Posted on 09/22/2012 11:52:31 AM PDT by ruralvoter
A Wall Street behemoth plans to spend $1 billion on Tampa Bay's hobbled housing market, dispatching teams of brokers to scour neighborhoods and buy hundreds of homes a month.
But rather than resell the homes, the Blackstone Group is opting to become a landlord, renting the homes to tenants including foreclosed ex-homeowners burned by the housing crash.
Blackstone, one of the nation's largest private-equity firms, plans to buy as many as 15,000 homes in Tampa Bay over the next three years, many of them foreclosures, capitalizing on decimated home prices and growing rents.
The shopping spree, and those of half a dozen other big investment firms and hedge funds, could radically change the local home landscape, as big-money brokers compete with first-time buyers and mom-and-pop landlords over homes in tight supply.
"It's a land grab unlike anything we've ever seen," said Peter Murphy, CEO of Home Encounter, the largest manager of rental homes in Tampa Bay. "You're going to drive through parts of town and all of it is going to be institutionally owned."
(Excerpt) Read more at tampabay.com ...
... and sometimes it’s like being set upon by nihilist profit-seeking robots that see you more in terms of the price you’d fetch at a rendering plant.
I don’t think it will go far at all. This is a management nightmare and no sane RE investor would pursue it. 15,000 scattered site homes?
The entire story makes no sense. If they pay $150,000/home and rent them for $1500 they gross $18,000/home less any rent up costs, repairs, etc. prior to renting them out. How much are taxes, insurance and utilities on these homes? How much is maintenance?
If taxes are just one month, insurance one month and utilities are just one month you’ve got a net before maintenance costs of $13,500. Add maintenance of one month’s rent and you’re down to $12,000/150,000 investment for a return of 8% and a lot of hassle. They can’t beat that in stocks or corporate investing? Perhaps they’ll self manage it, but figure vacancies will run 5-7% and you lose another grand. That’s about 7% ROI. I’m not impressed.
I suspect Blackstone is either juicing it’s own game or hoping for massive inflation. Could be they’re taking a HUD portfolio, but the story makes it sound like their shopping the market on an individual basis. If they buy at $66K and rent at $1500 and sell out in 5 years at $150K that’s impressive, but once the Fed stops gaming the interest rate it’s going to level out. Who can afford a home at 16% interest?
A friend knows a guy who told my friend at Blackstone and we put $1 Billion on it right away. We’re too big to fail.
Yep, the vast majority of lease to buy deals go sour. It’s not a good deal to overpay your rent, lose your security deposit (down payment) and often more. You’re better off renting.
Unless, that is, they were planning to farm out the management (and had a good consortium of RE management companies in mind). There is no reason why existing condo and rental management companies wouldn't jump at the chance to get involved.
Hmmm...need to think this through more slowly. There might be something here.
It would be a real boon for the local economy...
Years ago I worked in the mortgage loan assumption department of a bank. Assumption as in someone buys your house and assumes the burden of your mortgage loan.
I saw many a heartbroken young couple lose their nest egg in one of these agreements and then the seller just went out and sold the same house again.
From what I hear from FL is 1500 is no where near enough for hazard insurance. I have a friend in Miami paying 6K.
They will probably average 50k. The whole point is to pick up distressed properties in areas where renters have no chance of leaving. Areas might look slummy but those are the cash cows of the rental industry.
It makes a little more sens if you go to the bottom of the article. It says they want to collateralize the rent payments like regular MBS
Young couple gets in over their head...someone else gets their house because they can't make the payment...
Business is not charity. If you can't afford a house...don't but it.
Boo-fricken-HOO.
You need to sign in a Democraticunderground.com...they love you bleeding heart liberals.
Yeah, sellers just like you.
Thanks for the demonstration.
Here is an article from July 2012 about this bundled sell off of real estate around the country:
Obama Administration to Sell Foreclosed Homes To ‘Vulture Capitalists’
I’m afraid you’re right, 4Runner.
What a mess!
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