Despite the current state of interest rates, investors are optimistic about the residential transitional loan (RTL) space because RTL products are short-term and carry low risk, making them attractive and accretive relative-value investments, according to Churchill Real Estate in a recent report. The optimism is fueled by tightening residential credit spreads, increased origination of new loans, and a growing appetite from both new and existing investors.
The stable outlook for housing based on limited inventory has given rise to new and consistently growing forms of RTLs, short-term loans to contractors who repair and renovate a home. The positive backdrop for RTLs is driven by several factors including the chronic housing shortage, favorable immigration dynamics, older homeowners’ tendency to age in place, low homeownership among Millennials and Gen Z, and the fact that older homes need revitalization given median home age is approximately 45 years old with roughly half