Arixa Capital interviews Brandon Hance, Founder and CEO of Avenue Homes. Avenue Homes s a vertically integrated real estate investment and brokerage firm committed to reconnecting the fractured and inefficient process of buying and selling real estate by streamlining the process to optimizing the client experience.
What does Avenue Homes do?
We think of ourselves as a modern-day home builder. All new construction focused, flat lot, City of Los Angeles. Mostly focused on $2 to $4 million dollar resale values.
Where do you find opportunity in today’s market?
We were focused on the distressed market, we saw that began to dry up and the real opportunity was around new product. $2 to $4 million dollars was where we felt was the most opportunistic strata. Lots of demand, lots of liquidity, and very small supply.
What is your ideal property?
We like to find a neighborhood that has a beautiful home right next door to a small outdated and outmoded home and really trying to bring that to the highest and best use.
What kind of returns are you trying to achieve for your equity investors?
Ideally, we’re targeting north of 20% and there are certainly projects where we’re able to achieve returns at that level. I would say over the last year or so, we’ve seen margins continue to compress. [In] 2013, 14, 15, they were probably higher, it’s becoming a more efficient market. And the only way to compete in this market is to be a really strong operator. It’s very challenging to find deals below market, it just doesn’t happen unless you’re finding off market opportunities. So the only real way to compete, we believe, is at scale and to be performing at a best in class level.
What makes your projects different?
We have pre-defined and essentially pre-approved floor plans with the city of LA, and rather than finding a home, and deciding what to do with it, we have built model homes and we’re looking for lots to build them on. So we know exactly what our costing is, how long it takes, what the design package will be ahead of time. That allows us to dramatically accelerate the process.
What is your differentiator?
We’ve built a proprietary database that has essentially every piece of information you’d ever want on every lot in LA County. MLS, county, topography, max allowable square footages, etc. We overlay our cost structure on that, to determine which opportunities are best for us and we literally have a maximum offer price for every home, in every neighborhood, we focus on.