CoreVest Finance is about as niche as you can get
Before we start, let’s clarify what CoreVest does: commercial loans for residential properties. Not loans on commercial property, not straight residential loans, but commercial, business-purpose products for single-family rental properties.
This is a unique niche, and even professionals within the mortgage industry sometimes misunderstand their focus.
“It’s kind of like we’re the stepchild in this whole business,” said Tuan Pham, senior vice president of marketing at CoreVest. “The folks that we exist to serve are investors in residential property. It’s something that is not new in terms of a business, but it’s new in terms of financing for that on a very private larger scale. What they’ve been able to get is relatively new.”
CoreVest was founded in 2014. They’ve financed nearly 30,000 properties, approaching $4 billion in closed loans. Their approach, Pham said, is slow and steady. It’s geared to what investors need and takes a hard look at the underwriting, the business plan, and the property itself to determine the viability of the loan.
When it comes to financing, CoreVest is kind of in a sweet spot.
“We’re close to the conventional loan at the lower rate, and we’re definitely under the hard money loan interest rate . . . I would consider us private money but more like soft money, we’re definitely not a hard money lender for sure,” Pham said.
That distinction helps a lot of mortgage brokers whose investors may have originally gotten a friends-and-family type deal or they went to a hard money lender in order to get property quickly and now want to refinance at a lower rate for a longer term.
Mortgage originators and brokers provide CoreVest with a growing number of their borrowers, even though they do work with individual investors directly. The availability of “soft money” lending could be an opportunity for many brokers to get into the investment space, seeing as how refinances have slowed to a trickle and there’s room in the pipeline for other types of clients.
Most of the investors who work with CoreVest have financed between 15-100 properties, but the company has a number of products and programs for a variety of experience levels that are custom-tailored to investor needs. For mortgage brokers who work with small-scale investors, CoreVest offers a single rental loan product and the single project bridge loan, which helps investors who are working on one property at a time, often with a purchase and renovate or a fix and flip strategy.
The Broker+ partner program works with those who are doing volume on the smaller side; the wholesale partner program deals with a larger volume, and then CoreVest has a correspondent level program, which works with lending houses that deal with the loan from start to finish and CoreVest underwrites the loans.
This summer, CoreVest launched Build-To-Rent Complete, which provides construction financing for the development of new rental properties along with long-term financing once the projects have been completed and stabilized. With loan sizes ranging from $3 to $25 million, the Build-to-Rent Complete program is really for the experienced investor, who’s already done a number of fix and flips and smaller portfolio-type projects.
“They’re getting to a point where they’re so comfortable with their investment strategy and their investment area that they want to build to rent as a long-term hold type of strategy. So this project helps them do that, where it starts out as kind of a bridge loan to help build the property, and then it’s converted into a long-term product, which is our rental product,” Pham said.
There isn’t a lot of data for this particular market, but according to the 2017 American Community survey, single family homes comprised 34.5% of all 43.4 million rental residences, for a total of around 15 million units—and that’s expected to grow in the coming years. There’s trillions of dollars at stake, and given that the vast majority of investment properties are owned by individual investors as opposed to large institutional players, the market is friendly for even more investors to get into rental property on a large scale.
Pham says that there was a huge influx in institutional capital because players started realizing the potential, but the handy individuals who know their community and realized the opportunity have always been there. Everyone’s chasing after owner-occupied borrowers, but there are a lot of untapped investors nationwide.
“They’re buying a lot quicker than an owner-occupied person. [Owner-occupied borrowers] buy a house . . . will probably live in it for five years, and then maybe they’ll go get another one. But these investors are doing several properties a year. So for the originator, getting involved with these folks makes sense for them just based on the sheer multiplier effect,” he said.
