What if you could become one of multiple investment landlords of a property — like buying into a timeshare — and earn passive income? And you could do it on the cheap?
Co-ownership models have given rise to a new way of looking at affording real estate. Take Arrived Homes, a Seattle-based real estate investment company, backed by Amazon, which has set up over 100 single-family homes in cities across the U.S. These homes are co-owned by everyday investors, many of which cannot afford a home on their own.
The company worked with the U.S. Securities and Exchange Commission (SEC) to be qualified, meaning they received regulatory compliance from the SEC, not product approval, as the SEC does not approve any investment offering.
READ: When It Comes to Purchasing Property as a Group, People in B.C. Are Fearless
Ryan Frazier, co-founder and CEO of Arrived Homes, says they spent close to a year organizing their SEC offer, which was vital to ensure anyone, including non-accredited investors, could invest.
“Before Arrived there were no SEC Qualified Offerings for everyday people, or non-accredited investors, to invest in shares of single family rental homes,” Frazier tells STOREYS. “The options were limited to the capital-intensive option of buying homes or investing in a public REIT.”
Frazier sees each property as a “mini house IPO,” adding that a property must be qualified on an individual basis by the SEC to offer the home for fractional ownership on their platform.
Currently, Arrived Homes offers property shares to U.S.-only investors, who buy shares starting at US$100.
A similar model can be seen in Canada, but instead of single-family homes, Addy offers investment on multi-family, mixed-use, industrial, and commercial properties.
Addy serves as a mix between a landlord and property manager. Like Arrived Homes, Addy allows retail investors a chance to own property, in a co-ownership way, helping them capitalize on real estate deals which would often only be available to wealthy investors.
Founded by Michael Stephenson, Stephen Jagger, and Jeff Booth, Addy breaks each property into investment increments valued at $1. Units of each investment are listed for sale on the platform and an investor can invest anywhere from one buck to $1,500 per property. For example, a $1,000,000 investment opportunity would be divided up into 1,000,000 units.
“As governments continue to print money in response to the global pandemic, they are pushing asset prices higher, which ironically makes it harder for anyone without vast sums of cash to participate in real estate,” says Michael Stephenson, Addy’s co-founder and CEO, to STOREYS. “This has increased demand for Addy.”
Stephenson also says rising interest rates have made it more expensive to borrow money, which reduces the amount of debt on commercial real estate and increases the amount of equity needed.
After signing up via Addy’s website or downloading the app (which is currently only available in the Apple Store), interested investors will need to become a member (minimum of $25/year).
Next, they connect their bank account to link their digital wallet via the Addy platform, choose a property, review the due diligence documents, sign, and invest.
The number of people who can invest in a property depends on the amount being raised (and cap of $1,500 per property). Some deals have seen hundreds of investors, while the largest investment saw 2,197 investors, according to Stephenson. The average investment is approximately $346, and if someone wants to invest more than $1,500, they can invest in multiple properties.
To date, 26 properties have sold out on the Addy platform, of which include industrial, retail, office, and hospitality spaces, as well as recreational units. 11 properties are in British Columbia; 10 in Ontario; three in Alberta; and two in Quebec.
“All investment decisions are made collectively by Addy’s real estate acquisitions teams, and all opportunities go through a rigorous due diligence process,” says Stephenson.
Tenants of a multi-family or mixed-use property can invest in the building they are residents of and reap financial gains too. However, Addy does deal with renting out units; the only way to rent in a building that is on the Addy platform is through a traditional realtor or property manager.
Addy is currently open to residents in British Columbia, Alberta, Ontario, and Quebec over the age of majority. “As Addy gets enough members in each province, we aim to unlock it,” says Stephenson.
Frazier says any company wishing to follow in its footsteps “should realize there is a lot of regulatory work you need to tackle to do this the right way.”
“Working on the process through the SEC helped us do two things. First, we were able to produce an innovative investment product that anyone can access. Second, going through the registration process with the SEC gives our customers the peace of mind knowing that we have gone through the property disclosure process and will do things like reporting audited annual financial statements,” says Frazier. He says the company wants to expand its offerings to include short term rentals, like Airbnb’s and VRBOs.
As for Addy, Stephenson says the plan is to add more properties and grow the membership base.
“Owning real estate is no longer an overwhelming solo venture,” he says. “Now you will own a piece of a commercial complex, business park, or entire apartment building alongside us and other community members, which includes tenants, employees, and local residents.”
Robert McLister: Tax shelters don’t make housing more affordable, but those with the cash would be foolish not to use them
Published Apr 19, 2024 • Last updated 55 minutes ago • 4 minute read
With housing unaffordability near its worst-ever level, our trusty leaders are on a quest to right their housing wrongs and get more young people into homes.
Part of Ottawa’s big strategy to “help” is promoting tax-sheltered savings accounts and pumping up their contribution limits. That, of course, stimulates real estate demand amidst Canada’s population and housing supply crises. But save that thought.
Advertisement 2
Article content
Article content
First-time buyers now have three government piggy banks to stockpile cash for a down payment:
1. The 32-year-old RRSP Home Buyers’ Plan — which lets you deduct contributions from your income to defer taxes and then borrow from the account interest-free for your down payment (as long as you wait 90-plus days to withdraw any contributions);
2. The 15-year-old Tax-free Savings Account (TFSA) — which lets you save after-tax dollars, grow your money tax-free and withdraw it without the taxman taking a bite;
3. The one-year-old First Home Savings Account (FHSA) — which is a combination of an RRSP and TFSA. It lets you deduct contributions from income, compound it tax-free and never pay tax on withdrawals used to buy a home. You can even save the deduction for a year when you need it more — when you’re earning more money.
Assuming you have the funds and contribution room, these tax shelters can combine to help you amass a supersized down payment.
“Looking at the FHSA alone, with the max annual contribution room of $8,000 for 2023 and 2024, a potential first-time home buyer could have as much as $16,000 deposited in the account today for a down payment,” says Eric Larocque, chief mortgage operations officer at Questrade’s Community Trust Company.
Top Stories
Article content
Advertisement 3
Article content
“If you also add in the cumulative contribution room of $95,000 for the TFSA, it amounts to $111,000 in potential funds available — and that’s before incorporating investment gains from either account.”
And it doesn’t stop there. RRSP, TFSA and FHSA savings limits keep increasing. If first-timers have enough contribution room, down payment savers in 2024 can sock away even more in these tax-sheltered troves.
“Factoring in the recent changes to the Home Buyers’ Plan, which now permits RRSP withdrawals of up to $60,000 — up from $35,000 — we land at a potential total of $171,000 in deposited funds that can be tapped for a first-time home buyer’s down payment,” Larocque adds.
That’s quite a wad — easily enough to cover the 20 per cent ($139,706) down payment required to avoid mandatory (and pricey) default insurance on the average home. Canada’s average abode is now worth $698,530 by the way, according to the Canadian Real Estate Association.
Here’s the rub: Canada’s living costs are sky-high, and real disposable income has trended downward. So, how’s an average first-time buyer household, raking in less than six figures, supposed to amass such a stash?
Advertisement 4
Article content
Based on national averages, saving 10 per cent of one’s pre-tax income per year (who does that?) would take a young FTB couple over 15 years to sock away $140,000. History shows what would happen to home values if you waited 15 years — they’d jet off without you.
If you have no other resources and your bet is that historical appreciation rates continue — despite slower population growth, more building and potentially higher long-term rates — you’re better off saving less and buying sooner with a five per cent down insured mortgage.
So, does Big Brother really expect your typical first-time buyer to max out all these savings plans? Nope. But hey, throwing a buffet of options at you sure paints a pretty picture of government effort, doesn’t it?
Ottawa’s dirty little secret is that these nifty programs crank up demand, turning renters into buyers. So don’t bet on them making the home-owning dream any cheaper, for first-timers or anyone else.
Take advantage of them anyway.
The government sets limits on these tax shelters with well-off home buyers in mind. One lucky bunch who can make use of all three down payment savings plans is the first-timer with prosperous parents.
Advertisement 5
Article content
Such buyers can make a withdrawal from their parental ATM (a living inheritance, some call it), deposit that cash in all three savings vehicles above and reap: hefty income tax savings or deferrals (thanks to the FHSA and RRSP deductions); tax-free/tax-deferred growth on the investments; and tax-free withdrawals if the money is used to buy a qualifying home (albeit, you’ll have to pay the RRSP HBP back over 15 years, starting five years after your withdrawal).
Recommended from Editorial
The more opportunities it gives people to save for a down payment, the more Ottawa worsens the imbalance between purchase demand and supply. And that, of course, boosts real estate values skyward — which is dandy for existing owners but contradictory to the government’s affordability messaging.
But hey, these tax treats are ripe for the picking. Home shoppers with the means — especially those with deep-pocketed parents — might as well take advantage of all three accounts.
Robert McLister is a mortgage strategist, interest rate analyst and editor of MortgageLogic.news. You can follow him on X at @RobMcLister.
Article content
Successful real estate investors have long followed the adage: When there is blood in the street, buy property.
Historically, this approach has yielded dividends, and it explains the mindset behind a new venture from Hines, a real estate giant with over $93 billion in assets under management. Hines recently announced a new platform called Hines Private Wealth Solutions that seeks to capitalize on the recent troubles in the real estate industry.
The management at Hines has been carefully watching the real estate industry for decades, and they believe that today’s market presents the perfect opportunity for investors to buy distressed assets and sell them at a profit in the future. When you consider that nearly $4 trillion in commercial real estate loans are set to mature between now and 2027, it’s easy to see the logic behind Hines Private Wealth Solutions.
The developers behind many of those projects took out loans assuming they would be able to refinance at pre-COVID interest rates. Considering that current interest rates are about double what they were before COVID-19, that assumption looks more like a losing bet every day. It also means there will be a lot of foreclosures that a well-positioned fund can snap up for pennies on the dollar.
Don’t Miss:
That’s where Hines Private Wealth Solutions seeks to step into the picture. It’s already contracted with investing heavyweight Paul Ferraro, former head of Carlyle Private Wealth Group, and raised $10 billion in funds for the new project. It will offer its clients a range of investment options, including:
In addition to these offerings, Hines will also give personal guidance to its investors on how to best manage their real estate assets. It is targeting investors who want to turn away from the traditional 60/40 investment model by channeling more money into real estate and away from other alternative investments. Hines is banking on the idea that high interest rates and high inflation will be around for a while.
Trending
When that happens, it becomes more important for investors to hold inflation-resistant assets. That’s a big part of why Hines is betting that real estate is near the bottom after years of declining profits resulting from high interest rates and major losses in the commercial sector. Hines’s conclusion that now is the time to buy real estate is based on long-term company research showing that real estate typically declines after a 15- to 17-year-long growth period.
Its research shows that the decline normally lasts around two years, which is about the same length of time the real estate market has been suffering from high prices and high interest rates. Theoretically, that makes this the perfect time to make aggressive moves in the real estate market, and the Hines Private Wealth Fund was conceived to allow investors to take advantage of current market conditions.
Despite the deep troubles facing today’s real estate industry, it’s not hard to see the logic in Hines’s approach.
“This is a great vintage, it’s a great moment. This real estate correction began really over two years ago, right when the Fed started raising interest rates,” Hines global Chief Investment Officer David Steinbach told Fortune magazine. “So, we’re two years into a cycle, which means we’re near the end.”
If Hines is correct, real estate investors will have a lot of good bargains with high upside to choose from in the next 12 to 24 months. The good news is that even if you’re not wealthy enough to buy into the Hines Private Wealth Solution, there may still be plenty of opportunity for you to adopt their investment philosophy and start scouting for an undervalued, distressed asset to scoop up. Keep your eyes open and be ready.
Read Next:
“ACTIVE INVESTORS’ SECRET WEAPON” Supercharge Your Stock Market Game with the #1 “news & everything else” trading tool: Benzinga Pro – Click here to start Your 14-Day Trial Now!
Get the latest stock analysis from Benzinga?
This article $93 Billion Real Estate Giant Is Betting The Market Is About To Hit Rock Bottom originally appeared on Benzinga.com
© 2024 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Jen Hubbell became a real estate agent in Greenville, S.C., because she believed a good life started with a good home, and now her phone buzzed regularly with calls from out-of-state clients who believed they could find both things in her city.
Many were staunch conservatives from deeply blue states like New York, Washington and California, fed up with the politics there. Could Ms. Hubbell, a conservative herself, help them find neighborhoods of like-minded people?
Her response was always emphatic: “You are going to love it here.”
Ms. Hubbell is the lead agent in South Carolina for Conservative Move, a Texas-based company that helps conservatives migrate to solidly red places. (“When your community no longer reflects morals and values, it might be time to move,” its website says.) And with South Carolina surpassing Florida last year as the fastest-growing state in the country, she is keeping very busy.
The in-migration has fueled a yearslong real estate boom across South Carolina, where Republicans have controlled the governor’s mansion and legislature for more than two decades. Real estate agents like Ms. Hubbell say many of their clients are religious conservatives whose reasons for moving include opposition to policies like abortion access, support for transgender rights and vaccine mandates during the pandemic.
Paul Chabot, the founder and president of Conservative Move, which works with about 500 agents across the country, said that when he started his company in 2017, there were not a lot of people asking to go to South Carolina.
In the last two years, however, it has joined Texas and Florida among the top three states that the company’s clients are buying homes in, Mr. Chabot said. About 5,000 people in its clientele database have expressed interest in moving to South Carolina soon.
Most of the company’s clients in South Carolina have chosen to buy a house in Greenville County, which is in a deeply conservative and Christian region known as the Upstate. The county had the second-largest population growth in the state from 2020-2022, behind Horry County, which encompasses Myrtle Beach and has more expensive houses.
Ms. Hubbell, along with half a dozen real estate agents who do not work with Conservative Move but whose experience has mirrored hers, described having had an easy time selling the appeal of Greenville. That was especially true with clients moving from large liberal cities and their outskirts who still want a hint of a cosmopolitan life.
Greenville is big enough for Broadway shows and rooftop bars, but people still often see their neighbors downtown, where a pedestrian bridge gives an overhead view of the Reedy River Falls. Agents also often point out the lack of homeless encampments in the city.
Perhaps most important, property taxes are low, and houses are generally less expensive than out West or in New England. The median price of a house is about $360,000. Real estate agents will also note that there are hundreds of churches near Greenville, mostly Christian. And Bob Jones University, a prominent evangelical school, is here.
“When I walked inside banks or stores or schools, there was always Christian music playing in the background,” said Lina Brock, a conservative who recently moved to Greenville from Temecula, Calif., where she was dismayed by the vocal support for access to abortions. “I felt good, I felt welcomed. I felt like I was in the United States.”
Some agents use a Goldilocks-like strategy when selling clients on the state: Texas is too hot, they say; Florida is too expensive; Tennessee has too many blue cities. But South Carolina?
“It’s perfect,” Ms. Hubbell recently told a buyer.
Last year, about 15,500 New Yorkers, 15,000 Californians and 36,000 North Carolinians moved to the state, which has a population of more than 5.3 million. There is no data that breaks down those demographics by political party, but few believe that the growth will do much to shift the state politically. The same cannot be said for Texas, Georgia and North Carolina, which are becoming somewhat more blue as young, liberal-leaning people flock to some of their cities, said Mark Owens, a political science professor at the Citadel in Charleston.
The flow of conservatives into South Carolina is underscoring what even many of those moving concede is an unfortunate reality in a polarized America, as people choose to part ways with neighbors they disagree with. Several newcomers to the Greenville area said it had been a difficult decision, but that they had grown tired of feeling lonely and even ostracized.
Yana Ghannam, a recent client of Ms. Hubbell, said that she had moved to Greenville from Livermore, Calif., because she wanted to make friends who wouldn’t criticize her for voting Republican or for being anti-union. “It was very much, ‘Oh you have to do this to fit in, you have to do that,’” Ms. Ghannam said of her life in Livermore.
Politics, of course, are not the only reason people are moving to South Carolina. The weather counts for something, and jobs have been a big draw, including in a growing electric vehicle industry.
Gov. Henry McMaster has touted the state’s economic growth in recent years and attacked the few unions in the state for posing a threat to it. The South Carolina Department of Commerce said that in 2023, the state had a capital investment of more than $9 billion, the second-largest amount in its history, which represented roughly 14,000 jobs.
Still, Pamela Harrison, another real estate agent in the Upstate, said the equation for most of her clients has been simple: “They like the climate, they like the politics and they’re trying to get out of their blue states.”
Brad Liles, an agent based in Spartanburg, about 30 miles east of Greenville, said that he and his colleagues have referred to the wave of Republican newcomers as “the great migration.”
Several of the agents said that many conservative-leaning buyers in Greenville have sought acres of land slightly off the grid, avoided homeowners associations and purchased homes with plenty of backyard space for vegetable gardens, chickens or other barn animals because they are interested in being independent and self-reliant.
“If you would have told me five years ago I would have chickens, I’d be like, ‘You are lying,’” said Lauren Gomes, a conservative who moved to Greenville County in 2022 with her husband and three children because she was angered by the liberal politics in Minnesota, where her family had lived for seven generations.
Ms. Gomes, who described herself as Christian and anti-abortion, said she felt compelled to leave because she was getting yelled at in grocery stores for not wearing a mask during the pandemic, and because abortion remains legal, with no restrictions, in Minnesota.
She said she was also worried about how, in her view, “transgenderism infiltrates all aspects of education, public life, when you’re out and about” in Minnesota.
Ms. Gomes and other conservatives who moved to South Carolina said that they liked the state’s ban on abortions after about six weeks of pregnancy. Other local policies in Greenville County have also appealed to them, such as when the board of trustees for the county’s libraries voted to relocate children’s materials depicting transgender minors from the children’s section to the parenting section.
Stephen Johnson Jr. recently helped Rick and Natalie Samuelson move from Gig Harbor, Wash., to Williamston, S.C., a town of roughly 4,000 about 20 miles outside Greenville, where their budget of $2 million meant they could afford almost anything in the area.
But on Friday, the Samuelsons, who are Republican, met with Mr. Johnson at the BrickTop’s restaurant in downtown and discussed possibly buying a new home in Greenville because they wanted to live closer to a hospital. They also discussed a transgender athlete that Mr. Johnson said he saw play in a girl’s basketball game he refereed.
“It’s clearly a young boy that is bigger than all of his friend’s teammates,” Mr. Johnson said as the waiter removed the leftover deviled eggs and sweetened “Millionaire’s Bacon.” “He identifies as female, so they allowed him to play.”
Ms. Samuelson shook her head.
Then the conversation switched to how wonderful Greenville was for them.
“A conservative bubble melting pot,” Mr. Johnson said.
“It’s Christianity,” Mr. Samuelson said. “No place is more unifying for Christianity to this degree.”
The recent growth and influx of wealthier residents has forced many poorer residents out, a problem hardly unique to Greenville or the South, but hard on its Black community in particular. A 2023 study from Furman University found that Greenville has seen a 22 percent decline in its Black population since 1990, while the city’s overall population has grown by about 21 percent.
“Wealthy white families are moving into historically Black neighborhoods that ring the City of Greenville,” the study found. “Their newfound interest in places they once avoided is increasing property values beyond what the existing Black population can afford.”
Downtown Greenville, one of the biggest selling points for real estate agents, is also driving up the values of nearby homes as it continues to grow and draw crowds. On a recent Saturday night, brassy notes from saxophonists oozed from sidewalks as couples danced below treetops drizzled with dangling lights.
Similar scenes have captivated many newcomers, including Curt and Liz Cutler and their 10-year-old daughter. Mr. Cutler was fired from his sanitation job in New York City in 2021, he said, after refusing to comply with the city’s coronavirus vaccine mandate for government employees. He served as a deacon in his Baptist church there, he said, but his request for a religious exemption was denied.
They had traveled 700 miles southward, spent $350,000 on a home outside Spartanburg, painted the interior walls a pumpkin-cream shade and built a den for their chickens. They had trusted their real estate agent’s promise of a Christian, conservative America, and on a recent Sunday, the family worshiped at a Baptist church, thanking God for their new home.
“Blessed shall be you by the city,” the pastor said. “And blessed shall be you by the country.”
UK Mulls New Curbs on Outbound Investment Over Security Risks – BNN Bloomberg
Auston Matthews denied 70th goal as depleted Leafs lose last regular-season game – Toronto Sun
BC short-term rental rules take effect May 1 – CityNews Vancouver
Collection of First Nations art stolen from Gordon Head home – Times Colonist
Benjamin Bergen: Why would anyone invest in Canada now? – National Post
Save $700 Off This 4K Projector at Amazon While You Still Can – CNET
'Kingdom Come: Deliverance II' Revealed In Epic New Trailer And It Looks Incredible – Forbes
Jeremy Hansen – The Canadian Encyclopedia
Comments