The WIN survey from Velocity Capital Mortgage provides insight into the interests and behaviors of investors, as well as what they want in a mortgage broker
Feuds typically aren’t positive thing. At NAMB National 2019, however, originators and executives participated in the “Funding Feud,” sponsored by Velocity Mortgage Capital and hosted by actor and television personality John O’Hurley.
The entertaining presentation was also informative, as the data used for the “Funding Feud” was from Velocity’s WIN (What Investors Need) quantitative research survey. The survey featured interviews conducted with almost 300 independent residential and small commercial property investors gives brokers insights into the needs, interests and behaviors of their potential clients.
“Independent real estate investors and small business owners play a key role in helping communities grow and prosper, and Velocity’s WIN research helps brokers increase their businesses by providing an understanding of how investors find, evaluate, and select investment properties, brokers and financing solutions,” said Michael Oddi, Chief Marketing Officer for Velocity Mortgage. “We commissioned the WIN survey for the benefit of brokers and are happy to support their businesses with its findings and our subsequent analysis.”
There are a lot of direct lenders in the private lending space, but Oddi said that Velocity’s investors need more than just great products; they need people who they can talk to about their business, i.e., mortgage brokers. With that in mind, the basis of the research was to ask investors how they find investment properties and how they determine the viability of that purchase. Investors were also asked how they found a mortgage broker and what qualities a mortgage broker must have in order to do business with them.
Mortgage brokers can feel particularly good about several survey results, including the fact that at 65%, Velocity investors are nearly two times more likely to work with an independent mortgage broker than other investors at 34%. This ratio nearly reverses for other investors, who prefer to use a large bank, at 45%, versus Velocity investors at 27%.
The survey also found that single-family homes are the most common type of investment property. Six out of ten independent real estate investors own a single family home used for investment purposes (SFI) that is used to produce rental income. Most brokers operate in single-family residential lending, which Oddi points out is the same property, simply used for a different purpose. The broker knowledge is already there, and if those brokers could team up with some of those investors working in single-family units, they could keep their business going when external factors impact their output.
“Instead of being forced to do something that you don't want to do, if you diversify what you're doing, and you do it simultaneously, then you can keep your regular business going,” Oddi said. “You do some [residential] over here, and when this dries up, you do more [investment properties]. And typically when residential dries up, it drives rental business because if you can't afford a house, you got to live someplace.”
Other results from the WIN survey on investors include:
- When combined, residential 1-4 properties, which include single family units, condominiums, townhomes and apartment buildings with less than five units, are by far the most popular types of investment properties among independent real estate investors.
- About 11% of independent real estate investors own a multi-family property with 5+ units with a value that is less than $10 million.
- Mixed-use buildings, composed of commercial and residential units, account for 4% of investment properties.
- Small commercial buildings valued at less than $10 million account for 13% of investment properties.
- 60% of investors rely on the assistance of a real estate agent to find investment properties; however, age plays an important role in the adoption of other methods.
- Investors under age 55 are 38% more likely to engage with online listing sites and are 33% more likely to use an Internet search engine when researching investment properties.
- Investors over age 55 are 67% more likely to utilize real estate auctions and 20% more likely to consult with a friend when looking for investment properties.
Although nine out of 10 investors state that the interest rate is the most important factor when considering an investment property loan, Oddi says brokers should take another route when finding opportunities to talk to brokers, and that’s focusing on their ‘why.’ Only when brokers know what investors need can they determine how to help.
“Don't focus on the fact that you offer mortgages, don't focus on the fact that it's a loan with an interest rate that's blah, blah, blah, blah, blah, and it's got this repayment program, or whatever it is. If you focus on the property of the product aspects of something, you're not going to get the attention of investors, and they're not going to want to come flock to your door to help you out. But if you show them that you understand their business, you understand their needs, and that you can help them with sort of a business solution,” Oddi said.
The Funding Feud was an engaging way to share knowledge gleaned from the WIN survey with an audience of mortgage brokers, some of whom will take that information and tap into a lot of new investor business.
“The Funding Feud was entertaining, fun, and highly educational,” said Kimber White, incoming president of NAMB. “Even though I’ve been in the mortgage business for over 30 years, I learned some important facts about real estate investors that I never knew.”
