How one established lender is helping address current housing demand
This article was produced in partnership with RCN Capital
Karen Surca of Mortgage Professional America sat down with Justin Parker, chief financial officer with RCN Capital to discuss types of private loan products that address the needs of private investors while tapping into the current housing demand.
It is an interesting time in the housing market. Although the worst of the pandemic is behind us, there exists an overarching issue in the mortgage sector that has become increasingly pressing due to converging market conditions, namely a distinct housing shortage.
Current market conditions have created a perfect storm. With home price appreciation (HPA) and historically low mortgage rates a continuing reality, the prospect of owning a home for many, has become a dream that may not easily come true.
Throw in the reality that the US is facing a real housing shortage with demand far outstripping the supply of available properties and those in the mortgage sector are left looking for solutions.
RCN Capital views this current housing shortage as a golden opportunity. As Justin Parker, chief financial officer with RCN Capital explained, by focusing on providing the private financing needed for investors to either restore distressed homes or build new properties for rental purposes, not only are the market conditions working in the investor’s favor, but any investment will help to address the housing shortage.
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“If you look at what’s going on in the macro-economic environment. We are seeing historically low-interest rate levels and although it is probably hitting its floor and starting to go up, prices are still exponentially going up. This is an amazing opportunity for people to go out and scale their portfolios at the lowest cost of capital they have ever been,” Parker stated.
Fix and flip to new construction opportunities
To further illustrate RCN’s key role, Parker pointed out that “many are waiting until the price is at a level that gives them comfort. There are unique opportunities that exist within our space (private lending). Our space right now is thriving,” Parker emphasized.
Available inventory is tending to be older homes that may need renovations and fixups to be up to rental standards. There is also plenty of opportunities in the current housing market for different forms of new constructions that require private financing to get off the ground.
“We have construction that needs vertical integrations throughout the country. This is also creating a unique opportunity for lenders such as ourselves. We can offer that financing or those monies to help scale and fit that need. This, in turn, provides housing in the US to normalize the home price appreciation (HPA) that we have seen,” Parker emphasized.
Given the current real estate climate, key products provided by RCN Capital are receiving considerable attention from both private investors and brokers who are now more than cognizant of the likely investment potential they can offer.
Parker pinpointed three lending options that have seen a marked uptick in interest; Fix and Flip, new construction, and build to Rent.
“There is a tremendous opportunity that exists around the US right now for those Fix and Flip products that we are known for,” Parker illustrated.
When it comes to the innovative Build to Rent product Parker is equally as enthusiastic.
“The beauty of Build to Rent is that it combines both elements in that provides the ground-up construction financing as well as the rental financing all in one. This gives the ability to be able to give people multiple alternatives, multiple business strategies, VR financing which helps scale portfolios and find solutions to their investment needs,” Parker added.
By investing in one of these lending products, RCN Capital can play its part in addressing the overall housing demand, Parker highlighted. With rental demand continuing to go up this type of financing represents an attractive proposition for both the investor and those individuals who need to find a place to call home.
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As Parker outlined RCN’s “primary focus as a lender is to make sure that we are providing a different alternative from a financing perspective to help fit the needs of really anything that exists right now. We offer ground-up construction and provide the level opportunity.
Parker illustrates this point by providing the example of how a fix and flip product could represent fixing up and flipping a house to sell for a family that is looking to buy their first home.
In this case, not only does the house turn a profit for the investor, but it also profits the family who may not have been able to get a foot on the property ladder. It is examples like this that leave RCN Capital feeling optimistic about their lending options. The net result is helping to directly tackle the current housing shortage, Parker concluded.
How will things evolve?
“We are living in a unique time. I think the most important consideration every day is to find solutions to fit those problems and for us to be flexible enough in what we proved to give people the level of confidence knowing they have a partner in RCN,” Parker pointed out.
With the likelihood of housing continuing to appreciate and rates creeping back up slowly, the market continues to be in the investor's favor. Parker predicted that the trend towards renting for many also shows little signs of slowing down. For private lenders, this only highlights the opportunities presenting themselves and the chance to help with housing demands.
“Every market is different. Every opportunity is different. To have somebody that can pivot and provide the tools necessary to meet whatever the demand might be. This is where we (RCN Capital) excel and where we try to put most of our attention,” Parker concluded.
Justin Parker currently holds the position of CFO for RCN Capital. While assuming duties related to economic initiatives within RCN Capital, Parker works closely with investors and brokers to find the best products to meet their financial objectives. Prior to assuming the role of CFO for RCN Capital Parker held the role of vice president of treasury for four years.
