Single-Family Redux Lending Trending

LOS ANGELES-Lending to developers who buy homes execute major renovations before selling them is a new niche for Arixa Capital Advisors, managing director and chief investment officer Jan Brzeski tells GlobeSt.com. As we reported last week, Brzeski moderated a panel discussion titled “Secondary vs. Tertiary Markets: Where Will the Prime Investment Opportunities be in 2014?” at the IMN Winter Forum on Opportunity and Real Estate Investing here in January.

“Owning real estate and operating it for income and appreciation is one strategy,” says Brzeski. “But we also have a thriving construction-lending business with some funds that lend to developers who buy a house of up to $2 million and do major renovations on it. They're somewhere between a flipper and a spec home builder. That's a business we found to be a good niche for our investors.

Brzeski adds that many financing companies such as Mesa West and Lone Oak are “doing a fantastic job lending on larger commercial real estate projects, and we've found the single-family market to be a great one. That's our thrust for 2014: short-term loans to developers.”

The single-family market has evolved to a point where there aren't as many foreclosures, but there are quite a few homes that haven't been upgraded in many years. “For successful professionals with kids who want to move into a house that's fully done and don't have time to renovate, there's a whole industry of people who are like contractors, but they're developers who buy it and sell it for a profit. That's how they get paid, and everybody wins.”

With so many savvy investors in the industry that have a considerable amount of capital invest, it's important to pick a niche that's under the radar screen of the “big guys” and lets firms like Arixa stand out, Brzeski points out. “It's necessary in order to get any kind of returns that are special and deliver real results. That's what we did.”