a significant role at RE/MAX.