Two Questions with Chris Hoeffel, CFO


Welcome to Two Questions with Colony American Finance, where we ask team members two questions about what they do and real estate finance. With me here today is Chris Hoeffel, CFO of Colony American Finance, who is a leader in the finance industry and former president of CREFC. Chris, what trends do you see in the market that you think rental investors should be taking a closer look at? We’re at a point in time where we’ve seen many years of home price appreciation, and there’s concern among some that home prices aren’t going to continue to grow for very much longer. The nice thing though for investors in rental housing is that the demographic trends supporting rental growth are pretty significant. We anticipate that even in places where home prices may not continue to grow, rental prices will continue to grow over a long period of time. A lot of our investors are really focused on yield. The most solid growth and the most solid occupancy has been in the lower to mid-tier home values. So, instead of investing in very high-end homes which tend to be more volatile and may fluctuate in terms of performance based on housing prices, the lower to mid-tier homes are really generating pretty consistent returns. Why should mortgage professionals consider this asset class? Well, I liken the SFR market today to the commercial mortgage business back in the early nineties, that was a time when the CMBS industry was really getting started, I was fortunate enough to be part of that industry at the time and at that time the commercial mortgage securities market was in its nascent stages, they were trying to win market shares from insurance companies and banks and people weren’t sure how much growth there was in the business. It turned out to be a hundred billion dollar-a-year business. Pretty significant. Today SFR is a brand new asset class and I think there’s incredible blue sky for growth because it’s a product that didn’t exist yet there are people all across the country that need financing for their assets, so as a mortgage professional looking for an opportunity for increased business and more transactions, I think the SFR space is pretty interesting. I think anyone in the real estate business whether on the residential side or the commercial side knows people that have portfolios or single family rental properties and they often need financing. This product didn’t exist a few years ago and so people don’t even know that the financing opportunities are there. So, a mortgage professional can really generate a lot of revenue by seeking out these investors, many of whom they know already, and helping them find financing and boosting their returns. The interesting thing also is that once somebody drinks from the well, they get financing and they realized what their return opportunities are on a leveraged property they go out and buy more. And so, a mortgage professional can help a small investor become a very large investor. We’ve seen that happen over and over again. I think particularly for people who are newer to the real estate business the SFR industry creates a lot of opportunity because they can help small investors grow into larger investors and they can really create some interesting market share. Colony American finances is a specialty lender that provides loans to residential real estate investors. For more information about our portfolio term loans, single asset term loans, or acquisition credit lines, visit www.colonyamericanfinance.com

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