Local real estate investors across the country are uniquely positioned to help alleviate the significant shortage of homes available to low- to mid-income families. They work closely with private lenders and capital providers who enable and encourage the delivery of updated affordable housing.
The severe lack of quality affordable housing in the U.S. market is unmistakable. A National Association of Realtors report shows new housing construction in the U.S. over the past 20 years fell 5.5 million units below historical levels, and in the past decade, new home construction fell 6.8 million units short of what is needed to meet household formation growth and normal reductions to housing inventory. The data also shows that for every 100 low-income households, there are only 37 affordable and available rental homes.
While the pressure placed on those in need of affordable housing options was already immense, the COVID-19 pandemic only made the problem worse for those in need of affordable housing as the sudden and sustained flight from city centers combined with new migration patterns to raise prices on homes that were previously accessible to those with lower incomes.
But with challenges come opportunities. Local investors, with their grass roots insight to the local markets are able to meet the housing needs of their communities by improving outdated housing stock, converting industrial and retail properties into residential units, converting single-family properties into multifamily properties, and starting new ground-up construction. In turn, they create additional opportunities for members in their communities by hiring local and promoting economic activity in the areas where they invest.
By specifically focusing on affordable housing, real estate investors often generate secondary and tertiary benefits for the communities in which they operate and are critical to the affordable housing solution as they are on the ground in underserved areas and have visibility into each neighborhood’s unique background, obstacles, and solutions for improvement. They can often shorten the learning curve for the ultimate home buyers with respect to credit improvement and the benefits and opportunities of home ownership.
One such investor is Mohin Abedin, who is intimately familiar with the need for affordable housing – and has been committed to a solution since he was 19 years old. Raised in Elizabeth, New Jersey by his father, an immigrant from Bangladesh, Mohin grew up seeing lower income families being gradually pushed out of neighborhoods that for generations served as starting points for minority groups and immigrants from Asia, Africa, the Caribbean and Latin America. He especially took note of nearby Newark, a city that has been experiencing a rapid transition from low-income rentals to higher priced units – displacing long-standing communities with no path to affordable options or home ownership.
Having taken an internship while enrolled at Farleigh Dickenson University with a real estate finance firm, Mohin decided to take matters into his own hands. Not willing to wait, he dropped out of college and started his own home renovation investment business.
To date, Mohin has deployed more than $3.6 million to rehabilitate and stabilize 23 homes in Newark, typically for families with an average household income of $44,000 (well below the U.S. national average of $78,000). His investment almost doubled property values – from an aggregate of $3.8mm to $6mm within an average of one year.
But Mohin’s returns are measured in much more than simple dollar amounts, and what sets him apart is his focus on the local community. Mohin understands that renovating previously dilapidated homes can not only have a positive impact on residents and the overall aesthetic of the neighborhood but can also serve as a springboard for broader community engagement, employment, and education about upward mobility.
Instead of looking outside the community to realize higher rent or resale value, Mohin actively seeks out members of the Newark community in need of affordable housing, particularly historically disadvantaged groups such as immigrants and persons of color. In most cases, Mohin rents his rehabilitated properties and remains engaged with his tenants as a way to educate them on the process and merits of home ownership. He provides credit counseling, financial planning, mortgage brokering and other services that enable tenants to improve their financial standing to the point where they may remain in their homes as first-time buyers.
For each project, he makes an effort to hire locally at every level, including skilled labor and craftsman to conduct the renovation itself in addition to ancillary work including clean up, landscaping, debris removal and property security. Thanks to his efforts, Mohin has seen immediate and significant improvements to neighborhoods in Newark following these renovations and continues to expand his engagement by interacting further with the local community.
Investors like Mohin need ready access to capital to fund their projects, and experienced partners offering predictable loan structures and underwriting to meet the timing and transaction needs of the market. These could be bridge loans for rehab or non-rehab projects, ground up construction loans, intermediate loans or long-term loans.
Toorak Capital Partners works with lenders across the country, who in turn provide loans to investors like Mohin. Once local lenders have issued these loans, Toorak purchases them, freeing up capital for more loans to local entrepreneurs, who in turn work on more projects that increase housing inventory. This sustainable flow of capital equates to more engagement in disadvantaged areas, more home ownership, and improvement in overall quality of life based on organic, community-focused growth rather than gentrification.
Toorak funded Abedin’s work in Newark, which is just one part of the company’s larger impact on the affordable housing market. Since 2016, the firm has funded over $7 billion of loans for thousands of real estate investors across the country, who have renovated or stabilized approximately 30,000 units for families. Over 85% of the units funded by Toorak’s bridge loans are considered affordable, with the average value per unit of less than $400,000. These investments – and the local entrepreneurs like Mohin workings on projects – serve to help communities and residents by providing new and improved affordable housing, repairing unsafe or unhealthy housing conditions, and improving quality of life in under-served communities.
John Beacham is the CEO and founder of Toorak Capital Partners. Prior to Toorak, John was the founder and President of B2R Finance, the leading mortgage origination company focused on the single-family rental and residential bridge loan markets. John led Deutsche Bank’s single-family rental lending practice where he structured the first-ever securitization of single-family rental properties. In total, John has completed more than $50 billion in transactions and has structured financings which won CMBS or structured finance Deal of the Year awards four times. John graduated from Princeton University magna cum laude with an A.B. degree in economics.