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REI Nation Newsroom

4 min read

Turnkey vs Conventional Investing: Which Strategy is Right For You?

By Chris Clothier on Jan 30, 2024 9:00:00 AM

Microsoft Start | Jan 30, 2024 | Mia Rodriguez

When looking to build wealth through real estate, investors have two main options - turnkey or conventional investing. Both come with pros and cons, so it's important to weigh your goals, timeline, budget and risk tolerance. 

"We started out buying run-down properties, fixing them up, and renting them out ourselves," said REI Nation founder and CEO Kent Clothier Sr. "It was rewarding but extremely time- and labor-intensive. We knew there had to be an easier way for investors to benefit from residential real estate without all the hassles."

The answer was turnkey - a hands-off approach that allows investors to own rental properties without handling any of the legwork involved. A turnkey company like REI Nation purchases, renovates and rents the property, then transfers ownership to the investor under a triple-net lease agreement.

So, what are the key differences between turnkey and conventional real estate investing? And how do you decide which strategy is better for your goals?

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3 min read

Financing Out-of-State Rental Properties: Loans, Terms & Qualification

By Chris Clothier on Jan 24, 2024 9:00:00 AM

Real Estate Today | Jan 24, 2024 | Aize Perez

Investing in rental properties remains one of the most reliable ways to build long-term wealth. And with today’s interest rate environment, investors can still capitalize on real estate. However, obtaining financing poses unique hurdles when purchasing out-of-state investment properties.

“Out-of-state investment properties can be more challenging to finance because lenders have to manage risk without local market familiarity,” said REI Nation CEO Kent Clothier Sr, an industry veteran in rental real estate finance. “Working with specialized lenders is key. They understand factors like cross-state landlord-tenant laws, long-distance property oversight, market analytics and appropriate loan products. Guiding investors to the right financing partners ensures smooth transactions plus portfolios tailored to their current assets and future investment goals.”

While securing financing for a primary home follows pretty standard protocols, investment loans differ greatly. And if you live in a different state than your rental property, several additional considerations come into play around loans, terms, qualification criteria and more.

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4 min read

Point, Click, Own: Firms Transform How to Buy Investment Homes

By Peter Grant, Wall Street Journal on Jan 20, 2021 10:41:00 AM

WSJ | January 7, 2020 | Peter Grant

Real estate startups exploit new technologies and data on house rentals developed after the housing bust:

Buying a home as an investment property has long been too complex or daunting a
process for all but the wealthy. Thanks to a group of real estate startups, that may be
changing.

The companies enable individuals to assemble a portfolio of rental homes throughout
the country relatively hassle-free. Without ever visiting the properties, investors can buy
and manage homes with a few clicks of a mouse or taps on the phone.

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5 min read

Eight Ways To Invest In Real Estate Without A Large Down Payment

By Jason Hsiao, Forbes on Sep 8, 2020 11:46:00 AM

Forbes | Sep 8, 2020 | Jason Hsiao

One of the most common questions I get is how to invest in real estate when not enough down payment is saved up to purchase a property, especially in expensive states such as California or New York. Sure, with programs like FHA you can put as little as 3.5% down, but in competitive markets, your offer will likely go straight to the recycling bin. Here are eight ways to get exposure and diversify into real estate, even without having six figures saved up.

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6 min read

Is Remote Real Estate Investing the Next Big Thing?

By Lillian Dickerson, Inman on Aug 9, 2020 1:30:00 PM

Inman | March 16, 2020 | Lillian Dickerson

Going remote isn't just a new trend in the standard workforce — it's also on the rise among real estate investors:

As new kinds of technologies have allowed greater connectivity, individuals can work from home more than ever before.

It’s not only the average office worker who’s working from home, though — over the past few years, remote buyers of real estate owned (REO) properties have gradually increased, and more remote-focused investment companies and increased technology are empowering individual investors to buy out-of-state.

REI Nation, a family-run investment property portfolio management company traditionally focused on passive investors, started assisting remote investors once the internet became more pervasive.

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7 min read

The Rise of Remote Real Estate Investing

By Auction.com, HousingWire on Jun 22, 2020 9:15:00 AM

HousingWire | March 4, 2020 | Auction.com

Access to Nationwide Inventory, Investing Services Helps Investors Buy Beyond Their Backyard: After a successful Denver-area home flip in 2016, newly minted real estate investors Scott Stuber and Tyrone Velasquez realized they could get more bang for their buck investing elsewhere.

“We were looking for a more affordable market. Denver has gotten so expensive. You’ll find a house at the top of the market that needs to be fully rehabbed — there’s no potential profit there,” said Stuber, who now invests full-time, running Nuremberg Properties with Velasquez, his husband. “So we decided to look for more affordable markets that were being overlooked.”

Stuber and Velasquez are not alone in their quest to find overlooked markets that are more affordable and profitable for their real estate investing strategy.

Expensive home prices, high property taxes and anti-investor legislation are prompting a growing number of real estate investors to invest remotely outside where they live.

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3 min read

5 Tips to Effectively Manage Your Commercial Property

By Lane Genik, NuWire on Apr 8, 2019 11:16:00 AM

NuWire | April 8, 2019 | Lane Genik

Purchasing a commercial property is a big decision. It is a large purchase and needs to be managed well for the investment to be worth it for you.  How a commercial property is managed can affect the value of the investment. A property can increase in value significantly just from being well managed, and of course the opposite is true as well.

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6 min read

As Renters Move In, Some Homeowners Fret

By Chris Clothier on Aug 28, 2013 12:23:00 PM

New York Times | August 28, 2013 | Shaila Dewan

Neighborhoods across the country are being transformed, as houses built for homeowners are turned into rental properties. Residents of one such community in Memphis, Tenn., discuss the changes.

Beneath the spreading shade tree in Laura Holcomb’s front yard, there are some 70 varieties of hosta, stands of elephant ear and a Japanese maple. For the 17 years she has owned the brick house on Rose Trail Drive in the Hillshire subdivision, Ms. Holcomb has devoted herself to her home and garden.

Across the street, Carl Osborne and his family have been tenants for two years, moving in after the previous owner lost the house in a foreclosure. They are happy to have a decent place to call home but, like many renters, they have not done much to improve the appearance or join the community.

They are not alone: the family behind Ms. Holcomb, the one two doors down, and several in the cul-de-sac across the way are among the renters who have been supplanting homeowners in this blue-collar, suburban neighborhood as investors buy single-family homes and convert them to rentals.

“Used to, we knew our neighbors,” Ms. Holcomb said. Then she gestured toward the few remaining owner-occupied houses nearby. “Except for the two that have been here, I don’t know any of my neighbors.”

Across the country, a growing number of single-family rentals provide an option for many who lost their homes in the housing crash through foreclosure and for those who cannot obtain a mortgage under today’s tougher credit conditions. But the decline in homeownership is also changing many neighborhoods in profound ways, including reduced home values, lower voter turnout and political influence, less social stability and higher crime.

“When there are fewer homeowners, there is less ‘self-help,’ like park and neighborhood cleanup, neighborhood watch,” said William M. Rohe, a professor at the University of North Carolina at Chapel Hill who has just completed a review of current research on homeownership’s effects.

Even conscientious landlords and tenants invest less in their property than owner-occupants, he said. “Who’s going to paint the outside of a rental house? You’d almost have to be crazy.”

Despite signs of a recovery in the housing market, the country’s homeownership rate is still on the decline. In Memphis, it has fallen from roughly 65 percent of families in 2005 to about 55 percent now, according to the Census Bureau.

In hundreds of neighborhoods that once attracted first-time home buyers, investors have stepped in, buying up tens of thousands of homes for the rental market.

That has helped put paying tenants in a number of homes that were vacant or becoming eyesores. And many of the new tenants say they are eager to buy a home at the first opportunity and share the same concerns as homeowners about maintaining a safe and healthy neighborhood for their families and children.

But it has also raised the ire of some homeowners whose tidy subdivisions have changed, seemingly overnight, into a parade of strangers.

Hillshire was built in the late 1970s, its single-story, three-bedroom homes designed with no particular architectural pedigree, but not ticky-tacky identical. As a young mother of two, Ms. Holcomb, a medical practice administrator, chose the neighborhood because of its school district, paying $73,000 for her home in 1996.

The homeowners interviewed for this article tended to have steady middle-class incomes; several were retired military and police officers. Among the renters, who pay about $900 to $1,000 a month, were several construction and restaurant workers, with lower, less reliable earnings.

On a recent evening, parents pushed strollers and lawn mowers droned, children played on a tire swing and in one driveway, a longtime resident and his grandson tinkered with the fat tire of a slick red drag racer.

But there was a seedy underside. Jimmy Fumich, a homeowner and air-conditioner repairman, said he had been in court that day as a witness in an animal cruelty case against a neighbor, a renter, who had left a dog chained to a stop sign in the heat. She was already in trouble, he said, for breaking into an empty house on the block.

Mr. Fumich, who is Ms. Holcomb’s brother, mentioned a couple of meth houses and one that had been used as a brothel. All were rentals. Police department records show that major crime in the area, which does not include drug offenses, has actually gone down since spiking in 2010.

Still, Lea Ann Braswell, the captain of the neighborhood watch, recounted a recent episode in which a teenage girl, whose throat police said was cut by a young man carrying a sword, sought refuge on Ms. Braswell’s doorstep.

“We used to have hardly anything happen,” she said.

Asked how many renters were active with the neighborhood watch, Mr. Fumich said, “Zero.”

What is watchful to some, however, can feel intrusive to others. In the Osbornes’ home, one resident who keeps a close eye on things is referred to as “Nosy Neighbor.”

Carl Osborne, 26, who parks his boat and the DirecTV van he drives for work out front, rents the house across the street from Ms. Holcomb with his wife, two children and collection of exotic birds. “We just look for somewhere that’s safe for your kids,” he said. “That’s all I’m worried about, my kids and my wife.”

Hillshire does not have a homeowners association to enforce rules about uncut lawns, abandoned cars or rented units. And despite the changes, the neighborhood is largely trim and neat. But in cities like Las Vegas and Atlanta, where homeowners associations are more common, some have struggled with how to handle the influx of renters.

When investors started buying town homes in the small, Atlanta-area community of Austin Park, where units that once sold for over $100,000 now go for as low as $30,000, homeowners did not at first enforce a rental cap because they preferred landlords over vacant units that were no longer paying association dues.

After a summer of loud music, barking dogs, prostitutes and two tenants served with a murder warrant, the board changed its mind, said Joi Aikens, the president of the homeowners association.

Phasing out the rentals will take time, since the association has to wait until a home becomes vacant or is sold.

“You’re caught between ‘I want the dues paid’ and ‘I want a peaceable, nice existence,’ ” Ms. Aikens said.

Investors, however, say they have done a service to neighborhoods plagued by foreclosures, by helping to nudge home values upward and renovating and maintaining formerly vacant homes.

“Where we go in, we go in to fix that house up, and we’re the best-looking house on the street when that goes through,” said Kent Clothier Sr., the senior partner of REI Nation, which buys and renovates homes, sells them to mostly out-of-town investors, then manages the property for them. “That’s good for the neighborhood.”

REI Nation’s tenants stay two years on average, the company said, and about two out of 10 are former homeowners who lost their homes and want to maintain a similar lifestyle while they repair their credit.

Those reluctant renters dislike other renters almost as much as many homeowners do.

In a small cul-de-sac near Hillshire — or what in Memphis is called a “cove” — Rusby Amador cooked dinner for her three sons while waiting for her husband, a tile layer, to get home. One son was hosing off the walkway of their rented home. Two prodigious Boston ferns hung in the entry, and at the curb a colorful ceramic urn sat atop the mailbox.

“When the people buy a house, the people’s more nice,” Ms. Amador said.

“Renters, they don’t care about neighbors. We don’t know who’s going to move in. We worry all the time because we don’t know. I have children.”

Ms. Amador, 33, said the family had bought a new home in 2004 but had not checked the terms of the mortgage carefully, and the payments had grown too high. Now, she said, they are saving to buy again.

Across the street, their neighbor Monica Costict is the last homeowner left on the cove. She, too, is looking to get out of the neighborhood and buy somewhere else. “When we leave,” she said, “we’re going to rent out the house.” 

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4 min read

Investors Cooling on 'REO-to-Rent'

By Chris Clothier on Jun 7, 2013 12:25:00 PM

CNBC | June 7, 2013 | By Diana Olick

For the past three years they have been swarming over the hardest hit housing markets, buying distressed properties in bulk and pushing prices higher by double digits. The idea for these investors was not to buy and flip, but to hold and rent. Now some investors say they have priced themselves out of the market.

"Higher prices are reducing returns on investment, and investors are responding by cutting back on their purchasing plans until conditions sort out," said Chris Clothier, a partner in MemphisInvest.com and Premier Property Management Group, which commissioned a national survey of investors conducted by ORC International. "Fewer foreclosures, rising property values and competition from hedge funds are making it tough to find good deals on distress sales."

Nearly half the investors surveyed said they planned to cut back on purchases of homes in the coming year; in a survey last August, just 30 percent said they planned to cut back. Only 20 percent of investors said they plan to increase purchases, compared with 39 percent who said they would last August.

All this could have a significant impact on the housing recovery.

(Read More: Reverse Mortgages Backfiring on Seniors)

"If the investors gets sidelined—along with first-time buyers who are already sidelined—this housing market falls apart quickly," says Mark Hanson, a California-based housing and mortgage analyst. Hanson points to still-high levels of negative equity, which has kept many homeowners stuck in place.

Connecticut-based Carrington Mortgage Holdings, a hedge fund that had been buying distressed homes, recently stopped.

"We think the market is a little bit too frothy," said Carrington's Rick Sharga in an interview last month. Home prices are now up 12 percent from a year ago nationally, according to CoreLogic, but have risen far more greatly in formerly distressed markets where investors originally focused their purchases.

"The general consensus right now is that the bargains are drying up when it comes to buying foreclosed properties," adds Sharga.

(Read More: Rising Rates Turn Investors From REITs)

That is largely due to a lack of distressed homes for sale. The number of foreclosure sales in the first quarter of this year fell 22 percent from a year ago, according to RealtyTrac, a real estate website. The number of short sales, when the home is sold for less than the value of the mortgage, also fell, as rising prices provided less incentive for banks to agree to such deals. Some claim banks are actually holding onto repossessed homes, waiting for prices to rise higher.

Investors accounted for 19 percent of home sales in April, according to the National Association of Realtors, down from 24 percent in all of 2012. Investors include individual buyers as well as large hedge funds, but the hedge funds have been getting much of the attention, credited with juicing prices in the hardest hit housing markets like Phoenix and Las Vegas. Their so-called REO-to-Rent strategy (Real Estate Owned-to-Rent) has evolved into a new asset class, with two of the companies that engage in the practice going public this year as real estate investment trusts (REITs).

Still, the institutional investors are far from dominant players.

"Institutional investors play an extraordinarily small part," says Laurie Hawkes, president and COO of Phoenix-based American Residential Properties, which went public in May. "If you look at the number of dollars that are absolutely invested at this point, it's probably between 12 and 15 billion. On a house basis, that's about 120 thousand houses. If you think about the houses that have moved into the rental market due to subprime, it's about 5-6 million households, so if you do that math, it is a very small percentage."

(Read More: Home Prices Jump to Seven Year High)

Hawkes says she sees no shortage of opportunity in the space, since the rental market has grown so large and the costs for investors are still lower than replacement costs. Rents are still rising along with home prices nationally, but they are falling in the markets where investors initially set their sights.

"Single-family rents in the cities surrounding Phoenix proper— where all the 'investors' bought all the foreclosures—have plunged 25 percent in the past 5 months," says Hanson, who recently visited the market, meeting with rental agents and investors.

Hanson also points to a high vacancy rate among investor rentals. Still, over half the investors surveyed by ORC International said they plan to hold them for at least five years. One third said they would hold for 10 years or more.

"Investors aren't going to dump a lot of properties into a market and run the risk of losing money or devaluating the rest of their portfolios," he says. 

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2 min read

Survey: Single-Family Renters More Likely to Stay Longer

By Chris Clothier on Feb 25, 2013 12:26:00 PM

Wall Street Journal | February 25, 2013 | Nick Timiraos

Renters who opt for single-family homes over apartments are more likely to live in those homes for five years or longer and more interested in ultimately becoming a homeowner, according to a study released Monday.

Some 26% of single-family-home renters said they planned to live in their current rental for five years or more, compared with 22% for renters in multifamily buildings. Three out of every five single-family renters also said they planned to become a homeowner within five years, compared with just 44% of apartment renters.

More than 14 million renters live in single-family homes in the U.S., but over the past year the sector has received much more attention from private-equity funds and other institutional investors looking to build large pools of rental homes by purchasing foreclosures and other distressed properties at fire-sale prices.

While some critics have questioned the ability of these firms to effectively manage hundreds or thousands of single-family homes scattered across a city, the lower turnover of single-family tenants could help reduce costs for landlords.

The survey, conducted by ORC International for Premier Property Management, also found that a majority of apartment and single-family renters indicated that they rent because they enjoy the lifestyle, and not because they’re unable to get a mortgage. Less than one third of renters cited an inability to get a mortgage as the reason they won’t become a homeowner within five years.

Compared with apartment tenants, tenants of single-family homes are twice as likely to have kids. They also tend to have higher median household incomes and value neighborhood amenities such as good schools and parks more than apartment dwellers.

ORC conducted the survey of 1,006 adults between Jan. 10 and Jan. 13.

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