HomeUnion wants to level the playing field for smaller investors, helping them compete with institutional giants to identify bargain-priced single-family rental properties in markets around the country, and then buy and manage them from afar.
Institutional investors try to make a killing by snatching up undervalued homes and renting them out. But it can be harder for smaller investors to get in on the action if they don’t live near the markets with the best deals, or don’t want to be landlords.
HomeUnion lets investors buy real estate in 15 areas around the country that the company has deemed favorable for single-family rental plays using algorithms and some on-the-ground research. Investors can buy properties in cash, or use financing provided by HomeUnion or a lender.
The Irvine, California-based company, which plans to expand soon into 10 more markets, is out “to characterize and profile real estate as you’re used to seeing other assets in the stock market,” said CEO Don Ganguly.
HomeUnion is a broker in each of its investment markets, employing salaried real estate agents to find and bid on properties when a client is ready to pull the trigger.
If an investor gives the go-ahead for HomeUnion to purchase a home but the home is sold to another buyer, the company will continue to bid for a similar home, Ganguly said.
Clients can coast after making a purchase, as monthly revenue and performance reports roll in thanks to HomeUnion handling upkeep and rent collection.
“We’re actually staying on the hook for the management of that asset,” Ganguly said.
When an investor wants to sell, HomeUnion handles that, too. For now, its agents will list and market properties its investors are ready to sell, but the plan is to build a marketplace where HomeUnion clients can purchase properties from each other.
When the marketplace is up and running, a client who purchased a home for $100,000 to earn a 7 percent return after expenses might be able to sell that property for $110,000 to another HomeUnion client comfortable with earning a 6 percent return, Ganguly said.
The concept is somewhat similar to a platform envisioned by crowdfunder PRIMARQ, which, if all goes according to plan, will let investors buy and sell stakes in homes (Ganguly said HomeUnion has had “some conversations” with PRIMARQ).
Crowdfunding is the next step for HomeUnion. When rules governing the financing method become clearer, the company will bundle single-family rental properties into portfolios and sell stakes in those portfolios to investors.
The company’s approach will differ somewhat from other real estate crowdfunders in that it plans to sell slices of packages of homes, not slices of individual homes. Nor will it pass the responsibility for managing properties onto a sponsor. The company will handle that itself.