While driving through a relatively new neighborhood this morning to close a commercial loan, I noticed almost an entire street with “For Lease” signs in the front yard. When I left I took a brief tour of the neighborhood and I’d estimate about 40-50% of the new homes were up for lease. I reached out to one of my contacts in the local Realty market who explained that one of the builders has sold those homes to a private equity firm and turned those homes into rentals. He thinks this will become more common in the near future.
I read real estate section of CNBC online and they also stated may be way of the future for now. Some are also listing vacant apartments on AirBnB. Crazy world !!
It is scary I see for lease signs EVERYWHERE!!!
Yep…it’s the latest ‘get rich quick’ scheme. Small time investors get into a ‘club’ (for lack of a better word) and then buy apt. bldgs, (houses, too, apparently) and rent them out. Probably a good idea in present high interest mortgage market.
Owners can always raise the rent (and sell when market improves).
Sure. . . doesn’t it make sense if a buyer has some $$ but can’t afford a place of their own, to “invest” in a property they can afford and let the lessors or renters make the owner’s mortgage payments for them while the property increases in value over time? In three years when rates come down and equity has been built and the value of the property has gone up, it’ll be time to sell and take the ‘free’ money that was earned and go buy the place they want. No brainer.
But if they have money to invest in a place they can afford, why don’t they just live there instead of renting it? As per Warren Buffett,The first rule of investing is don’t lose money. The second rule is, don’t forget rule number one." It’s a strategy he employs in his personal life as well, and it begins by living far below his means. If we go by your business plan, any increase in the value of the rental is offset by the rent you’re having to pay, because you have to live somewhere.
These investments are done by people who pool their cash & buy something
I should have offered additional clarity on the situation I observed. The homes I mentioned were not purchased by individuals or small group investment clubs. These homes were purchased by large private equity groups. Entire neighborhoods have become owned by one company. The early home buyers did not realize that most of their neighborhood was owned by a single entity. The big concern among the exiting individual owners is this opens the door to turn these rentals into public housing, which often results in rising crime rates and deflates home values.
Have you heard about “smart homes” owned by the government. That’s what’s coming next, but I won’t say too much about that…
WOW ! I never thought of that. That’s really BAD news.
My clients moved in about two weeks ago only to look out the front window one morning and every house across the street had a for lease sign in the yard.
In San Antonio, the national home developers so over-built that they’re trying to move as many units as possible by slashing prices, but probably selling most to large volume buyers, such as the equity firms you mention. As individuals, I suggest buying a home in an an established neighborhood you want to live in, and not necessarily a property you want to invest in/flip. Plus prices are coming down making home ownership more affordable. Home ownership is the greatest builder of wealth for the average individual, but it’s a long term investment.
Hi Jack, It’s nice to meet a fellow Texan. I’m just north of San Antonio, between San Antonio and Austin. Many of the builders have slowed their pace of construction for the $200k-500K range. We have several +$500K - $2million range, north of New Braunfels along US 46 between NB and Boerne, that are under contract. Most of these +$500K are custom builds focused on out of state buyers. There isn’t a large volume of these homes so I’m not as busy as I once was.
My neighbor is a Project Manager for a builder who indicated that the current +$200k neighborhoods are being bought by institutional investors. The US-46 corridor between Seguin and New Braunfels is another are that institutional investors are focused. I’m expecting to see more of this as time moves along.
I’m suspect that the builders/developers are stuck with large tracks that are planed for construction, that were stalled due to Covid and now rising interest rates. The developers are trying to get empty plots off their balance sheet.
If you get a chance stop by my website [Riverpointetax.com] and drop me a message. Let’s see if can meet up for lunch to share ‘war stories’.
There was recenltly an article about an investment company who was buying up real estate. As a real estate agent of 38 years, i have known for about 7 years or so that hedge funds were buying up real estate. This was a big contributer to the value escalation as normal buyers were competing against investors with deeper pockets who were over bidding and driving values out to the stratosphere. For instance, a starter home was worth 180k in 2014 is now over 500k. Denver has seen whole neighborhoods torn down with million dollar replacements. Not sure if anything can be done to curb it in our “free market” economy. Canada is now limiting sales to investors in an effort to allow more owner occupants. More and morecwe are just pawns in the hands of mega rich. Denver market is sliding though, but rents are still exceeding many tenants ability to pay.
Im in Memphis Tennessee. One HOA got together and passed a rule stating that investor groups could no longer buy and sell houses in the neighborhood.
HOAs cannot lawfully dictate who can buy or not buy in a neighborhood. That rule will get contested in court and lotsa money will be spent on both sides and the HOA will ultimately lose. What legal standing does the HOA have if a homeowner wants to sell their property and the rules say “No”? Keep an eye on the outcome of that one.
It’s like saying the HOA prohibits buyers of a certain race, ethnicity or other category (see “woke” definitions) to buy into the community. In today’s world??? Unh-uh.
Its a start. Local Govt could put limitations on. But more expensive buildings increase taxes. Follow the money!
Local government will have no standing in such cases. In the end, federal law and regulations will easily preclude any local rules, ordinances, etc. from dictating who can or cannot enter into a residential real estate transaction. Consider ECOA, FHA, HUD, RESPA, SAFE, HMDA for starters.
I read some on what’s happening in TN - and honestly, it appears what they did was vote in a rule (requiring 2/3 approval by all homeowners) that requires the buyer(s) to permanently reside in the property - basically it would have to be their primary residence. Another county is looking into doing the same thing. I don’t think it’s any different than a lender requiring the property they giving the mortgage on be owner occupied (for the best interest rate) - if not owner-occupied, higher interest rate.
No issue with what you said. Was just relating whats happening…