Daily Archives: March 25, 2015

Agents: Closing Gifts for a Lasting Impression

Posted on by NAWRB
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25 Mar

The process of buying a home can be stressful for many buyers, especially first time home buyers. Luckily, real estate agents have the expertise to help clients navigate the process to find their perfect home. The constant interaction between buyers and agents can also result in the formation of strong bonds. What better way to cement your friendship and business relationship with your client than with a small closing gift?

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The Rise of Private Equity Firms

Posted on by NAWRB
RiseofPrivateEquityFirms1
25 Mar
Despite the FHFA’s latest efforts to improve circumstances for first time homebuyers, the housing market has maintained stagnant levels. With millennials eclipsing the baby boomer population, their choice of housing widely affects the housing market.
However, a significant amount of millennials are grappling with overwhelming student loan debt. Over 40 million Americans are reported to have student loan debt with an average balance of $30,000 upon graduation. Thus, rental properties are becoming an increasingly popular living option as opposed to purchasing a home.
Rentals allow millennials to bypass unattainable mortgages in an uncertain market in addition to letting them focus on paying off their debts to avoid default. But, rental properties are not just ideal for millennials. Rentals can be a safe haven and sometimes, the only option for Americans struggling with poor credit that disqualifies them from obtaining a mortgage. With the popularity of rentals on the rise, small- and mid-sized investors are receiving greater access to capital through private equity firms.
After the financial crisis, the economic conditions made it necessary for private equity firms to utilize different strategies for survival. The burst of the housing bubble offered renewed chances of financial stability.
According to a client note from investment banking firm Keefe, Bruyette & Woods, private equity firms in conjunction with hedge funds and real estate investment trusts have spent a minimum of $25 billion on over 150,000 houses since 2012. Suffice it to say, firms have accumulated an impressive portfolio of single-family homes. Typically, these single-family homes are purchased for the sole reason of converting them into sought-after rental properties.
With the current market, small- and mid-sized investors have been eyeing rental properties more and more. But, small investors do not always have the means to secure loans. Interest rates and credit history are just some of the variables preventing investors from tackling the rental market on their own.
This is where private equity firms come into the picture. They offer more flexible financing with interest rates as low as 5 percent. Investors that do not qualify for loans from the government-sponsored enterprises can likely receive them from loan origination groups within private equity firms. For example, the private equity powerhouse Blackstone Group created a loan origination group called B2R Finance.
According to HousingWire, “B2R Finance originates loans on the potential cash flow of the investment property, not on the investor’s personal debt-to-income ratio, so the company relies on market data to assess the potential cash flow of a property and uses FIRREA appraisals to assess value.”
This allows small real estate entrepreneurs to have access to loans like never before. It is a win-win situation for both parties since small investors can have access to the rental properties they desire and private equity firms can tap into a plentiful demographic.
Small investors can obtain loans from a wide range as well. For example, B2R Finance offers loans that range from $500,000 to $50 million. The only caveat from Blackstone is that investors must purchase at least five single-family rental properties.
However, the risk associated with owning rental properties remains the same. Previous experience is often critical for those looking to expand their portfolios with rental properties. The newfound ease of obtaining loans through private equity firms does not mean investors should necessarily apply for these loans.
It is one thing for a novice, small investor to adopt the responsibilities of a landlord for a single property, let alone the multiple properties that are required for private equity firms to provide funding.  The hiccups that can occur along the way can be overwhelming for some.
In particular, small- and mid-size investors must endure the sporadic property repairs that can arise. Repairs can range from relatively inexpensive appliance replacements to complete overhauls such as major roof repairs or termites.
Not all tenants that appear to be ideal candidates in the beginning will remain ideal candidates across the life of their lease.  Unexpected roadblocks such as unemployment or perhaps a car breaking down completely can prevent a tenant from paying rent.  These negative variables add pressure to the role of being a landlord and are bigger issues for inexperienced investors taking on additional properties.
And, what about vacancy rates among the rental sector? An influx of vacancies will heavily affect the market. Luckily, this has largely been a minimal issue. According to a survey conducted by the U.S. Census Bureau, the fourth quarter of 2014 ended with a 7 percent vacancy rate for rental housing. This number is down from 2013’s fourth quarter of 8.2 percent. Since the financial crisis, vacancy rates have also decreased by an average of 2.47 percent.
With an easier road to financing and a healthy rental market with lessening vacancies, it seems as though conditions cannot be any better for small investors. Private equity firms have opened a gateway that connects investors with the capital they need to pursue their aspirations of owning multiple rental properties.
But, let’s take a closer look at the firms that investors will actually be utilizing. After all, an investor must have a firm awareness of who they are accepting financing from as it is a major investment to undertake.
Right now, the major players in the realm of private equity include the origination groups of B2R Finance, FirstKey Lending, and Colony Capital. B2R Finance will be the main focus as it is part of Blackstone, the world’s largest private equity landlord of single-family homes that has also been trending in the news in recent months.
Blackstone has immense influence in the housing market as the owner of Hilton (through a $26 billion leverage buyout, no less), the new owner of the Willis Tower which was formerly the Sears Tower, and of 41,000 homes that were acquired in the past two years alone.
Blackstone is rapidly amassing properties with rumors of more major purchases within the coming year. Perhaps venturing into financing for small investors is a natural step for the powerhouse firm but it can also be viewed as a strategy.
Although novice investors may struggle with expanding their rental portfolio, experienced investors are more likely to capitalize on the current market. When it comes to landlords, tenants are far better off having an individual rather than a major private equity firm. It is in the best interest of Blackstone to have investors act as landlords rather than the firm itself.
This sentiment was validated when Blackstone’s real estate portfolio company, Invitation Homes, was sued last year over its inability to properly maintain a tenant’s single-family home rental. According to the plaintiffs, cockroaches, leaks and mold were rampant in the home. Without the intimate, personable nature of a single landlord, some aspects of landlordship can suffer.
In the lawsuit, water damage and mold spread throughout the house causing unsuitable living conditions. The plaintiffs were essentially forced out of the rental because of health concerns related to the mold and were unable to retrieve belongings due to locks that were added to the property. Despite their ordeal, Invitation Homes still ordered the plaintiffs to pay rent for a property they could not live in.
The lawsuit is not a singular example. Many more tenants nationwide have complained of major hedge funds and private equity firms failing to properly manage rentals. With private equity financing on the rise and the possibility of thousands of small- to mid-size investors managing their own properties, this could be the beginning of a much-needed respite for equity firms in regards to single-family rentals. As for commercial properties and other common investments, it is safe to assume that it is business as usual for the burgeoning private equity firms dominating the market right now.
To view the original article please see our magazine titled “Latest Trends” Vol 4, Issue 2 by Clicking Here 

The Unique Bank that Offers Women-Owned Business Financing

Posted on by NAWRB
TheUniqueBank
25 Mar

Some banks are actively promoting access to capital for women-owned businesses and using their resources to help move them forward. One of those banks is Wells Fargo. Wells Fargo made a commitment to lend $55 billion to women-owned businesses in the United States by the year 2020. Since 1995, Wells Fargo has lent over $38 billion dollars to women-owned businesses. In addition to the cumulative lending goal, Wells Fargo supports numerous outreach efforts to build relationships with women business owners and help them succeed financially. For women-owned businesses, Wells Fargo offers banking, payroll, business loans and lines of credit, insurance, credit cards, merchant services, online resources, and retirement planning.

Key Bank is another company committed to the growth of women-owned small businesses. They have lent more than $6 billion to women business owners since 2005—the year Key4Women was established. The Key4Women program provides women in business access to capital, customized financial solutions, educational and networking opportunities.
PNC Financial Services has demonstrated its commitment to supporting women-owned businesses through corporate actions. For example, since 2007, PNC has spent more than $353 million directly with Women Business Enterprises (WBEs). The supportive actions of PNC transcends to its client base.
There are more than 1400 PNC-Certified Women’s Business Advocates (WBAs) who are bankers especially committed to supporting the achievement of women who own or run businesses. In addition to delivering the financial products, services and resources, the WBAs are often in management, or other commanding roles in organizations that instruct women or bring together women in business.
Union Bank, on the other hand, offers a unique lending program specifically for women-owned (and minority- and veteran-owned) businesses. The program has been in use for over two decades. Its financing program provides direct access to capital for women-owned businesses with less restrictive lending requirements and has some flexibility on underwriting loans. Union Bank is regulated by the Federal Acquisition Regulation (FAR), so if a loan is on the fence and can’t be financed under the regulated guidelines, Union Bank partners with over 21 outside Community-Based financing partners  to help secure financing without brokering out the deal. Talk about going the extra mile on behalf of WOBs!

“Wells Fargo Has Made A Commitment To Raise $55 Billion For Women-Owned Businesses In The United States By The Year 2020.”

Applications can be completed online for credit lines and loans up to $100,000. Access to larger limits are available through their direct bankers. WOBs have the option to choose from unsecured or secured loans with fixed- or variable-rate financing programs.
According to Union Bank, ‘Women-Owned Business’ is defined as a woman who owns at least 51% of the business, manages the day-to-day operations and the company has been in business for at least two years. The bank’s special lending program is focused on WOBs having annual sales up to $15 million with a loan limit of $2.5 million for their women-owned business lending portfolio.
It is an exciting time for women-owned businesses as there is more education and opportunities with growth potential and access to capital. Union Bank’s lending program is obtaining fruitful results. One of the companies benefiting from the program is FCI Management. FCI Management was created in 1998 and provides customers with innovative strategies and solutions in the energy and water industries. It offers more efficient systems to customers which reduces costs, makes a positive impact on climate change, and creates a sustainable global environment.
Union Bank was able to accept FCI Management through an examination of the positive repayment history between FCI Management and one of its major clients. Union Bank regulated the loan amount using the SBA CAPLINE Program—a program for loans up to$5 million to help small businesses make their cyclical working and short-term capital obligations. This allows FCI Management to amplify and preserve its cash flow while abolishing their factoring line, which carried high fees and interest. Union Bank was able to give the company a one million dollar SBA CAPLINE and save them $150,000 in annual interest and fees.
“…the fact that we were able to get the loan actually reduces the amount of interest that we’ll have to pay using any type of loan or financial vehicle. So, I think that’s going to save us a tremendous amount of money on interest,” said Founder and CEO of FCI Management, Patricia Watts. The company can now continue to expand, and add additional support and sales staff.
Union Bank also termed out the current balance on the factoring line by utilizing the SBA 7(a) program—the SBA’s most prevalent loan program, which provides financial assistance for businesses that have special requirements. Watts was able to participate in the SBA’s 504 loan program which allowed her to purchase the building she has occupied for the past four years.
A 504 loan is a fixed-rate, 10 percent down, long-term loan providing revenue for the acquirement of fixed assets (e.g. buildings, machinery, real estate, etc.) at lower market rates.
FCI Management is just one of the many women-owned businesses taking advantage of Union Bank’s unique loan program. More financial institutions are coming on board pledging resources to help women-owned businesses, spreading awareness and connecting women to opportunities. Visit unionbank.com or sba.gov to be one step closer to growing your business with the necessary capital.