This new housing market has been called by some “A new frontier” — Some big-time investors are starting to buy up thousands of homes to turn into rentals. This concept is nothing new. You may have heard this quote, “There is nothing new under the sun.” This applies to buying foreclosed homes as well. I have been investing in real estate and purchasing bank owned homes for over 25 years and now at Performance Property Management we help manage 100’s of properties for other investors in the Denver metro market as well. Still, some housing advocates are nervous. There will always be the naysayers telling you this will not work or that will not work, however, real estate is a tangible investment that you can see, touch and control, unlike many other investments. If you have a good team to help you with your real estate investments, this will eliminate many of the horror stories that you hear about.
For decades, most single-family homes available for rent have been owned by mom-and-pop landlords. Sometimes it’s the nice old guy up the street who owns a couple of rental homes, and some even offer advice on the Internet.
But, it’s not just mom-and-pops anymore. With the collapse of the housing market, some professional investors with a lot of money smell an opportunity. Right now, there are fewer people able to own a house and more looking to rent. That’s driving up rental costs. Meanwhile, there’s a glut of foreclosed properties being sold on the cheap.
Some larger investment corporations are spending billions of dollars buying up foreclosed homes and turning them into rental houses. And they’re not alone. One company was quoted saying, “We’ve purchased almost 1,300 homes; we actually bought 137 homes last month.” This is no mom and pop operation.
It works really well if you purchase them in your own neighborhood and you buy five homes and you manage them yourself or have a local management company do it for you. It gets a little dicier as you get to 100.
When you are a serious real estate investor you will need and want a professional property management company to deal with the endless issues of owning real estate. This is why many investors will not invest in real estate.
We do our best with helping our clients locate and find good rental properties, after all, if we have to manage them we want to create a win/win scenario with our clients.
‘A New Industry’
Some say, “This is a new industry that’s unfolding, there are no brands,” I say “This is an opportune time to purchase and hold real estate as part of your weath building strategy”. Still, there will be challenges. Scott Simon is a managing director at PIMCO — a firm that’s one of the biggest mortgage bond investors in the world. He says there’s a reason the landlords are mostly mom-and-pops.
It works really well if you do them in your own neighborhood and you buy five homes and you manage them yourself or use a local property manager. It gets a little dicier as you get to 100 or 1000.
Managing more than a thousand homes in three or four cities — with broken furnaces, leaky roofs and people not paying rent — can present more of a challenge.
That scale gets somewhat dubious, the numbers aren’t quite as good. But there’s a tremendous amount of money in the private equity space, for example, that’s chasing these kind of investments.
Crisis In The Housing Market
How Fast Does Your State Foreclose?
If foreclosure numbers continue to grow, it’s conceivable that institutional investors could convert a million or more foreclosed homes into rentals. That means they wouldn’t be sitting for sale, weighing down the housing market.
It would take the excess supply off the market, so it could actually be a very good thing for single-family housing.
But some housing advocates have some concerns. In the past, when speculators started buying up a lot of houses, that’s sometimes leads to problems.
As a property owner and manager of 100’s of properties we konw that there is a tremendous amount of work required to maintain the properties and keep them in good condition. Meanwhile, the government-owned mortgage giant Fannie Mae is starting to gear up to sell thousands of foreclosed properties through bulk sales to investors. So, whether you are a property owner already or would like to invest in real estate we are here to help you in the Denver, Colorado market.