“Invitation Homes, a subsidiary of Blackstone, for example, is now the largest owner of single-family homes nationwide. They own 13,000 single-family homes in California.
I am not sure what all this means, but I am pretty sure I don’t like it.”
Leasing Lifestyle: Investors (a/k/a Hedge Fund Landlords) across the world, especially Wall Street but even as far as China, heard Buffett and moved very quickly and purchased hundreds of thousands of single-family homes in our neighborhoods. They paid cash for houses at auctions one at a time and made bulk purchases from lenders that had tons of REO (bank-owned homes). Some banks and lenders decided to sell huge numbers of houses in bulk to these hedge fund companies to just get the houses off the books and avoid the hassle of listing them with agents and dealing with evictions.
These shrewd investors could write a check for $20 million and buy 200 or 300 California houses at a time. Some of the homes in the pool were huge “home runs,” purchased at 60 to 70 percent below market value and vacant, and some were “nightmares,” dilapidated messes with tenant problems. The bottom line is some billionaires and hedge funds bought hundreds of thousands of homes at the bottom of the market from 2010 to 2015.
Unlike flippers, they don’t seem to be selling the homes now even though they have doubled their money. They are now the largest landlords in many markets in this country and especially in middle-class ZIP codes like Sacramento and Solano County, which is a brand new phenomenon in America.
Previously, institutional investors and REITs focused on commercial real estate like malls, office buildings and huge apartment complexes, leaving the local one- to four-unit residential rental housing for upper-middle-class mom-and-pop investors like some of my clients and friends. Invitation Homes, a subsidiary of Blackstone, for example, is now the largest owner of single-family homes nationwide. They own 13,000 single-family homes in California.
I am not sure what all this means, but I am pretty sure I don’t like it.