Key Highlights
– Investors now buying entire subdivisions and neighborhoods
– Seller making 25%-50% more by selling entire developments rather than making house-by-house deals
Your Buyer Could Be a Pension Fund
Big investors are making themselves felt in the housing industry a big way these days. Build-to-rent developments are now selling entire subdivisions and neighborhoods to name-brand investment firms, home-rental firms and pension funds.
Sure, investment groups are continuing to buy individual homes when they become available but now, with interest rates at nearly all-time lows, such investors are chomping at the bit to buy in mass.
One Example in Housto
In late December 2020, an entire build-to-rent subdivision of 124 homes went on the block. Built by behemoth D.R. Horton Inc., multiple high-profile investment groups presented offers in what turned out to be a very competitive bidding war.
Fundrise LLC, an online property-investment platform that manages +$1B for approximately 150,000 individuals, won this bidding war for $32M
The buyer was happy. And the selling entity made nearly twice as much as it would have made if the seller had offered the homes for sale one at a time.
Yield-Chasing Investors Hungry for Single-Family Houses to Rent or Flip
John Burns, president of John Burns Real Estate Consulting, said, “You now have permanent capital competing with a young couple trying to buy a house. That’s going to make US housing permanently more expensive.”
Burns estimates that some one in every five homes now on the market for sale is being snapped up by a buyer who never moves in. He believes that in boomtowns such as Houston, Phoenix, Miami and Las Vegas, 24% of homes priced below $300,000 in decent school districts are being acquired by investment groups.
Mega Landlords Are Booming
This last spring brought a stampede of mega-buyers into the housing market. The COVID pandemic had spawned a race for home-office space and yards…with that race, prices for both home sales and single-family rentals exploded. Likewise, the “ecosystem” of investment firm money and services exploded with it.
Companies such as Opendoor, JP Morgan Asset Management, Black Rock, Fundrise, Roofstock , PCCP LC, Centerbridge Partners LP, Allianz SE, Madison Realty Capital and states’ retirement systems are now flourishing via their investments in for-rent housing.
Josh Zegen, Madison Realty’s managing partner, said, “A lot of things that would have been for-sale housing are going to be for-rent housing.”
Thanks to The Wall Street Journal.
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