Investors Are Being Watched

We should all be aware by now that serious Wall Street money has gotten into the landlording business.  Hedge funds have been buying up thousands of foreclosed homes all over the United States and placing them on the rental market.  I have been watching this process take place here in Memphis, TN and have wondered how it is all going to shake out in 5 or 10 years.  Looks like others are starting to watch and wonder as well.

This article from the Memphis Daily News takes a look at the impact investors have made on the Memphis real estate market over the past few years.  The article notes that according to Jim Reedy, who owns Reedy & Company here in Memphis:

“Memphis is a 50 percent rental town now and I expect that to go to 60 percent, possibly 65 percent.”

What will the impact on the city be upon loosing so many homeowners?  The article goes on to say:

“The role of investors is growing and the impact on different kinds of neighborhoods is largely unstudied and unknown.”

People are watching this process develop however.  Some, like the Center for Community Building and Neighborhood Action (CBANA) at the University of Memphis are watching rather closely.

In a rather detailed 2010 study of lending patterns in Memphis which examined the roles of some of this City’s largest investors and turnkey providers, CBANA concluded that:

            The significance of the investor-driven market, however, has been anything but clear.

While CBANA can’t say that all of this investor activity is bad for neighborhoods, one can tell from the tone of their reports that they do not think it will turn out very well.

So while none of us may know what the future holds, here is the moral to this story.  With folks like CBANA and others watching us investors, we investors need to be sure we are keeping an eye what CBANA and others like them report.  Why?  Because at the first sign of trouble it will be folks like CBANA calling for new regulations, restrictions and registrations. 

And it will not only happen here in Memphis as there are similar situations in cities all over the country such as Atlanta, Dallas, Indianapolis.   Landlords and real estate investors of all types need to keep tuned into what is said and make sure their voices are heard as well.  Their business may depend on it.