The drumbeat in residential real estate market news this year has largely been that of investors scooping up single-family homes on the cheap and turning them into investment rentals. It’s an interesting story with a lot of implications for property values, tax base, neighborhood character and other angles of interest to general readers.
But this just-out illustration by Bloomberg of just how grand the is the scale of private homes now owned by corporate landlords really made my jaw drop; the article says that Magnetar Capitol LLC owns one-third of all rental housing in the Dayton, Ohio suburb of Huber Heights, having plunked down cash for some 1,900 houses earlier this year. The article says the concentration of these purchases, and the resulting influence the company will have on town politics and perhaps property tax decisions, is a new facet of the old story.
The Bloomberg story, with plenty of context about historical home prices, the origins of Magnetar and even the history of Huber Heights, is an instructive read and seems like a good one to localize. Can you search property records in your region to find emerging and dominant corporate landlords?
Unless you are in a huge market, the story seems to cry out for a graphic representation of where the houses are located, along with selling price. In an Indianapolis Star article on the topic, from September; note the reporter also used securities filings from dominant new landlord American Homes 4 Rent to glean information about the number of properties the company is purchasing in the area. Realtors and municipal officials, as well as executives at area financial institutions and perhaps title companies, also may help you discern buying patterns. And this SFGate.com article on the high percentage of all-cash real estate transactions refers to Dataquick as a source of market-level transactions; you might try them.
And as the investors settle into running their rental businesses, how are they faring revenue-wise, and what does the institutional landlord mean for tenants? This CNBC report predicts that investors in it for home price appreciation have largely made whatever gains they might expect, and that operating the rental units might be a tougher route to profits. And this Atlantic Cities article brings up some interesting cons — and pros — for consumers in having a corporate rather than grass-roots landlord.
Meanwhile, as the economy stumbles through the fifth anniversary of market meltdown, what do we behold but the securitization of … rents. Reuters just reported Tuesday that private equity firm Blackstone is expected to begin marketing a bond backed by rental revenue, underwritten by Deutsche Bank. Note that this is different from securities backed by ownership of the rental properties themselves; this bond would be based on the cash flow generated by the properties. Hmm. So what happens to the holders of these bonds when another downturn occurs and renters skip out on what they owe? We know how that worked out with mortgage-backed securities oh, about five years go.
While it’s doubtful that your area’s new dominant corporate landlords are on the verge of issuing bonds — this Blackstone deal appears to have been in the works a long time — you could look at these companies and related REITs (real estate investment trusts) from an investment point of view; are their shares publicly available, or about to be? Is investing via shares or even mutual funds a realistic play for those who would like to get in on the trend but can’t afford actual properties? Here’s an interesting Reuters blog on investment possibilities, and a similar article from The Motley Fool.