According to a recent report from real estate data firm ATTOM, the remodel-and-resale market has boomed in recent years, with more than 407,000 homes resold in 2022, up 14% from 2021 and 58% from 2020. ATTOM reports that a remodel-and-resale investor was involved in about 1 in 12 home sales (8.4%) last year.
But rising costs and the banking crisis this year have sapped investment returns for property flippers, and for those still interested, raising capital or bridge loans to repair and resell may be harder than in past years.
“In today's market, liquidity for reform-and-flip and bridge loans has been significantly reduced, especially since the banking crisis,” said Keith Lind, CEO of Accra Lending. “Generally, given what we've experienced and where home prices, construction costs and interest rates are, bridge loans and reform-and-flip liquidity has been reduced relative to non-QM loans.”
As an example, Lind pointed to Acra's pipeline of non-QM products, which include bank statement loans and DSCR loans, growing 93% since December, but its pipeline of bridge loans and remodel/resale loans fell 40% over the same period.
“It's hard to buy a home today, renovate it and make a profit because borrowing costs and fixed costs are so high. That's what people are struggling with,” he said.
There's also the issue of home prices falling and appraisals being lower than investors expect, again making it difficult for flippers to achieve the ROI they're hoping for.
Add to that the fact that some large regional banks have suspended or completely withdrawn from lending to these types of assets.
“Loans that would normally have gone to these regional banks are now flowing to our banks,” Lind said.
Despite the challenges of obtaining bridge loans and repair-and-resale loans, Lind is optimistic that such opportunities will increase as the market consolidates.
“In today's environment, investors are looking for yield in a safe product, and people are bullish on housing, so I think this is a very good backdrop for investors to say, 'I'm a lot more confident in housing than commercial property,'” he said. “If you're looking for high yields and large yields, you've got to turn to lenders like Accra.”
Acra's non-QM pipeline continues to grow, and Lind expects to further expand market share in bridge loan and fix-and-flip loan products as well.
“A lot of our competitors are disappearing,” he said. “A lot of our competitors are going out of business or having financing and capital issues. We have a very strong balance sheet and our pricing is competitive.”
Accra has provided more than $10 billion in loans since it was founded in 2014. The company also services its own loans, and is doing big business, with its 300 employees providing about $230 million in loans in June.
“Our pipeline is growing,” Lind said. “Let's say it's $235 million this month. That's a run rate of almost $3 billion in assets over the next 12 months. Where else can you do this? There aren't many originators with the scale, expertise and experience that Acra has.”
To learn more about working with Acra, visit https://acralending.com/