HomeUnion is a company promising a better way to invest your money in real estate, taking care of almost the entire process and allowing you to reap the rewards. HomeUnion states their data scientists and real estate investment experts have identified the hottest investment properties around the US, which you can review, select, and monitor on your computer while sipping your morning coffee.
What exactly does HomeUnion do and how does it work?
HomeUnion’s motto explains it in the simplest terms: “You Invest, We Do The Rest”. Explained in more detail, this means that HomeUnion a real estate scout, financial advisor, real estate broker, and property management company for investment properties (meaning a house, apartment, or condo) that you don’t live in but rent out to others. They claim by buying an investment property through HomeUnion you will be able to invest your money both easier and smarter, building wealth.
To do this, HomeUnion claims to have a combination of “big data” and “boots on the ground” in real estate markets around the US (currently the Midwest and South, with some properties in Southern California). Combining these numbers with human input, HomeUnion boasts that it is able to create comprehensive investment metrics of properties from coast-to-coast explaining in simple terms and charts what it will cost to buy and how much money you will make, shown in annual yield and appreciation. Think of it as kind of like an eTrade for homes.
Potential investors are instructed to sign up for a HomeUnion account and enter simple metrics like how much money you have to invest and whether you are paying cash or taking out a loan. From this info, HomeUnion’s algorithm crunches the data and spits out the best areas to invest so you can reach this goal.
For example, when we tried it with a $25,000 investment and the rest in loans HomeUnion presented us with a list of properties in Davenport, Iowa that they said would be perfect for us. Here is the basic metrics of what we got:
From there, you can click on links to individual properties and see the particulars until you zero in on a home you like. They insist most of the properties they list are in middle-class neighborhoods that have a stable tenant base and good cash flow and many are “turn key” properties, meaning they are ready for someone to move in without needed any rehab.
This is when the next phase of HomeUnion’s business kicks in: they say they will negotiate the selling price, help you get the loan, and make sure you sail safely through escrow. In other words, they become your real estate broker.
Finally, once the property is yours, they offer to vet a local property manager for you who will find the perfect tenants, collect the rent, and make sure any problems with the plumbing, etc. are fixed.
Since you likely won’t live in the same city or state where the property is, they claim HomeUnion will save you a lot of headaches. Instead of stressing, they claim you can monitor activity on your property, including appreciation, remotely via the HomeUnion website.
OK, but how much does HomeUnion charge for their real estate investment services?
They don’t list the actual fees on their website, but a discussion on a real estate blog that included a HomeUnion rep disclosed that they charge a 1% “asset management fee” based on the purchase price, which they say covers their costs for vetting properties, finding management companies as well as managing taxes and providing “detailed reporting” of your asset.
HomeUnion also acts as your real estate broker, so they get a commission, usually 3-6% of the sale. Then, you must pay the individual property management company’s fee, which varies from area to area, as well as an annual 1% asset management fee.
To recap, HomeUnion gets paid:
- 1% fee based on purchase price
- Property management fees (varied depending on locale)
- 1% fee every year for asset management
- Real estate commission from purchase (3-6%)
- Any fees associate with your loans
HomeUnion states that you are not required to use their property management services and if you do there is no long-term commitment required, so you could avoid the yearly 1% fee if you cancel it.
Bottom Line: Is HomeUnion a great way to invest passively in the real estate market?
This is a tricky question with no easy answer. Investing in real estate is a complex endeavor that HomeUnion is attempting to streamline.
Like investing in stocks (or a real estate investment trust called an REIT) you can certainly make money on a real estate investment, but you can also lose your shirt. Remember the crash of 2008?
Unlike stocks or REITs, there is no simple “buy” and “sell” buttons for your transaction.
HomeUnion does seem to give a list of detailed metrics on properties such as rental income, losses from vacancies and expenses like taxes or HOA fees. But as the fine print states, these are not actual results and are projections based on “various assumptions and representative properties.”
While a HomeUnion rep may walk you through all these numbers, you’re going to need to do number crunching and pondering on your own. One “down and dirty” suggestion for judging an income property is to divide the potential rent income in half and minus the mortgage payment. For example, if the rent will be $1000 and the mortgage is $400, the net is $100 per month.
And generally speaking, buying real estate investment property out of state is a high-risk proposition and a major commitment, even if you hire a property management company or have HomeUnion do it for you, especially if it’s your first time.
According to investopedia, you should never buy a house sight unseen, which means you will have to travel there at least once before purchase. As a landlord, you’ll also be on the hook for any code violations and maintenance fees.
You (not HomeUnion or the property management company) will be responsible for paying the mortgage, regardless of whether there is a tenant in there or not. HomeUnion charges one month’s rent as a “marketing fee” when the property is vacant, but do not charge an asset management fee.
And while HomeUnion says they have been in business since 2010 and asset managed over a hundred properties, we couldn’t find any reviews from average people who used their services. One commenter on the aforementioned discussion thread named Jacob Elbe says he bought 2 properties through them, but he is a professional investor.
The video testimonial on the HomeUnion website from a woman named Ramya Subramanian who says she is a librarian in Connecticut is clearly scripted. (We couldn’t find any more information about her elsewhere on line.)
So is HomeUnion legit or a scam? They are likely legit, but before buying any property we would encourage you to do extensive research into the market you are buying into using not only their tools but also sites like Zillow.com. Crunch all the numbers first and weigh all the pros and cons of this type of investment before signing on the dotted line.
We hope this helps paint a clearer picture of HomeUnion. If you’ve had experience buying or selling a home through them please let us know below!