Big Foreclosure Investors Poised to Start Selling Homes

One the major reasons why foreclosures inventory fell off significantly from levels established at the height of foreclosed homes crisis had to do with Paul buying of homes by investment firms. These companies receive money from cash-rich pension funds hedge funds and private equity companies to body up cheap homes across the United States at significant discounts.

Even Uncle Sam got in on the act and sold government foreclosures by the thousands to big investors. Many of these home required minimal repairs.

However, as part of the transaction agreement the buyers were required by law to rent out the homes to tenants for a period of three years. At the end of the three-year period, the buyers  can cash-in and sell the homes.

Bulk Buying Business Model

With 4 million foreclosed homes coming on the market between 2007 and 2012, mortgage lenders, Fannie Mae and Freddie Mac sold off their extensive holding  to these “super investors” loaded with cash. These firms spent hundreds of millions of dollars siphoning up these foreclosed homes—even causing a bidding war in some locations.

In early 2012, some investors tor predicted that the audit video rental business model would blossom into a $100 billion in its. However, home price appreciation cost many of these buyers– American Residential Properties, American Homes 4 Rent and the Blackstone Group and to stop purchasing foreclosures because they could no longer secure the deep discount pricing that epitomize their earlier purchases thus earning their desire to return on investment.

At the height of the purchasing bonanza, Blackstone bought 45,000 units in 14 cities for $8.6 billion. Its pace has slowed down to about $30 million compared to $140 million. Every $30 million invested by Blackstone purchases about 116 foreclosure properties.

Criticism of Institutional Buying

The program received a lot of negative press because of the ideas of “Wall Street” benefiting from a residential real estate crisis that many housing advocates believe it precipitated with lax lending standards, particularly subprime loans.

In addition, the buying spree crowed out  first-time home buyers and  smaller  foreclosures investors—traditional buyers for homes in this price range . According to real to try pieces to show buyers bought for over 360,000 single-family homes since 2011.

The buying activity had a significant impact in metropolitan areas like Las Vegas, Atlanta Phoenix and parts of Southern California. Property values plunged as much as have fun as much as 50 percent in these areas.

Wall Street Property Managers

Now that this cheap inventory of foreclosed properties pass dropped off significantly many of you firms they got in on the ground floor of this “opportunity”  are  planning to cash out by flipping houses their competitors  and take their profits —Waypoint recently announce plans to sell 2000 home in Southern California.

Some companies intend to continue managing their rental portfolios. A few analyst forecast that property management of these homes will eventually be concentrated into the hands of  a few firms.  This new property management companies—with 18 months or less experience in the businesses—still need to iron out the wrinkles in their operations and become more cost effective to improve profit margins

This includes the hiring and oversight of contractors hired to make that improve and make repairs, the handling of tenant complaints, staff training and fair debt collection procedures.

These rental portfolios serves as collateral for mortgage backed security (bonds) that are typically sold to other wealthy investors.

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