Shelby Reed, CEO of Minnow Loan, shares some insights about the newest trends and challenges facing investors today in the residential rehab market in Missouri. Watch the video or read the transcript below to learn more.
Lender Link:
What are some of the challenges your real estate investor clients have been facing lately?
Shelby Reed:
There are two big issues that I hear our real estate investors locally having issues with.The first one is that they’re just struggling finding deals. They are struggling finding the right property at the right price that meets the margins they need to make sense. The second biggest issue that I’m seeing our real estate investors face is just analyzing a deal. They’re struggling with knowing what the purchase price should be, how much re rehab they should put into it, what should they do to it, and how much can they sell it for.
Lender Link:
In which cities or neighborhoods are you seeing the most activity?
Shelby Reed:
The areas that we are seeing, a significant increase in real estate activity is really across the state. However, specifically in the St.Louis market, that central corridor, you know, the Kirkwood Webster Groves remains a hotspot for real estate investors. It always has and it continues to do so. However, we’re starting to see real estate investors move to the florist area to do fix and flip projects there. Traditionally that used to be more of a buy and hold or a fix and hold. However, we’ve seen a lot of investors going up there to be able to do successful fix and flips as well. As far as the market goes here in Columbia and Jefferson City in the Midwest area, we’re seeing our investors kind of do it all. They’re doing fix and flips, fix and holds, and also utilizing our bridge products as well to help give them the cash to be competitive and get that winning edge on a deal.
Lender Link:
What is the more common investment strategy for your clients?
Shelby Reed:
One of the biggest things I’m seeing happening right now with real estate investors is instead of doing a traditional fix and flip, they’re deciding to fix and hold. They’re keeping it and adding it to their long-term rental portfolio. Because we have such a strong rental market here in the state of Missouri, and we’re able to do that with our long-term DSCR 30 year products where we see these investors start out as a traditional short-term fix and flip loan, but then as they get to the end of their project, they choose to end up keeping it and we transfer them into, or refi them into a long-term 30 year product. So it’s a really, really great option for these investors to add these assets to their balance sheet and add them to their rental rental portfolio.
Lender Link:
Tell us about your rehab loan program.
Shelby Reed:
So the way we structure our rehab loans or our fix and flip loans is we are seeing our borrowers bring a minimum of 15% cash down on the deal. Now what we’re also seeing our borrowers do is tap into properties that they have free and clear or debt-free, and they’re using that as additional collateral in lieu of potentially that cash down payment. We’ve done quite a few loans like that with borrowers and it’s worked out really, really well when their cash reserves are tight. But they do have properties that are debt free that they’re able to pledge as additional collateral. So right now our rates on our fix and Flip or our rehab loans are between 11.50% and 12.99%, and you’re gonna see those same rates and same terms with our fix and flip as well as our bridge products, our DSCR, long-term rental portfolio products. Those rates are gonna be lower and more consistent with where you’ll see market rates being. However, what we’re seeing right now is around seven to seven and a half, all the way up to about 10%.