In today’s episode of the “Start-up of the Week,” International Finance will talk about “Avenue One,” which has emerged as a disruptive force in the US real estate sector, by professionalising the rental experience for thousands of families across the world’s largest economy.
Single-family rentals present a massive opportunity. However, investing in dispersed homes at scale can be complex. Avenue One’s tech-driven approach bridges the gap between institutional capital and local operators, enabling investing in a previously inaccessible asset class.
“Our platform integrates over 400 local partners, including brokers, contractors, title experts, and property managers. This robust ecosystem contributes vital local expertise, enabling us to curate and uphold portfolios of exceptional rental properties. Our team has extensive real estate operations and capital markets expertise, empowering every investor and local business within our ecosystem,” the venture stated.
Knowing The Company In Detail
Avenue One’s tech-driven insights and institutional-level data—rent growth, asset appreciation research, MSA relative-value research and other solutions are enabling clients to make the most informed investment and management decisions at the market and property level.
The company, founded in 2020, hit the headlines in May 2023 by achieving the “Unicorn” status after raising USD 100 million. The company’s unique business model of helping single-family landlords purchase and sell rental properties, instead of acquiring properties on their own, helped Avenue One to protect itself amid the property sector slowdown, as the high interest rate regime was hurting the purchases of rental homes.
Avenue One earmarked the 2023 funding amount to enhance its technology offering and expand an online marketplace to assist landlords in hiring service providers such as contractors and real estate agents. And yes, the funding came at a pretty tough time indeed.
In May 2023, PYMNTS noted that it was effectively impossible to buy new homes, as it wrote, “Just in time for the traditional selling season, the market experienced only a small 0.2% uptick compared to the more significant 3.7% rise the previous month, the indices found. Impacted by rising mortgage rates, home prices may be moderating as the national average slips 4.9% below its June 2022 heights, with some West Coast cities seeing negative year-over-year sales growth.”
Even though the housing sector saw a slight dip in prices, high mortgage rates and wages incompatible with inflation still made homebuying a tough option for many.
Solutions Offered By Avenue One
Avenue One’s platform connects institutional debt and equity capital to local operating partners and property owners, enabling transparent and efficient large-scale investments in single-family rentals. A crucial part of its operational ecosystem is providing “Portfolio Loans,” designed for single-family homes. These portfolio loans are fast and dependable lending solutions for real estate investors nationwide.
These real estate lending products are divided into two parts: Bridge and SFR Portfolio Loans. The Bridge is further divided into three sub-types. “Bridge: In Progress” deals with “New Build Communities,” that are over 75% complete and need additional time to finish construction for retail sale or long-term rental. Then comes “Bridge: Completed,” which provides the solution for “Post-Certificate of Occupancy” for newly built communities, including just completed development, partially leased, and fully leased. “Bridge to Permanent” is a combined solution for newly built communities that need both stabilisation time and/or a long-term debt solution.
Avenue One also offers “SFR Portfolio Loan,” which is a long-term financing for owners of more than five single-family rental properties. The Bridge and SFR Portfolio Loans provide financial flexibility with higher LTV (Loan-to-Value) loans (assessment of lending risk that financial institutions and other lenders examine before approving a mortgage) and lower minimum DSCR (Debt Service Coverage Ratio) requirement (measure of the cash flow available to pay current debt obligations), giving the customers the freedom to pursue their real estate ambitions confidently.
These lending products have been trusted by hundreds of property owners, providing more than USD 2.4 billion in liquidity into the real estate industry since 2020. Close to USD 2 billion transactions have been facilitated between local portfolio owners and institutional investors, with 9000 homes currently under management.
Avenue One also provides “Strategy Development,” which helps its customers maximise returns by creating investment strategies perfectly tailored to their unique objectives.
These are bespoke strategies and guidance driven by asset class experts, helping Avenue One’s customers maximise returns by creating portfolio strategies tailored to unique individual objectives. The customers can invest smarter with unparalleled market insights, helping these individuals to make informed investment decisions with the start-up’s proprietary datasets, advanced analytics, and in-depth research.
Acquisitions, Renovations And More
Avenue One’s off-platform sales solutions unlock the potential for unique investment strategies, enabling the customers to leverage their expertise in sourcing and evaluating institutional bulk and scaled contiguous BTR (Basic Tax Register) opportunities to maximise net operating income.
Through the words “Avenue One also performs seamless acquisitions,” we are giving a sneak peek of the venture’s brokerage services, which function both on and off-market modes, along with a “Build-to-Rent” model. In the on-market scenario, the client can enhance his/her property purchasing journey with the start-up’s expert insights and strategic guidance. Utilising proprietary data from its network, Avenue One tailors its approach for MLS purchases, to maximise returns.
“Gain a competitive edge with our proactive approach to sourcing uniquely discounted and targeted portfolios. Leveraging local relationships and our proprietary technology, clients gain access to opportunities not found through traditional channels,” said Avenue One on its off-market mode, while summarising its “Build-to-Rent” solution in these following words, “Unlock a promising sourcing opportunity in the thriving BTR sector. Avenue One’s seasoned team provides access to our local builder network of over 1,000 builders.”
Avenue One has made its underwriting (process lenders use to determine the creditworthiness of a potential customer) a cutting-edge one through the power of data and technology, which helps the company perform asset selections and risk management seamlessly and efficiently.
Utilising various financial models further, Avenue One also tailors products suiting different portfolio and asset types. To ensure the most accurate valuations, the venture prioritises precision in risk assessment and focuses on specific portfolio criteria. Through Avenue One’s help, investors can elevate their SFR portfolio performances, as the start-up’s tailored disposition solutions come into play. From optimal timing to pricing strategies, the venture’s experts empower their clients to make informed decisions designed to maximise the ROI (Return on Investment).
When it comes to executing exit strategies with partial/full portfolio sales, the start-up’s tailored solutions enable investors to sell a portion of their investment portfolio on the MLS or in bulk, by leveraging market insights to optimise the divestment process, helping the investors to achieve their financial goals while maintaining a diversified position.
In terms of full portfolio sales, the start-up crafts a comprehensive approach for its clients that considers market dynamics, timing, and value optimisation. If the investor is seeking to refine the composition of his/her portfolio or reposition to enhance asset performance, Avenue One’s comprehensive advisory team ensures that the decisions get backed by strategic expertise.
Avenue One and its expert renovations team have also become a known name in optimising rental properties, by partnering with local contractors to improve the quality of homes in their communities. In terms of inspection activities, the venture helps its clients access precise and expert-led renovation budgets.
From 2020 till date, it has completed 8000-plus renovation works worth over USD 300 million, while fostering a competitive marketplace, providing contractors visibility into relative performance, rewarding high performers and sharing best practices. Avenue One’s platform has seamlessly integrated over 400 local partners, including brokers, contractors, title agents, and property managers with debt and equity capital. This robust ecosystem of local operators is now enabling the venture to curate and maintain portfolios of exceptional rental properties.
Asset Management Solution
The start-up’s “Fully Integrated Property Management Services” optimises portfolios by using Avenue One’s local expertise in over 20 markets, before generating unparalleled insight on market-rate rents, valuations and tenant relations to drive the clients’ portfolio strategy.
Partnering with a local property manager also gives the venture’s clients the ability to improve net operating income, by accessing a host of asset-level data on Avenue One’s platform, which enables the clients to maximise their monthly rental income. Customised reports and real-time dashboards spotlight critical operating data and give these individuals the ability to enhance their property’s value.
In conjunction with its partners, Avenue One handles local property management and administrative services including marketing and leasing, rent collection, tenant relations, repairs and maintenance, HOA, utilities, and more. The start-up’s platform enables its customers to mitigate financial and legal risks by addressing state and local requirements, especially legal ones.
After carefully selecting its property managers based on skills and local expertise, Avenue One integrates data across its operating systems. Its standardised approach guarantees an integrated delivery for streamlined workflows and reporting.