July 26, 2014

Real Estate in Florida

Landlord Inc.

Big investment firms are buying Florida single-family foreclosures in bulk, expecting to profit twice: First by renting out the homes and then by reselling them in a few years.

Amy Keller | 1/30/2013

Less pleased, however, are real estate agents and brokers, for whom a bulk sale represents the potential loss of dozens of individual commissions.

“We have buyers that are anxious to buy their first home, and they’re getting beat out by these cash buyers and investors. It’s actually hurting the market and closing a lot of people out of the home market,” says Summer Greene, regional manager of Better Homes and Gardens Real Estate Florida First Fort Lauderdale and president of the Florida Realtors.

Greene says her organization and other Realtor groups across the country are “fighting these bulk sales” at both the state and national level to try to get government-sponsored entities like Fannie Mae and Freddie Mac to open their sales to the public on a property-by-property basis. “Right now, the biggest challenge we have is a lack of inventory, so while this might have had some value several years ago, if it continues, this is going to hurt our markets and drive prices up, which will be great for investors but lousy for home buyers.”

Most of those betting on the institutionally managed single-family rental platform are convinced that, at least in the short term, those who need housing will prefer to rent rather than to buy. Even with historically low interest rates, mortgages are more difficult to obtain, and the drop in home prices has soured consumer attitudes on housing as investment. Mounting student loan debt and underemployment, meanwhile, have put homeownership out of reach for many so-called “echo boomers,” those born between 1982 and 2004. All that demand has created a competitive market and driven rents up in recent years.

In three to five years, however, as rents rise and credit profiles heal, the investment groups expect to begin selling off their single-family rental portfolios to a new generation of home buyers. If all goes according to plan, most investors are projecting a 20% to 25% total return on their investment.

Whether the market evolves as the equity firms expect remains to be seen. Last October, hedge fund Ochs-Ziff exited the buy-fix-rent business and liquidated its portfolio of California homes. Others see nothing but upside. Jordan Kavana, founder and CEO of Transcendent Investment Management in Aventura, says he aims to have $1 billion invested in the single-family housing rental market in the next three years.

“It’s one of the most exciting businesses I’ve been involved in. I see an opportunity in this space, and I think that what we’re doing is absolutely pivotal to the stabilization of the U.S. housing market.”

“If I had a way of buying a couple hundred thousand single-family homes, I would load up on them. It’s a very attractive asset class now. I could buy them at distressed prices and find renters and (take a) mortgage. It’s a leveraged way of owning a very cheap asset, and I think that’s as attractive of an investment as you can make.”

— Warren Buffett on CNBC in February 2012

Tags: Real Estate

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