Pent up housing demand means golden time for real estate investors

Quick, how many US apartments have three bedrooms?

Pent up housing demand means golden time for real estate investors

This article was produced in partnership with Acra Lending.

Desmond Devoy, of Mortgage Professional America, sat down with Jeffrey Lemieux, managing director, correspondent lending, Acra Lending, about why his company is well capitalized, and why high demand for houses means that this is a good time for real estate investors.

People still need a place to live.

Which is why, even with the volatility of the real estate sector, it remains a great vehicle for investors.

“There’s a significant demand for rental properties,” said Jeffrey Lemieux (pictured), managing director, correspondent lending & investor loans division, at Acra Lending. “That’s primarily due to the continuing housing shortage. Ten percent (10%) of all apartment buildings ever built in the United States had a third bedroom. So, that forces people into single family home ownership, because we’re human beings. We have children, we need a third bedroom.”

Houses are not getting built fast enough to satisfy the demand, he noted. That “really speaks to why it’s continuing to be good for people buying and investing in properties.” Higher interest rates also mean that “fewer people can afford to own a home,” which is “creating even more demand as a result,” Lemieux said. “So, they’re going to need to go to the default solution, which is to rent a home. So, the interest rate environment is really also driving the greater demand for rental properties.”

Rising interest rates also means that fewer people may qualify for a mortgage, which is where private lenders like Acra come in.

“Acra is a leader in the private lending sector,” said Lemieux. “We have a very strong balance sheet and we’re well capitalized. That is paramount in order for a company to be there for its customers. You’ve got to be well capitalized, particularly in the private lending space.”

Acra has a wide range of products, from non-QM loans, DSCR loans and bridge loans, and even multi-family loans.

The investor loan division did a soft launch in the fourth quarter of 2021, with a material launch in the third quarter of 2022.

“We continue to grow and produce more loans every month and the division is about five to 10% of the total loan volume of the company,” Lemieux said. “The goal is to get that production as high as 25%.” In round numbers, he would like to see the division get to between $50 and $75 million within the next year.

While home renovation events and shows continue to be popular, Acra’s Investor loans are intended for more experienced investors.

“The division I manage only originates business purpose loans lending to entities,” Lemieux explained. “Acra has a separate division originating consumer loans.”

Acra looks at the overall cash flow of a property from a business perspective, whether it is a DSCR or a bridge loan.

“What can that property produce relative to the loan amount we’re giving,” Lemieux said. The most challenging loans tend to be bridge loans: “You’ve got to evaluate the draw, relative to the P&I. You’ve got to make sure you’ve got lien releases, permits, etc. Then, it’s all a process to try and help that borrower get the rehabilitation work done, in a timely manner, so they can turn that property into one that is generating cash flow.”

Another way to generate cash flow? Come work for Acra. “We’re always looking for loan originators,” he said. “We’re constantly looking for best-in-class, experienced salespeople. We’d like folks to reach out to us if they’re looking for work.” for these remote positions. “Generally, it helps for them to be in the market in which they have relationships,” Lemieux stressed.