Investment in U.S. multifamily reached $127 billion for the year ending June 30, 2015—the highest four-quarter total in U.S. history and representing growth of 36 percent over the 12-month period, according to research from CBRE.
“I’m bullish on multifamily,” said Elliot Vermes, founder and CEO of ResiModel, a multifamily investment analysis platform. “I think multifamily is stronger than any other asset class. Not only in the property sector, but just in general. If you look at any other financial asset, on a relative basis, I think multifamily is going to continue to outperform, period.”
A report from Marcus & Millichap claims that steady hiring since the end of the recession has lifted apartment demand more directly than other commercial property types. As job formation, rising consumer confidence and modest wage growth take hold, apartment demand drivers are expected to maintain momentum. The employment to population ratio for the prime rental cohort, ages 25 to 34, has reached a 15-year high, a particularly encouraging threshold.
Vermes added, “It’s harder now, than it was before the crash, to get a mortgage. Fewer people are eligible even though the economy is doing well. And people who are able to buy are less willing to make a commitment because of uncertainty, so you have a trend towards rental.”
A self-described tech geek, Vermes spent several years building enterprise management software and databases before leaving the tech world to work in commercial real estate. It was while working in acquisitions for a multifamily distressed debt fund, that he experienced first-hand the inefficiencies in existing analysis processes.
“The thing that amazed me about real estate was that it was such a manual, sort of analog industry. So many other industries are digitized and there’s standards. In real estate, everything was transacted by sending PDF files,” observed Vermes.
50% of all underwriting time is spent converting the data into a format you can consume — and that’s totally non-value-add. That’s basically saying, hey lets spend 50% of our time doing absolutely nothing.
With his technology background, Vermes believed that he could build a SaaS platform (software as a service) to streamline analysis and valuation of multifamily market transactions. “To me it was inefficient on a number of levels. First, 50% of all underwriting time is spent converting the data into a format you can consume — and that’s totally non-value-add. That’s basically saying, hey lets spend 50% of our time doing absolutely nothing.”
According to Vermes, investors sometimes spent so much time on data conversion, that they were losing deals. But the data was just the beginning of the problem. Once that data was in a useable format, the tools available to analyze it were limited to Excel. “There is so much more intel that you can glean from that data with much more hi-tech, sophisticated analytics tools,” explained Vermes. “That’s a problem because the market is really competitive and the deeper understanding you can get of the property and the better you can understand the upside, the more aggressively you can bid and ultimately the more deals you are going to win.”
A third problem that Vermes noted was the lack of historical data access. “Once you finish looking at a deal, all the work you’ve done, you save it on a subdirectory somewhere, on a network drive or DropBox. Once you save it, you almost never go back to it again,” added Vermes. “It’s effectively like throwing that data away. People have all of this valuable information and no way of capitalizing on it.”
By providing deal parties with sophisticated data analytics and visualization tools, ResiModel now allows brokers, investors, lenders and appraisers to build their own comprehensive databases of ￼underlying property rent rolls and operating statements.
Two years after introducing the beta version of its software, ResiModel’s client list includes multifamily teams at CBRE, Colliers’s, and Moran & Co.’s, among others. In addition, they’ve won over some major buy‐side ￼clients, like Abacus Capital and Strategic Property Investment. According to Vermes, more than 60 percent of new sales are from word-of-mouth referrals.
ResiModel has raised $3.5 million in a series of rounds from investors who have witnessed the multifamily industry’s growth and recognize the demand for the platform, said Vermes. “It’s inevitable that there is going to be standardization in this industry and that people are going to stop trying to do everything manually.”