Homeownership can be a powerful wealth-building tool, and one way homeowners can leverage their property to grow their wealth is through a Home Equity Line of Credit (HELOC). A HELOC allows homeowners to tap into the equity they’ve built in their home to access funds for various purposes, including purchasing an investment property. Here’s how homeowners can use a HELOC to make this move:

1. Understanding HELOC Basics:

• A HELOC is a revolving line of credit secured by your home, similar to a credit card but with a lower interest rate.

• The amount you can borrow is based on the equity you have in your home, which is the difference between your home’s market value and the balance you owe on your mortgage.

2. Benefits of Using a HELOC for Investment Property:

• Flexibility: You can use the funds from a HELOC for various purposes, giving you the flexibility to invest in different types of properties or projects.

• Potential tax benefits: In some cases, the interest paid on a HELOC used for investment purposes may be tax-deductible, but it’s essential to consult with a tax advisor to understand your specific situation.

3. Steps to Purchase an Investment Property Using a HELOC:

• Evaluate Your Equity: Determine how much equity you have in your home and how much you can borrow through a HELOC.

• Research Investment Opportunities: Research potential investment properties to find one that fits your budget and investment goals.

• Apply for a HELOC: Contact your lender or financial institution to apply for a HELOC. The approval process typically involves a credit check and an appraisal of your home.

• Use the Funds Wisely: Once approved, use the funds from your HELOC to put towards a down payment when purchasing an investment property.

• Manage Your Investment: After purchasing the property, manage it effectively to ensure it generates a positive return on your investment.

4. Risks to Consider:

• Risk of foreclosure: Since a HELOC is secured by your home, failing to repay the loan could result in foreclosure.

• Variable interest rates: HELOCs often have variable interest rates, which means your monthly payments could increase if interest rates rise.

Conclusion:

Using a HELOC to purchase an investment property can be a smart financial move for homeowners looking to diversify their investment portfolio and build wealth. However, it’s crucial to carefully consider the risks and seek professional advice to make an informed decision.

Russell Wilson appears to be making a quick departure from Denver and will lose $3.5 million as he goes.

The Broncos’ recently released quarterback has sold his Cherry Hills Village home for $21.5 million, according to property records recorded on March 20. That’s compared to the record $25 million he and his wife, singer-songwriter Ciara, paid for the home at 10 Cherry Hills Park Drive on April 1, 2022.

After the Broncos released Wilson earlier this month, Wilson signed a one-year deal with the Pittsburgh Steelers. The Steelers will pay Wilson $1.21 million, while the Denver Broncos will pay the remainder of his $39 million salary, according to the Associated Press. In all, Wilson will essentially be paid $124 million for two years of service and 11 wins with the Broncos, according to 9News’ reporting.

It was reported in February that Wilson and his wife were quietly seeking offers on their 13,000-square-foot home on a 5.34-acre property. It boasts four bedrooms, 12 bathrooms and a 2,590-square-foot pool house with an indoor pool.

Related: See a gallery of the interior and exterior photos of Russell Wilson’s former home in Cherry Hills Village.

Property records show it is now owned by Cherry Park LLC, an entity formed just a week before the purchase, according to Colorado Secretary of State records.

The deed transferring the home was signed in Washington state by Duchess Investments LLC manager Scott Pickett. Pickett also appears to be the director of Russell Wilson Quarterback Academy, Wilson’s Seattle-based business that says it is “dedicated to providing the highest level of instruction for quarterbacks of all ages.”

Wilson also owns a waterfront mansion in the Seattle area that he listed in 2022 for $36 million, according to previous reporting. The price of the home, which originally included a second parcel of land valued at $8 million, has since dropped to $28 million and then $26 million as it sits on the market.

There remain a number of unknowns about how the National Association of Realtors settlement reached late last week will shake up the housing market.

The NAR on Friday said it had reached a $418 million settlement to end a number of class-action lawsuits targeting its commission structure. The lawsuits alleged a conspiracy between the NAR, multiple listing services and brokers to keep commissions high by largely requiring home sellers to pay buyer-broker commissions, and to require those commissions to be listed on listing services.

There is still a great deal of uncertainty about how the settlement will play out — among the actions still needed is a judge to approve it.

But one of the proposed changes, as part of the NAR’s agreement, is that buyers must enter formal representation agreements with MLS members so they’re aware of what their agents will charge for their services. The NAR also said it has agreed to put in place a new MLS rule that prohibits offers of broker compensation on the MLS. These changes are expected to go into effect in July.

While the biggest reform may be around how real estate agents get paid, most in the industry say it’s still too early to know what impact it’ll have more broadly on the business of buying and selling homes. That the shift is a significant one is obvious, but whether that will affect how buyers and sellers operate within the market — and when — is debatable.

“Real estate is always supply and demand,” said Brandon Brittingham, CEO of The Maryland and Delaware Group of Long & Foster Real Estate in Salisbury, Maryland. “A lot of things cause people to buy and sell a house. If there are structural changes to more cost being put on the buyer, I think that negatively affects the buyer and positively affects the seller.”

But, he continued, what’s still up in the air is how many buyers will ultimately be paying agent commissions, and how much. With a move to a more negotiated fee commission, that doesn’t necessarily mean the standard regime — a 6% commission split between the buyer and seller brokers, and paid for by the seller — will go away entirely.

Brittingham said it’s frustrating that the litigation was intended to protect consumers but some changes could ultimately end up hurting them. Most tracking the lawsuits have said, though, the homebuying process will become more transparent with the reforms.

In the wake of the settlement announcement, there have been a lot of myths about the 6% commission going away entirely, Brittingham said. Sellers may decide to continue offering to pay a buyer agent’s commission, he said, as a tactic to draw more potential buyers — and the more people interested in buying that house, the more money you could potentially get from selling it.

“For first-time homebuyers, it’s always a struggle for them from a financing standpoint, especially in a competitive market,” he said. “If they have to pay the commission, they’re going to get squeezed out of the market.”

Affordability has been a signature challenge of the pandemic-era housing market, especially in the wake of rapidly rising mortgage rates that began after the Federal Reserve started to hike interest rates in 2022. Zillow Group Inc. (NYSE: ZG) recently found buyers need to make more than $106,000 to comfortably afford a home, an 80% increase from the $59,000 needed in 2020.

If there’s even a perception that buyers — especially cash-strapped first-time buyers — will now have to pay another fee to close on a home, it could serve as one more deterrent to enter the housing market, some in real estate say.

Suzanne Seini, founder of Innovate Realty Inc. in Irvine, California, said in an emailed statement if a buyer’s agent fails to negotiate their commission with the seller, they will have to contract and arrange compensation to be paid by the buyer. That can then strain first-time buyers, in particular, who may already be exercising their maximum budget to buy a home in the price point and area they desire.

“This additional financial strain could potentially bump them out of their purchase price tier to cover buyer agent commission,” Seini said.

Although the spring housing market is already seeing more listings than last year, which is then predicted to lure more buyers into the market, it’s possible the recent headlines will detract would-be buyers.

“If somebody is on the fence, they may sit on the fence a little bit longer,” said Phil Crescenzo Jr., vice president of the Southeast division at Marlton, New Jersey-based mortgage lender Nation One Mortgage Corp. “If they’re ready to buy, then they’re going to do it — if interest rates aren’t going to deter them, (this won’t). It’s so case by case.”

There might be a perception, especially early on, among buyers that an agent commission is yet another fee to be paid on top of already high housing costs. But that amount can be negotiated, Crescenzo said, and will vary with market conditions.

“You’re going to see maybe stronger offers if they want to move a property,” he continued. “But (this is) all new. There’s no context to draw from.”

Mortgage industry impact

Questions have arisen, too, about how the mortgage industry may be affected by the upcoming changes.

The Mortgage Bankers Association in a statement to The Business Journals Tuesday said it was monitoring the outcome of the settlement, including the likelihood of new approaches to buyer agent commissions. An MBA representative wasn’t available for an interview by deadline but Bob Broeksmit, the association’s president and CEO, spoke briefly about the situation this week at the MBA’s National Advocacy Conference in Washington, D.C.

“There will be market reactions to this settlement, and it will create openings for other business models where we want the buyer represented, but the seller may not want to pay 3% for a buyer’s agent,” Broeksmit said at the conference. “One of those models could be that you, as lenders, license your loan officers as real estate agents and offer the buying agent service for less than a 3% fixed-fee point. And some of you will say, I want nothing to do with that. Others of you will say, that is a great retention opportunity for my loan officers and the market will figure all this out.”

A spokesperson for the MBA said it would continue its engagement with the Federal Housing Administration, Department of Veterans Affairs and Fannie Mae and Freddie Mac about any guideline changes that may be needed in the future.

The association continues to advocate that, if any buyer-agent commission is paid directly by the seller (rather than indirectly through the listing agent), that it not be included when calculating maximum seller contributions for conventional or government loans, the spokesperson added.

Many mortgage lenders share leads with a real estate brokerage in exchange for a fee — and a lot of lenders get referrals from buyer agents. But those practices might change with the buyer agreement requirement and commission structure shakeup, so there could be less reason to spend thousands of dollars a month in marketing agreements, Crescenzo said.

“That’s something as lenders we haven’t had to think about,” he continued. “That’s a change that we’ll have to monitor.”

Marty Green, a principal at law firm Polunsky Beitel Green, which specializes in serving mortgage lenders, said the possibilities that buyer broker costs will be passed on to the buyer may impact government-backed loans for veterans and first-time homebuyers, which often place limitations on what expenses buyers can incur.

While it is still too early in the process for mortgage lenders to craft definitive policies around these industry changes, it isn’t too soon for mortgage companies to start having discussions with government agencies on how to implement any needed changes once the dust settles, Green said.

Ultimately, some loan programs may be revised so that buyers can roll their broker costs into the home loan amount —essentially getting it financed. 

“Absent such an adjustment in underwriting guidelines, the affordability of home ownership, which is already stressed, will simply become out of reach for many Americans,” Green said.

That is especially so for Veterans Affairs loans, which allow service members to purchase homes with no down payment, but with limitations on out-of-pocket costs. 

“Without a change in VA loan guidelines, VA loans could become particularly tricky if the seller is unwilling to pay the buyer’s agent because of current limitations on what the veteran is allowed to pay in terms of expenses in the transaction,” Green said.

After two apartment communities in Denver and Castle Rock sold for a combined $132.5 million, brokers involved in the deal say the Denver multifamily market may be trending up.

The buyer, Virginia-based Harbor Group International LLC, also known as HGI, paid $75 million for The Prospector Modern Apartments at 3360 Esker Circle in Castle Rock, according to property records. It paid $57.5 million for the Ladora Modern Apartments at 18590 E. 61st Ave., near the Rocky Mountain Arsenal National Wildlife Refuge, according to property records.

HGI now owns 10 properties in the Denver area. Greg Heller, managing director of acquisitions at HGI, said in a release that Denver “is expected to attract more residents as the city’s investment in transportation and infrastructure creates additional jobs and opportunities in the market.”

CBRE’s Terrance Hunt, Shane Ozment, Andy Hellman and Justin Hunt and their multifamily investment properties team represented The Garrett Companies in the deal. 

Both apartment communities are new construction and are currently more than 80% leased, according to HGI. 

The Prospector apartments feature one-, two- and three-bedroom units with amenities that include a pool, fitness center, dog park and more. At 238 units, the sales price per unit was $315,126. 

At 196 units, the sales price for the Ladora community was $293,367 per unit. Ladora apartments feature one-, two- and three-bedroom units with attached and detached garages, a pool, a fitness center and outdoor kitchens. 

As part of CBRE’s multifamily team, Hunt and Ozment were part of ongoing litigation that sidelined them from working after they left Newmark for CBRE in 2021. 

But since getting back to business, they’ve been on a roll. 

“We’re ramped back up and feel we’re hitting our stride, and we’ve been able to perform in a difficult market because we’ve been through several downturns before, since we’ve been doing it almost three decades,” Hunt said. 

In addition to these two property sales, the team brokered three deals in December, including the $125.5 million sale of Platform at Union Station. Hunt said the team is on pace to finish five deals in February, “a pace we haven’t seen in a while.”

Hunt added that HGI, an institutional buyer, came onto the scene even though the properties hadn’t stabilized yet. Plus, HGI was in a bidding war with another group for both properties, “something we haven’t seen in over a year,” Hunt said. 

After the volatility created by interest rates, the multifamily market is getting more stable, and with rate cuts on the horizon, potential buyers are making sure they don’t miss their window of opportunity, according to Hunt.

“We are seeing some institutions call us and demonstrate through these transactions that they want to get in ahead of the wave,” Hunt said. 

Looking ahead to the rest of the year, Hunt said the outlook is much more positive than it’s been in recent times. 

“We’re optimistic, but one thing we’ve learned is you’re never too sure what’s going to happen around the corner,” Hunt said. 

In response to the sweeping energy regulations introduced by the city and county of Denver, the Apartment Association of Metro Denver (AAMD) and Colorado Apartment Association (CAA) have taken proactive steps to navigate the challenges posed by the Energize Denver program. These FAQs are designed to provide clarity on the litigation assessment and funding strategy initiated by the AAMD and CAA, shedding light on the voluntary contributions sought from building owners to support legal efforts challenging the impactful regulations. Explore the intricacies of the funding strategy, the legal team spearheading the initiative, and the comprehensive approach adopted by these associations to safeguard their members’ interests amidst the evolving landscape of energy efficiency mandates.

About the Regulations

What are the recent energy regulations impacting commercial buildings in Denver?

In the new year, the city and county of Denver have introduced stringent “energy efficiency” mandates known as the “Energize Denver” program. These mandates require all existing
commercial, multifamily, and public buildings with 25,000 square feet and larger to comply with strict energy efficiency measures.

 
What is the purpose of the Energize Denver program?

The Energize Denver program aims to dramatically reduce greenhouse gas emissions (GHG) to zero by 2040 for all existing and new Denver “covered buildings.” The program has no soft
implementation phase, and the first mandatory compliance period started on Jan. 1, 2024.

How does Energize Denver enforce compliance?

Denver plans to enforce compliance with steep penalties, liens for noncompliance, and mandated compliance status disclosures prior to any future sale of a “covered building.”

What contributes to GHG emissions in these buildings, and how can it be reduced?

GHG emissions in these buildings primarily come from the use of natural gas for heating and hot water. To reduce or eliminate these emissions, building owners are required to either forego the use of natural gas amenities or convert the building to use more costly electricity.

What are the main components of Energize Denver, and how are they measured?

Energize Denver has two main components: annual bench marking reporting of a building’s energy usage and final building performance standards that covered buildings must meet by 2030.

Both components are expressed using an Energy Use Intensity (EUI) metric, representing the building’s energy use per square foot.

 
What measures are building owners required to take to comply with Energize Denver?

Starting Jan. 1, 2024, covered building owners must implement energy efficiency measures necessary to meet their first interim building performance standard requirement. This includes retrofitting existing buildings to convert natural gas equipment to electric space and water heating, meeting energy efficiency targets, using a combination of efficiency and natural gas conversion measures, or installing on-site renewable power generation.

 
How does Energize Denver compel building owners to electrify equipment?

The regulations provide a 10% increase in required EUI targets for covered buildings that demonstrate their building is 80% electrified, emphasizing the push towards electrification.

 
What penalties are in place for noncompliance with Energize Denver?

Penalties for covered buildings failing to meet EUI building performance standards are steep, with fines up to $0.70 per year for each required kBtu reduction not achieved. These penalties
can result in significant financial burdens for building owners.

 
How can covered buildings apply for timeline adjustments?

Covered building owners can apply for timeline adjustments for deadlines in 2024, 2027, and 2030 based on factors such as end of major equipment system life, major renovation, change
of ownership or tenant, and financial distress. These applications are handled individually by Denver’s Office of Climate Action, Sustainability, and Resiliency (CASR).

 
What challenges do covered buildings face under Energize Denver? 

Covered buildings may face challenges in meeting stringent energy efficiency requirements, potentially impacting marketability and financing.

The fines, if not paid within 180 days, become a perpetual lien on the covered building, taking precedence over other liens, except for general taxes and prior special assessments.

About the Litigation Funding Strategy 

What is the purpose of the “Assessment” mentioned in the communications?

The “Assessment” is a term used for a voluntary contribution from members to support legal costs associated with challenging State and City of Denver energy regulations. It is part of a funding strategy aimed at protecting members from potential Billions of dollars in expenses related to converting natural gas to electric energy.

 
Who is being asked to contribute, and how are funds collected used?

The group targeted for contributions includes Apartment Association members and non-members with buildings over 25,000 sq. ft. that will be impacted. Funds collected will be
specifically used for legal and research expenses associated with energy regulations. Administrative costs are covered by AAMD & CAA general funds.

How transparent will the fund utilization be, and will there be updates on progress?

There will be extreme transparency regarding the fund, detailing where expenses are allocated. Regular updates on progress will be provided to keep contributors informed about the legal and research efforts.

 
Will contributors’ information be made public, and is it optional?

The decision to publish contributions is optional and at the contributor’s discretion. At present, there is no plan to publish contributions without the contributor’s consent.

 
How has the response been from members, and is contribution mandatory?

The response from members has been positive and supportive of the funding strategy. However, contribution is entirely voluntary, and there are no plans to mandate contributions. The association(s) have the financial capacity to support any potential shortfall from the membership.

What is the funding strategy and how is it determined?

The funding strategy involves a per-building assessment, with buildings between 25,000-50,000 sq ft assessed $1,250, and buildings over 50,000 sq ft assessed $2,500. The strategy was approved by the AAMD Board of Directors, CAA Board, Joint Legislative Advisory Council, and the AAMD Alliance.

How is the legal team involved, and who leads the effort?

The legal team leading the effort is GreenbergTraurig, a reputed firm for these types of cases. Paul Seby leads the team at GT. The Association has already invested over $175,000 through this legal team in being formal participants in the rulemaking process.

 
What is the ultimate goal of the legal efforts, and what are the estimated costs?

The ultimate goal is to challenge both State and City of Denver energy regulations in State and Federal Court. The estimated costs for the litigation efforts are in excess of a million dollars, considering the potential Billions of dollars in impact on members’ businesses.

 
How can companies provide support beyond financial contributions?

Beyond financial support, the Association seeks individuals with experience on the issues of conversion costs, time frames, and negative impacts on residents to help articulate the
challenges. Additionally, a professional fundraising group is engaged to seek support from other industries negatively impacted by these regulations.

What happens if more money is raised than needed?

In the unlikely event of excess funds, a pro rata share refund policy is in place to ensure responsible handling of contributions.

The nation’s for-sale housing market is off to a mixed start this year after a 2023 that proved largely challenging for homebuyers.

Existing-home sales ended 2023 down about 19% from the prior year, according to data from the National Association of Realtors. While the number of transactions declined, prices rose in most metro areas through the end of the year, and that trend appears to be holding up early into 2024.

In fact, single-family existing-home sale prices rose in 86% of metro areas measured by the NAR — or 189 of 221 — in the fourth quarter. That’s up from 82% in the third quarter.

At the end of 2023, the national median single-family existing-home price was up 3.5% from the year prior, to $391,700.

Lawrence Yun, chief economist at the NAR, said he believes the worst in inventory and sluggish home sales is done and that 2024 will largely be a year of recovery.

“Price increases have become much more moderate than the past two years,” Yun said. “That’s a good thing. Income growth is catching up with home prices.”

The South saw the largest share of single-family home sales in the final quarter of 2023, at 45%, with an annual price appreciation of 3.2%. Prices rose more significantly in other parts of the country: 7.3% in the Northeast, 4.7% in the Midwest and 4.2% in the West.

Among the metro areas tracked by the NAR, a number posted median price gains of nearly 15% between the end of 2022 and 2023. Among them: Dayton, Ohio (19.9%); Kingsport-Bristol-Bristol, Tennessee-Virginia (19.2%); Fond du Lac, Wisconsin (18.6%); Trenton, New Jersey (17.3%); Salinas, California (17.1%); Newark, New Jersey-Pennsylvania (16.7%); Anniston-Oxford, Alabama (15.7%); Bloomington, Illinois (15.4%); Johnson City, Tennessee (15.2%); and Anaheim-Santa Ana-Irvine, California (14.8%).

There was a notable inventory bright spot in the 2023 housing market. More than 660,000 newly built homes sold last year, a 4.2% increase from 2022, according to Zillow Group Inc. (Nasdaq: ZG) and the U.S. Census Bureau. Homebuilders have been able to offer concessions like mortgage-rate buydowns to lure buyers who may otherwise be locked out of the housing market.

Builders also have started to build smaller, more moderately priced homes, Yun said, making that segment of the market more competitive to buyers. And, he added, it’s likely builders will continue to offer incentives for new homes hitting the market this year.

“Builders made good profits last year, even with the concessions,” Yun said. “(It) may be a marketing trick where the price is higher but they’re giving the perception that they’re giving a better deal with the buydown.”

Mortgage rates are closely watched

Sales activity at the end of 2023 might’ve picked up at least in part because of mortgage-rate declines in the fourth quarter.

The 30-year fixed rate went from 7.79% to 6.61% in the final three months of the year. That’s down from 8% and higher earlier in 2023. The rate was 6.64% for the week ended Feb. 8, essentially unchanged from the 6.63% the week prior and 6.62% at the start of 2024, according to Freddie Mac data.

For the four-week period that ended Feb. 4, the median U.S. sales price was up 5.4% year over year, the biggest increase in more than a year, according to Redfin Corp. (Nasdaq: RDFN). Meanwhile, pending home sales are down 8% from the same period a year prior.

The Mortgage Bankers Association’s latest weekly Market Composite Index — a measure of mortgage loan application volume — increased 3.7% on a seasonally adjusted basis the week ended Feb. 7 compared to a week earlier. The seasonally adjusted Purchase Index decreased 1% from one week earlier.

“Mortgage rates have stayed close to where they started the year, despite swings in Treasury yields, because of slowing inflation offset by stronger-than-expected readings on the job market,” said Joel Kan, vice president and deputy chief economist at the MBA, in a statement. “Purchase activity has been strong to start 2024 compared to the final quarter of 2023. However, activity is still weaker than a year ago because of low housing supply.”

Yun said there may be room for mortgage rates to go down further this year but it likely won’t be by much. All eyes are on what the Federal Reserve will do with interest rates at its upcoming meetings — but, Yun said, downward rate movement that’s recently occurred is in anticipation of rate cuts from the Fed later this year.

“If there are more (than expected) cuts, mortgage rates could go down” further, Yun said, adding he’s optimistic inflation will continue to go down, and that might provide an opportunity for the Fed to cut rates more than what’s currently expected.

Because of the decline in mortgage rates seen in the final quarter of 2023, housing affordability improved somewhat compared to the prior quarter, according to the NAR. The monthly mortgage payment on a typical existing single-family home with a 20% down payment was $2,163 at the end of 2023, down 1.2% from the third quarter but a 10% increase from the end of 2022.