Wall Street’s hottest investment idea: Your US house

Saw an interesting article by Stephen Gandel from Fortune Magazine about Wall Streets interest in buying single family homes around the US.

Conventional wisdom on real estate has been that while home prices might not fall much more, they aren’t likely to go up anytime soon either. The best personal finance advice, then, when it came to buying a house, was to buy as little as possible.

Apparently, though, on Wall Street that common wisdom about home prices is not held by all, or even many.

In the past six months or so, a number of

• investment firms
• hedge funds
• private equity partnerships and
• real estate investors

have turned into avid buyers of single-family homes. And not just any homes, but foreclosures and Investment banks are lining up financing options to keep the purchases going.

He uses a great example of one firm (Blackstone Group) who about a year ago, made no mention of single-family homes or even that the firm was looking to profit from a rebound in the residential real estate market.

Last week a report came out that Blackstone now owns 2,000 single-family homes!

Buying up single-family homes as an investment is not a new idea but normally it’s smaller landlords that keep a small portfolio of a dozen homes or so.

The larger Real Estate Investment Trusts (REITs) and private equity funds generally focus on apartment buildings and commercial real estate but that also seems to be evolving.

Kenneth Rosen, a UC Berkeley professor who has a consulting firm that advises real estate investors, says he knows of two dozen investment funds in the process of buying up single family homes, a number of which are hoping to own as much as 10,000 homes around the country.

He predicts there could be as many as a dozen public REITs in the next few years that are devoted to single family homes.

Could be a good time to invest in a bargain-priced Florida villa?

Good luck!

Bill Cowie

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