Sunday, April 01, 2012

WaPo on Investors buying Foreclosures to Rent

by Bill McBride on 4/01/2012 06:57:00 PM

A long article from Edward Robinson at the WaPo: Foreclosures give rise to new industry. A few excerpts:

Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada.

With many suburban homes selling for half their peak values and demand for rentals from prospective tenants climbing, Waypoint was earning a return of
8 to 9 percent on its capital as of Dec. 31, according to a quarterly report. That beats the 6.3 percent gain in the BI NA Multifamily REIT Index, which tracks the performance of 27 apartment-building operators.
...
The home rental market boasts a total property value of $3 trillion, according to Morgan Stanley housing analyst Oliver Chang. Yet institutions have long shunned it as too scattered and impractical to be profitable.
...
Oaktree Capital Management, the investment firm co-founded by billionaire Howard Marks, announced a $450 million deal with Carrington Capital Management to acquire and convert foreclosed single-family homes into rental properties. Carrington rents out more than 3,000 houses in California and other states.

Starwood Capital Group is poised to enter the foreclosure-to-rental market, according to an investor familiar with its plans. So, too, are Zell and the real estate arm of Apollo Investment Management.
...
Investors are already having an effect: The supplies of homes for sale in Phoenix, Orlando and other hard-hit markets have fallen more than 60 percent from their post-crash highs as bargain hunters scoop up foreclosures.
I've talked to several smaller investor groups, and they have all done very well. Now the larger groups are moving in.

Investors buying foreclosures to rent is one of the reasons inventory levels of existing homes has fallen so sharply.

Yesterday:
Summary for Week Ending March 30th
Schedule for Week of April 1st

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