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Frequently Asked Questions
What type of investments does HomeUnion offer?
We primarily offer investment opportunities in one to four-unit single-family rental real estate. Properties may be brand new “Build to Rent” investments or existing properties in HomeUnion identified Real Estate Investment Locations. Our website and our Real Estate Solutions Specialists can help you select properties that fit your investment needs.
What is a Real Estate Investment Location?
A Real Estate Investment Location is a neighborhood or a set of neighborhoods where there are investment properties that produce positive monthly income after deducting all expenses including mortgage payments. However, the location has to meet a number of other criteria such as employment, median income, area comps, access to mass transit, quality of schools, employer diversity, average tenancy and more. HomeUnion determines if a neighborhood fits our definition through extensive use of our proprietary algorithms and ‘boots on the ground’ research.
What are the specific benefits of using HomeUnion over other, similar providers?
There is no one else today that offers a hands- free fully managed service with the geographic diversity that we provide our investors. We take the complexity out of investing in real estate so that many more people can participate. We combine the power of technology with the experience of on the ground management to make the investing experience simple and transparent.
What is fully managed?
- Management and oversight of all investment properties – We ensure that properties are rehabbed and brought up to HomeUnion standards so that repairs and maintenance are minimized over the life of the investment.
We enforce best practices on tenant recruitment and screening.
- We monitor the health of the property throughout the investment period. We drive standards and economies of scale for purchasing and cost efficiencies.Comprehensive asset protection – Warranty on all major appliances in the home. The investor has minimum out of pocket expenses for maintenance visits. All else is covered as part of the Asset Management agreement. Routine property inspections to ensure proper upkeep of the property. Early detection of tenant misuse is a big loss prevention measure.
- Portfolio Reporting and Accounting – Monthly reporting on the performance of your real estate investments. Key information on markets where you have investment properties.
Insider ‘first look’ at new opportunities and markets. Preparation of K1s, tax services (charges may apply) and other annual summary documents.
Does HomeUnion charge a fee to investors?
Investors do not pay a fee to register with HomeUnion or to search our database of available investment properties. We do charge an asset acquisition fee to cover all the services we provide to identify and acquire the asset. We also charge an asset management fee for the oversight and management of each investment property under management.
To learn more about our fees and all the services we provide, please contact us at 866-732-3220.
How is investing with HomeUnion different than a Real Estate Investment Trust (REIT)?
Although a REIT (Real Estate Investment Trust) invests in real estate there are many ways in which Real Estate crowdfunding is different from a REIT. In a REIT you don’t choose the real estate investments, with HomeUnion you do. You have visibility and choice. A REIT tracks very closely to the stock market so you really don’t get real diversification; it’s the same roller coaster. When interests change or the Fed says something the stock price of a REIT may change, as they are a fixed income play- even though the underlying real estate values haven’t changed.
Investing directly in real estate isn’t encumbered with the fundraising expenses or the heavy management overhead of a REIT. REITS often need to buy in bulk and frequently have to pick some bad with the good. In direct investing, you can be selective and take only the best properties.
How do I know the price of the property is fair? Some estimates online show it's worth less than you're showing.
Most estimates do not always reflect the right pricing. Most state that they do not have details on what improvements were made to a property and requests owners to update those details. In many of these investment locations, we have access to the most recent sales that serve as a more accurate comparison. Some properties we offer are bought and then refreshed so it is difficult for the right price to be reflected by many of the online valuation models.
What expenses are considered in the expected returns you provide?
We deduct the following expenses to project your return:
- Property insurance
- Vacancy provision – Our projections include a 6% vacancy provision, as we prefer to project returns conservatively. While we don’t actually take out this amount, we recommend you set aside 6% of rent each month in case a vacancy does occur.
- Maintenance provision – Like the vacancy provision, our projections also include an 8% maintenance provision. Similarly, we do not collect this amount, but recommend you set it aside in case there are any future maintenance needs.
- Asset management fees
How do I know things won't break right after I buy the property?
A full inspection is done on every property prior to the purchase and all documented repair requirements are made. We know the life of all major elements like the roof, HVAC etc. so that a decision can be made to replace these prior to purchase if required. If the property is being refreshed, it’s done to a certain set of standards. We get all repairs documented (in some cases the city requires it) before the house is purchased. The investor pays for the inspection but we do have independent licensed inspectors in all our investment locations.
Does HomeUnion own the property or does the investor?
The investor owns the property. HomeUnion helps identify and acquire the property on your behalf, but the investor own the title outright. To learn more about the acquisition process, sign up for a consultation with one of our Solutions Managers.
What are HomeUnion Fees?
Since HomeUnion handles the whole process of identification, acquisition, and property management, our fees are broken into two – Asset Acquisition (3.5% of the purchase price) and Asset Management (10.5% of monthly rent). These are minimal fees for all the time and effort we save you. Each property in our investor portal has our fees built into the Yield.
Is the HomeUnion website and my data secure?
We use a combination of firewall barriers, encryption techniques and authentication procedures, among others, to maintain the security of your online session and all HomeUnion.com accounts and systems from unauthorized access. When you register with us, we require a password from you for your privacy and security. We transmit your buy/ sell/ manage transaction data securely and our servers are in a secure facility. Access requires multiple levels of authentication. Our databases are protected from general employee access both physically and logically. We encrypt your password so that your password cannot be recovered, even by us. All backup data are also encrypted.
Real Estate Investing Questions
How do single-family real estate investments perform across different market cycles?
In general single-family real estate performs fairly well across all market cycles. In a growing economy with good employment the house prices tend to do well which would raise the value of your investment. Rising employment creates more households that help both home buying and renting. If prices go up rapidly then you will make less money from cash flow and more from appreciation.
Rents go up in inflationary times and act as an inflation hedge. In a soft economy more people tend to rent rather than buy and there is a softening of home price growth- in this scenario, you will see more cash flow and less appreciation. Of course, a major housing crash will diminish the value of your property, which will only affect you if you are looking to sell your property at that time.
Do I get a better return than the stock market? What's the advantage of this type of investment over the stock market?
It’s difficult to compare returns; it depends on the economic environment during time periods. There are periods when one outperforms the other. Real estate is an alternate asset class that does not have a correlation to the stock market. The stock market tends to react to many real-time triggers such as Fed’s comments or the latest unemployment reports or emerging market slowdowns. In addition, automated trading machines make it difficult for the real investor to time market entry and exits. Our clients invest in real estate to diversify from the stock market and balance their risk so that they don’t have all their eggs in one basket.
Are these investments risky?
As with all investments, there is some inherent risk. Just as with investing in the stock market, there are no guarantees. The major risk elements are vacancy, maintenance expenses and trying to sell in a down real estate market. In general, real estate has less volatility than the stock market.
Will my property appreciate?
It is always difficult to predict the future. We use a proprietary forecasting model that looks at employment, historical appreciation, new construction starts and a number of other factors that are neighborhood specific to come up with a Home Appreciation Forecast and only recommend properties in markets where we expect to see solid appreciation numbers. In general, the best cash flow investment locations are the ones that do not have great swings with economic cycles.
Identifying Good Investment Properties
How do I know the properties that HomeUnion selects are good investments?
We go through a rigorous due diligence and certification process to find the investment properties we recommend. We analyze over 50 criteria when selecting an investment location- such as crime, schools, employers, median income, rent to price ratio; availability of local resources for management and more. Furthermore, we deploy boots on the ground in the form of local managers; some have as many as 20+ years in their location to make sure the properties are sound and remain that way through the lifetime of your investment. There is no guarantee that any investment will reach any barometer of performance.
What type of neighborhoods am I buying in?
The properties we recommend tend to be in good middle-class neighborhoods. High-end neighborhoods do not provide as good of cash flow as home values are generally high compared to rents. A lower price neighborhood may produce good cash flow but will not have tenant stability, as lower income earners are the first to be affected in any local downturn. Therefore, we usually source properties that provide the maximum return on your investment, which means properties with high purchase-to-rental ratios in areas that are economically viable and will continue to be for the foreseeable future.
How does HomeUnion help me select the right investment property?
We first try to understand your financial goals, investment method (IRA, cash, loan), risk tolerance and any other preferences that you may have by asking you a few simple questions. We use the answers you provide to create a personalized investment portfolio that fits your needs using our proprietary real estate investment algorithms. Our Solutions Specialists then work with you every step of the way to select final properties. We deliver a hands-free investment experience for our investors.
Why do some homes produce more cash flow than others?
The best opportunities are when rents on a house are high compared to its purchase price. We have spent years identifying these opportunities exclusively for our investors. For example, a $70,000 house in Memphis, TN rents for $950 per month, and a $500,000 house in Irvine, CA rents for $2500 a month.
Therefore, the investor would be better served by buying seven comparable homes in Memphis, netting $6650 in rent instead of the $2500 that the one in Irvine would get. With us you don’t have to put all your eggs in Memphis either, we offer many similar locations across the country.
How do I know that you haven't just put a tenant in for purposes of selling the property?
It wouldn’t benefit us to do so. As a business, we would quickly get a bad reputation if we did so and as the ongoing property manager, it would add a lot of additional work. It is far easier to follow best practices for screening and marketing so that we get the best, long lasting tenants. But don’t take our word for it, we’re happy to connect you with many of our satisfied investor clients.
Asset Management Questions
Who manages the property?
While customers may utilize other property managers, HomeUnion is a one-stop shop and is capable of managing all aspects of the property for our investors. We employ consultants and asset managers to ensure that our investors have the most consistent experience across all their properties and markets.
How do I know the amount being charged for rent is right?
We look at rent comps in the neighborhood for similar houses to determine the rents. Our managers typically manage hundreds of homes in the neighborhood so we have good local rental data for comparison. We make sure rents are set competitively to attract the best tenants.
What happens if the tenant leaves?
If you use our property management services, we take responsibility for all management. If the tenant leaves, the property is refreshed and any damage comes out of the tenant’s deposit. The property is marketed to get another tenant. We charge 75% of the first month’s rent for marketing and tenant identification and vetting.
How long do properties stay vacant after a tenant leaves?
We pick locations based on good employment and neighborhoods that renters like to live in, so that vacancies can be minimized. Fifteen to forty-five days are normal although it may vary by location and the state of the local economy.
Selling Your Investment Property
What happens when I want to sell the property?
We can market the property to another investor through the HomeUnion network. If the property has been held for a little while it will have a history as a performing asset and will be attractive to other investors. You are of course free to sell it yourself to whomsoever that you choose in the open market. The good news is that it can be easily marketed to another investor or a homeowner.
I have an investment property I am interested in selling. How can I get it listed on HomeUnion?
Please contact firstname.lastname@example.org. Your property must meet certain criteria and be located in an investment location certified by HomeUnion where it offers asset management services.