Jay's Notes: I have included an article below that highlights an interesting development. The big boys as defined by hedge funds, endowments, and pensions and foregoing investing in large commercial real estate projects for portfolios of single-family homes that will generate large cash-on-cash returns and provide for the largest growth opportunity over the next 5-10 years. They like the business model of us small mom and pop investment groups so much, they are abandoning their models for ours. These are groups that can invest in WHATEVER THEY WANT and they are picking the very same opportunities that you can through our group.
Wall Street Journal
By ROBBIE WHELAN
Hedge funds, private-equity firms, pension funds and university endowments are dipping into the foreclosure market McKinley, which has acquired more than 300 foreclosed single-family homes …over the past two years, recently teamed up with Och-Ziff Capital Management Group LLC, a New York hedge fund, with plans to buy at least 500 more foreclosed homes in the next year. Those homes, too, …will be rented.
Buying foreclosed homes as investment properties has long been dominated by mom-and-pop investors. But now hedge funds, private-equity firms, pension funds and university endowments are dipping into that market. The attraction is double-digit returns at a time when most bonds and other income investments yield very little. The most popular strategy is for a big investor to team up with a local company that scouts out houses and finds the renters. The hope is to flip the homes in the future when prices recover.
"It's kind of the Wall Street meets Main Street phenomenon," says John Burns, an Irvine, Calif.-based real-estate consultant who has discussed investing in single-family rentals with hedge funds. "The Main Street guys need the capital, and Wall Street needs the expertise."
At the end of May, 3.5 million loans were at least 90 days delinquent or in foreclosure, according to investment bank Barclays Capital. At the same time, the country's home ownership rate has fallen, to 65.9% in the second quarter of 2011 from its peak of 69.2% in 2004, according to figures released by the U.S. Census Bureau last month. That drop has produced millions of new renters and helped push the vacancy rate for rental housing down by about two percentage points, to 9.2%.
G8 Capital, a private-equity fund, has bought 3,000 homes across the country since 2008, mostly to flip them. It decided last year to begin pursuing a hold-and-rent strategy. It has since bought 250 foreclosed homes as rentals.
Carrington Property Services LLC, a property investment company that manages about 4,500 homes nationally…plans to buy as many as 5,000 more rental homes..
Waypoint Real Estate Group, an Oakland, Calif.-based company, has bought 700 homes in the past two years as rental properties. Doug Brien, a former place kicker for the New York Jets who is now managing director of Waypoint, says he closed on a financing deal from an Ivy League university endowment, but declined to name the university.
"At some point, there will be a shortage of housing," Mr. Brien said. "Everyone is realizing that single-family buy-and-hold is the way to go."