HomeUnion Review: A New Way to Be a Landlord
With homeownership rates at a 50-year low and more than 2,600 new renters entering the rental market every day, now is a good time to be a landlord. The financial perks are attractive: a steady income stream, valuable tax breaks and the ability to build equity, to name a few.
What many landlords don’t enjoy (or have time for), however, is the hard work: finding suitable properties, filling them with quality tenants and managing the day-to-day obligations that come with the territory. The good news: It’s possible to reap the financial benefits of being a landlord while leaving the legwork to someone else.
Perks Without the Hassles
Online real estate investment management firms have opened up a new (mostly) hassle-free world for would-be landlords. One of the largest firms is HomeUnion, which offers an end-to-end real estate solution: They will find a property based on your investment goals, help you decide the best funding option (financing, all cash, SDIRA, 1031 Exchange or Solo 401k), or acquire the home on your behalf (including submitting offers, conducting inspections and facilitating the closing) and manage any rehabs to get the property tenant-ready.
When the rehabs are complete, HomeUnion will market your new property, find tenants, collect rents and oversee the day-to-day management of the property. Of course, you’ll pay a fee for these services – in HomeUnion’s case, an Asset Acquisition fee of 3.5% of the purchase price plus an Asset Management fee of 10.5% of monthly rent – but the theory is that you’ll still come out ahead, financially speaking, and have time left for your day job, family and friends.
A New Asset Class
Real estate investment management firms have essentially opened up a new asset class in the single-family residences rentals market to small, retail investors. “What we are changing is allowing these retail investors to invest in a more institutional way,” said Don Ganguly, founder and CEO of HomeUnion.
It’s not that different from investing in any other asset class, Ganguly explains. “It’s similar to you walking into like a Fidelity, saying, ‘I’ve got to invest.’ They put you in a set of mutual funds, and they manage those funds for you,” he says. “We’ve got 100 million properties, we’ve got 200,000 neighborhoods, we’ve got 20 years of transaction data, we rank neighborhoods from A-plus to C, and they rank based on yield, risk and the amount of growth we expect, so you can take these – just like you can take an A bond or BBB bond.”
Beyond Your Backyard
Because companies like HomeUnion handle the entire process – from property search and closing, to finding tenants and managing repairs – retail investors can own and rent out properties throughout the U.S., and not just in their local real estate markets. “A retail investor didn’t have data, didn’t have a way to calibrate assets, didn’t have a way to do due diligence in neighborhoods,” says Ganguly. “If they even were able to do all that, they didn’t have a good way to go acquire that property, manage it remotely. So as a result of that, most people were investing in their own backyards.”
This broader range can be especially advantageous for would-be landlords who live in high-priced markets where buying an investment property wouldn’t be feasible – either because buying wouldn’t be an option or the cost of the investment would be too high compared to the potential returns.
The Bottom Line
Being a landlord has its perks. While the property ideally appreciates in value over time, you receive income from rents that can match or exceed your monthly mortgage payment – allowing you to build equity in the home. You may also be able to deduct, among other things, depreciation, home office expenses, insurance, property management fees, mortgage interest, and the cost of repairs and maintenance. If you've found a property that you think would be ideal for renting, use a mortgage calculator to determine the various interest rates available for your prospective loan.
Shopping around for a mortgage can save you several thousand of dollars in interest—money that you can use to tackle other expenses you may incur as a landlord
Being a landlord is also a lot of work, which is where firms like HomeUnion can help. If you're thinking about this type of real estate investment, it's worth looking into this option. The end-to-end real estate solution can make it easier – and more enjoyable – to be a landlord, in your own backyard or on the other side of the country. (See our tutorial: Real Estate Investing: A Guide and 5 Mistakes Real Estate Investors Should Avoid.)