Older homes provide the keys to unlocking California’s housing supply crisis.
Much of the rhetoric around the issue revolves around the need to build more homes to increase supply and solve affordability.
Yet the most obvious solution to the problem is hiding in plain sight.
A growing body of research suggests that millions of potentially affordable homes already exist throughout the state and indeed the entire country.
Many simply require investment and renovation to restore them to a level where they again became desirable.
It creates a major untapped opportunity for value-add investors, developers and private lenders.
All operators need is access to the capital to transform them.
America’s housing stock levels
Not all housing solutions require ground-up construction.
Bloomberg reports that America has approximately 22 million affordable homes within existing housing stock.
American Community Survey data reveals that the median age of owner-occupied homes in the US is now greater than 40 years old.
California alone contains substantial aging housing inventory built in the post-war suburban expansion era from the 1940s-1980s.
Many of these homes remain structurally sound and represent viable housing inventory.
But they require restoration and have been overlooked by many buyers because:
- they are functionally obsolete
- they have been poorly maintained
- they no longer meet modern buyer expectations
- they have been under-utilized or even abandoned
The significance of older homes in California
California’s affordability challenges make value-add housing increasingly important.
Depending on the source and methodology, the state faces an estimated housing shortage of anywhere between 2-4 million homes.
Ground up constructions in California face a number of challenges including:
- zoning constraints
- permitting delays
- labor shortages
- environmental regulatory compliance
- high construction costs
- infrastructure bottlenecks
Hence revitalizing older homes is often materially faster and cheaper than building new housing inventory.
It’s the perfect opportunity for flippers, infill developers, ADU builders and transitional housing operators to line their pockets while addressing the housing shortage.
The role of value-add investors
Experienced flippers and investors have an important role to play in easing the housing supply problem.
They double as revitalization specialists within local housing markets by creating value where it previously didn’t exist.
But execution is critical when it comes to crystallizing that value.
Financing and discipline are also needed to protect margins.
A poorly designed and executed flip creates more problems than it solves.
But when done well, a successful value-add project may:
- improve housing quality
- extend the life of existing inventory
- enhance neighborhood appeal
- create more functional housing supply without requiring the creation of brand new subdivisions
The capital gap
Many older homes do not qualify for traditional financing for a variety of reasons.
They include:
- distressed properties
- properties with deferred maintenance
- outdated layouts
- vacant homes
- properties with title complexities
- properties in unfinanceable condition
- transitional assets
Even in the event banks and other traditional lenders will offer finance for these types of properties, these lenders are often poorly suited to the projects because:
- underwriting is slower
- timelines are restrictive
- draw structures are difficult
- rehab funding is complex
- acquisitions require fast execution
That leaves many flippers and developers searching for alternative capital solutions.
The importance of flexible private capital
When it comes to value-add projects and restoring older homes, private lenders provide flexibility with which banks simply cannot compete.
Their advantages include:
- fast access to capital
- certainty of execution
- fast closings (7-14 days)
- draw flexibility which is critical during rehab
They can do this because private lenders typically underwrite based on the asset and project plan rather than weeks of income verification and a committee review.
A bank loan could take up to two months for approval.
This risks the loss of any deal.
Banks don’t like lending on distressed or non-stablized properties or where California entitlement or construction risk exists.
Without private capital, many aging properties would remain in a distressed state, obsolete or permanently vacated.
Flexible financing helps transform those projects from underutilized assets into functioning housing stock.
Get finance and support today
New housing development is still needed in California – of that, there can be no doubt.
But the restoration of older homes plays a vital role in the solution to California’s housing supply crisis.
The narrative around that solution typically includes the input of developers, policymakers and affordability advocates.
Too often, the actual source of the capital enabling the rehabilitation of older homes is overlooked.
That’s where Equidy can help.
Equidy is a hard money lender that can finance flippers and developers in as little as 48 hours.
They stand by their core belief that anything is possible and they strive to prove it every single day.
Even in difficult economic times, they are determined to reward entrepreneurship and resolve to help their clients crystallize their wealth creation dreams.
But their service is not limited to simply providing capital.
Equidy has an intimate and personal history with all aspects of property development in California and has done so for well over 40 years.
They have deep connections with California real estate entrepreneurs and are vastly experienced with all renovation-based and transitional projects.
That means they work closely with their clients, offering strategic advice to ensure their success.
Their sole focus is to help you maximize the return on your investment without putting yourself at unnecessary financial risk.
Equidy enjoys long and established relationships with serious investors, sellers and real estate professionals while leveraging their reputation and trust, using clear communication to minimize the risk to all parties.
Contact Equidy today to book your free strategy call.
