Grab RSS FeedOut of the ruins of the housing crisis, a new asset class has emerged: publicly traded, single-family residential real estate.
Real estate investment trusts, hedge funds and private-equity firms have raised more than $18 billion to purchase more than 100,000 rental houses in the past two years, according to Bloomberg News.
Previously the domain of mom-and-pop companies that would own 20 or 30 rental homes in a market, the field is becoming crowded with big-name businesses.
The housing crisis brought out a large group of speculative buyers intending to flip the homes.
But many of the buyers realized they could earn a high return renting them.
Estimates suggest 5% to 6% — or about 7 million — of the 132.5 million single-family homes in the U.S. are owned by someone who rents them out for investment purposes.
Many of these buyers then "monetize" their portfolios by spinning them into publicly traded REITs.
The real estate investment community has not yet embraced this asset class which is a mistake.
A lot of these portfolios are trading at a discount to the prices the managers bought the homes for back in 2009 or 2010.
Last month, two of the bigger names in the industry — Blackstone and Colony — were able to borrow 60% of the value of the homes in a portion of their portfolios.
The fact that they were able to get financing, which will enhance their returns, has gotten people more interested in the sector.
But the sense is the residential markets have stabilized and the long-term trend will be positive for them.
For more information on purchasing real estate for investments, or in creating REITs, contact Black and Buono.
Journal Sentinel
