What Potential Franchisees Should Know About HomeVestors, the “We Buy Ugly Houses” Company
Sponsored Content Provided by HomeVestors
HomeVestors can buy your house, no matter what shape it’s in. The company’s tagline, “We Buy Ugly Houses®,” refers both to the state of a house and the situation the homeowner may find herself in when looking to sell. HomeVestors specializes in buying and selling distressed properties, helping anxious homeowners sell their houses “as-is” much faster.
The HomeVestors® brand has bought more than 95,000 houses since its inception in 1996. Beginning in Dallas, it expanded to Kansas City and Atlanta before growing to more than 1,100 franchises in 46 states and 146 major markets. Named as a Top 50 Franchise by Franchise Business Review in 2019, its franchisees ranked it as “Very Good” under both Financial Opportunity and Owner Enjoyment.
The Origin of HomeVestors
The company began with founder Ken D’Angelo, who worked as a real estate broker in Dallas in the early 1980’s, according to Mark McKeller, a HomeVestors’ Development Agent, and owner of franchises in Texas, California, and Florida. More and more customers began reaching out to D’Angelo, asking him to list their houses--some of them in tough shape. He offered to buy many of these houses and soon was buying more distressed properties than retail ready houses to list. Next, he ran creative advertising campaigns to continue to build up his stock, and by the mid-1990’s, was buying up to 25 houses a month, McKellar said.
D’Angelo would rehab and sell some houses, rent out others, or sell their mortgage notes to investors. His business model proved to be lucrative. Banker Bob Rometo started buying mortgage notes from D’Angelo and found himself attracted to the business model. With Rometo’s encouragement, D’Angelo decided to franchise HomeVestors. The first franchise out of Texas sprouted in Kansas City. After Kansas City, the franchise expanded to Atlanta, which became McKeller’s first franchise.
“When I bought in 2000, after sending people mail or running a TV ad, they asked me, ‘Will you really make me an offer? You aren’t going to list it?’” McKeller said. “We told them, ‘we will pay you. You don’t have to do anything,’ and people didn’t believe it.”
The reputation of the HomeVestors brand and the cooperation among the franchisees inspired trust in sellers. At the heart of the business is a commitment to relationship building: HomeVestors franchisees take calls from interested sellers, visit their homes, and help work out the best solution for that seller. Franchisees also help one another.
“We buy and sell houses from each other. We advertise together in our markets to maximize the advertising dollars and our national brand, “We buy ugly houses®”. The resulting qualified leads are rotated to the franchisees through a lead distribution system—we don’t compete with one another,” he said.
How HomeVestors’ Approach Differs from Traditional Real Estate
Most sellers must approach a local real estate agent and then sign a contract, list their house, invest in repairs, stage it, and then wait for buyers to make an offer—a process that can take months. HomeVestors simplifies the process, often making a cash offer to sellers and closing within weeks. HomeVestors not only trains franchise owners with proprietary software, ValueChek®, to find and buy investment properties, but they also teach them a variety of exit strategies to help ensure a smooth home sale or hold to rent experience.
How Does HomeVestors Work with its Franchisees?
HomeVestors equips its franchisees with unique tools and support to help them navigate everything from lead generation to financing to contracts. Some of the key areas HomeVestors covers with franchisees include:
- Professional real estate investor education – including a weeklong initial training course
- Buying houses – from understanding the process to buying the right house and closing
- Valuing properties – including using their proprietary ValueCheck® software to help ensure a solid return on investment
- Generating leads – thanks to the nationally recognized and trusted “We buy ugly houses®” marketing campaign that includes radio, TV, billboards and direct mail advertising
- Financing – including exclusive programs only available to franchisees
- Selling – from taking offers to deciding when to hire a real estate agent
- Ongoing support – including a dedicated mentor, or “Development Agent,” with real estate investing experience
HomeVestors® Development Agents play a critical role, serving as coaches to franchisees, helping them assess potential investments, while also helping them avoid major mistakes and pitfalls. Development Agents have already proven themselves as seasoned buyers and sellers and are available to respond to questions within 24 hours. In addition, franchisees can tap into the knowledge base of more than 1100 HomeVestors franchisees.
“We provide important training that I think sets us apart from any other professional real estate training network,” McKeller, who is also a Development Agent, said. “When new franchisee comes to the market, they work with Development Agents in that market. The local Development Agent will coach them on how to advertise properly, meet goals, and go out with them on their first few calls to meet the sellers. And it’s not just a week of training-- it's ongoing.”
Development Agents can also help guide franchisees on the direction they should consider once they buy a property.
“You can do one of three things with a house when you buy it. You can rehab it and sell at a retail price, you can sell it as-is wholesale to another investor, or you can rehab it and hold it as a rental property,” McKeller said.
HomeVestors franchises have the opportunity to buy and manage a lot of rentals if this is part of their business plan, he said. As an independently owned and operated HomeVestors® business, each franchisee sets their own individual business goals.
What Can a HomeVestors Franchisee Expect?
You don’t necessarily need a background in real estate to be a successful HomeVestors franchisee. But you should be interested in buying a portfolio of properties. Some of the advantages of being a franchisee include setting your own hours, working where you’d like, and deciding what types of real estate investments you want to make.
While most people who want to sell their homes call a real estate agent to get the most return, sellers contact HomeVestors because they have a problem they need to solve, and selling a house quickly is a way to solve that problem. For example, someone might need to sell an old family property quickly. Others might need to sell quickly due to illness or financial distress.
“The best experience you can have is sales experience,” McKeller said. “We are more about being in the people business than the house business. Our business includes being really good at taking a lot of calls from sellers, setting appointments, and sitting at their kitchen table explaining to them why selling their house to us at a discount might be their best option to solve the problem quickly and easily.”
- Franchisees mostly purchase single family homes. However, you can decide which properties to invest in.
- You should be prepared to invest in properties that must be sold quickly or need repair, which can include condos, townhouses, duplexes, multi-tenant buildings, and even some commercial properties.
- You should have funds to cover a 10% down payment on a property
- You should also have reserves available to cover the costs of rehabilitation, taxes, closing costs and insurance while you hold a property
- You can build your HomeVestors business under two opportunities that require different initial franchise fees:
- Full Franchise – With a $70,000 investment, you receive marketing rights in your territory, access to tools and mentorship, and jump right into operating your business full-time generally, at an office location.
- Associate Franchise – With a $30,000 investment, you typically work part-time out of your home while you grow your business. Under this agreement, you still get marketing rights in your territory and the same access to tools and mentorship as full franchisees.
Why Now is a Good Time to Invest in Distressed Properties
Now might be the perfect time to invest in “ugly houses.” While there are risks, there are also great deals to be had and favorable market conditions.
- Low purchase prices – distressed properties are often great bargains
- Potentially high profit margins – Depending on how well you manage rehabilitation costs, you could realize a high return on investment. However, you need to be able to recognize a good ROI, which is where HomeVestors’ ValueChek® tool can help
- Favorable interest rates – Interest rates are still historically low
- Broader financing options -- May be available for distressed properties and are more favorable for rental properties than they were in the past
“There is never a bad time to buy houses at a discount,” McKeller said. “Our sellers are not market-specific. If you have a mother who is sick and need to sell, do you care whether or not it’s a good economy?”
However, today’s market in 2019 does offer HomeVestors franchisees distinct advantages. Investors have little difficulty financing properties they wish to buy. Most areas of the country are experiencing strong real estate markets with low inventory. Homebuyers can enjoy low interest rates, and franchisees who choose to hold rental properties can expect to have little problem finding tenants.
“Millennials don’t want to be encumbered with mortgages. This makes the rental markets particularly strong,” McKeller said, adding that some banks have also become more favorable toward investors who plan to finance rental properties.
How Can Interested Investors Learn More?
HomeVestors currently offers many opportunities across the country, including in California, greater Chicago, the Carolinas, the New York City area, and in several Florida markets. HomeVestors is not a brick and mortar business; franchisees are not required to have a storefront office. Shortly after franchise approval and signing a HomeVestors of America, Inc. Franchise Agreement, franchisees can buy advertising and then expect to begin receiving calls from sellers within 45 days. In other words, interested franchisees can begin investing quickly, with a low cost barrier to entry.
“This year, franchisees completed over $1.5 billion in sales, and yet we still have an amazing amount of territory that is open for new franchises,” McKeller said.
Interested potential HomeVestors® franchisees who want to learn more about HomeVestors’ home-buying method, can read the Guide to Professional Home Buying – Business Plan and ROI Advice. And to learn more about other investors who have found success with the HomeVestors franchise model, you can check out their stories.
To learn if HomeVestors is the right fit for you, fill out a form to request information or call 800-230-0385.