#homes #investors #InstitutionalInvestors #landlords
Home is where the profit is.
Yes, institutional investors, i.e. pension funds, venture capitalists etc., are buying up individual, single-family homes.
So says an analysis by Zachary B. Wolf for CNN, published on cnn.com Aug. 2, 2021.
Here are the trends, as Wolf sees them: 1) Many people still can’t afford to buy homes, despite low interest rates. 2) The coronavirus pandemic has encouraged, even forced, people to work from home, so they may need more space. 3) Traditional landlords – people who own one or two properties, big property management operations, even Real Estate Investment Trusts are tired of people not paying rent because they lost their jobs in the pandemic.
In short, other people’s peril, and big potential for juicy rent checks, bring out big investors.
Perhaps the advantage here is that the new type of institutional investor doesn’t depend strictly on the income from one rental house to survive. Eventually, they figure, the juicy rent checks will reappear. Meanwhile, other real estate investors are looking for relief.
Perhaps also, since these investors don’t necessarily depend solely on the rent checks, they will eventually bail out of this space by allowing their tenants to purchase the homes they live in. Typical real estate investors generally shy away from those scenarios.
Here’s another thought: The equity building in the property – the housing market for purchase is on fire in most places – would be the new investors’ profit. That may put less pressure on tenants/rents, presuming the tenants eventually get out from under their pandemic hardships. If you are a tenant, it probably doesn’t matter to whom you write your rent check.
However, for tenants, it could matter if something goes wrong with your property. How will these investors handle property management? Might they hire back the property managers from whom they bought the property?
If you’ve ever taken a class, or read a book, on making money by investing in real estate, they tend to suck people in with leverage. In other words, you (the potential investor) can start by putting a small down payment on Property X, and taking a mortgage. The rent covers the mortgage payment and a little profit for you.
As you become more successful, you buy another property the same way. As that property becomes successful, you do it again etc.
All this depends on nothing going wrong. And, when properties need major repairs, does the aspiring rich landlord have the cash to cover them? Then, if you have a pandemic, suddenly, renters can’t pay. The government then stops you from evicting them. They will certainly owe back rent, but how long might it take for you (the landlord) to see that money?
The good news here is there are easier ways to make a good income from other than a W-2 job. You don’t need to buy property, and the headaches that come with it. You don’t need to hope for tenants who will pay faithfully every month, no matter what happens. You don’t need to worry about big repairs etc.
The bonus: you don’t need any specific education, background or experience to take advantage of these many programs. And, you can help your friends do the same in the process.
To learn about one of the best such programs, message me.
Meanwhile, even professional investors see an opportunity in single-family real estate – one house at a time. It’s probably a temporary strategy for them, since they likely don’t need the headaches of property management for the long term.
But, perhaps, they could provide the relief tenants – and many landlords – need in this extraordinary time.
One can only hope for a win-win for all concerned.
Peter