Investment firms eye single-family rentals

Is managing a portfolio of single-family homes the same as apartment rentals? More REITs and investors now think so.

WHAT DO YOU THINK?

  • October 25 2012 - Rio Vista
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Answers (5)

I think an investor would consider owning many rentals the same as owning an apartment building as far as income, but much more complicated to manage.
  • October 25 2012
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Profile picture for SteadyState
Agents should not be very happy with this trend as investment firms bypass REA and deal directly with the brokerage. What will happen to the REA's?
  • October 26 2012
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Profile picture for hpvanc
You would lose some, but not all of the economies of scale on operating aspects, and repair and maintenance aspects of the property management. 
  • October 26 2012
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Most mom and pop rental property owners, like myself, and I know a lot of M&P owners, get a kick out of all these firms buying single family homes with their investors' money... thinking there are some great returns.

Those firms are lining up money to buy homes and they make their money on the management of the funds/portfolio/homes... not on the returns of the homes. So the performance of the homes (which impacts the investors returns) is usually not as big of a concern to the REIT. The REITs just want to keep lining up more money to get more management fees.

Give it a few years, when the returns are much lower than expected, and their investors start to squirm, all the properties will be coming back on the market for mom and pops to purchase.
  • November 11 2012
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Profile picture for Jeff Grenz
Typically, small investors do well with single family rentals when purchased cheaply and they can avoid large maintenance or rehab costs.  SFR is normally the path for a small investor who can't afford a larger multifamily property or a homeowner who has moved from the property.

So highly capitalized hedge funds have decided that they can pay more that typical market comps, incorporate an extra layer of management and still make promised returns to investors in an area they have little experience or track record?

This will be interesting to watch something that defies logic.

I agree much with the professor above... returns are optimistic.  My guess is that the fees from setting up the REITs and recruiting money hungry for any returns, seems to the exit strategy, not the actual performance of the fund, unless pay for performance is specifically in the agreements.

  • November 12 2012
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