Time to Cashout!

The business of investing in portfolios of distressed single-family homes has come to the point in its current cycle (in specific markets) that investors who got into the game early are beginning to cash out.

Surging demand for entry-level homes that can be rented out is creating windfalls for investors who bought homes at deep discounts a few years ago.

Single-family rental homes are finishing out 2012 as one of the hottest real-estate assets as more investors look for ways to bet on a housing recovery. Home prices have climbed this year amid rising demand and big declines in the number of homes for sale. Investors have contributed to this trend by scooping up homes and holding them off the market. Mom-and-pop investors have long dominated the single-family rental space, but over the past 18 months, larger investors have begun acquiring thousands of homes and developing the infrastructure needed to manage scattered rental properties.

American Residential started buying homes in Phoenix and expanded to Las Vegas, Southern California, Georgia and Florida. Others like Colony Capital LLC and Blackstone Group LP also are trying to put together a rental business in multiple markets. American Residential raised $224 million in a private stock offering in May and has formed a private real-estate investment trust. It plans to file for an initial public offering in the coming year.

National home prices were up by 6% from one year ago in October, according to CoreLogic, a real-estate research firm. Until now, bulk sales have been limited to small sales of one or two dozen properties, and sales of homes with tenants in them have been even rarer. Fannie Mae in February marketed eight pools of 2,400 homes for sale, with most of them rented out. But the mortgage-finance company opted against selling any in bulk. Instead, it entered into three joint-venture arrangements this past fall that effectively sold minority stakes in seven of the pools.

A version of this article appeared Dec. 26, 2012 in The Wall Street Journal

The Management Group
Property and HOA Management in Vancouver WA and Portland OR
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