An interesting piece from Bloomberg entitled: Private Equity Has Too Much Money to Spend on Homes talking about how hard it is for large funds to buy foreclosed homes in bulk and turn them into rentals reminded me of a conversation I had with one of my private equity clients who was consulted by Tom Barrack’s Colony Capital about doing just that (and he said don’t).
“Funds planning to invest more than $6 billion to buy and rent foreclosed homes are finding it easy to raise money. The difficulty is spending it… The folks that raised capital are worried about under- accumulating properties and how to get capital out in an efficient way, Richard Ford, a managing director in the real estate investment banking group at Jefferies Group Inc., said in a telephone interview. A lot’s being raised. Less than $2 billion of institutional capital has been spent.”
It seems like between the banks’ increasing willingness to do short sales and small investors willingness to keep buying single family homes means there won’t be as many opportunities for the big funds as they had hoped. The complexities of owning, operating, maintaining and managing a handful of single family home rentals is what propels many individual investors to trade them in for apartment building investments. While the big funds can probably manage a larger pool of homes the big question is can they do it and hit their return targets?
Ready to trade your ten or twelve rental houses in for one apartment building? How about going from 12 roofs, 12 lawns, 12 different locations to just one? We can help you do that-
Hat tip: Barry Ritholtz