Private equity firms snap up foreclosed properties
Are residential homes a good investment right now?
We may well be at the nadir. At least that's what a crop of new private equity real estate companies are betting. They are gobbling up residences, often at auction and at rock bottom prices, with an eye on renting them in preparation for an eventual exit.
Bloomberg takes a look at the trend, focusing in part on Waypoint, which appears to be one of the pioneers.
"Since 2007, investors have been trolling the cratered suburbs stretching from California to Florida (SPCSMIA) for cheap houses to flip," it notes. "Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith LP in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada."
Homes are cheap, and rents are rising, and that has made for a pretty good business. We're seeing more pensions tap funds that have been set up for this market. Columbia University's endowment is an investor. No less than CalPERS is an investor as well as a part-owner of the firm. Oaktree has invested in another firm.
This bodes well for the housing recovery and for banks' ability to work through their foreclosure backlogs.
- here's the article