Large investor firms are taking advantage of the deep discounts found in some housing markets, and they’re finding that buying one or two homes is just not enough — they want thousands. The investors are then renting the homes out to tenants, banking on returns from the rental income, which they say is better than other investments at the moment.
Landlords usually are individuals or small investment firms that own a few homes. “Nobody has ever tried this on such a large scale, and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses,” notes a recent article at The New York Times.
For example, large private equity investors like Waypoint, which signed a deal with GI Partners, says it plan to buy 10,000 to 15,000 additional homes by the end of next year.
“We realized that there is a tremendous amount of brain damage around acquiring single-family homes, renovating them, and renting them out,” says Colin Wiel, a co-founder of Waypoint. “We think this is a huge opportunity, and we are going to treat it like a factory and create a production line to do this.”
Investors are seeing big opportunities in the real estate market, with nearly 650,000 foreclosed homes owned by lenders and 710,000 in the foreclosure process, according to housing data from RealtyTrac.
Meanwhile, rental demand is rising and so are rents.
Economists say that investors buying the homes by bulk could help to stabilize the housing market.
“If you have a lot of foreclosures in one community you will improve everybody’s home values if you take them off the market,” Diane Swonk, the chief economist at Mesirow Financial, told The New York Times. “If those homes are renovated and even rented, it is a lot better than having them stand empty.”