Being a landlord is no walk in the park. Yes, there are many benefits which I have touted here, however, it is not as easy as it first appears. Looks like the big boys may be about to find this out.
“Most rental houses in the U.S. are owned by individuals, or small, local businesses. Culpepper’s landlord is part of a new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion buying and renovating at least 75,000 homes in order to rent them out.
This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes. In recent weeks, HuffPost spoke with more than a dozen current tenants, along with former employees who recently left the real estate companies. Though it’s not uncommon for tenants to complain about their landlords, many who had rented before described their current experience as the worst they’ve ever had.”
Read the rest here.
Good article, not surprised. Ownership of a Property Management company is hard enough at the local level, I can see why it is a nightmare at the National Level. Rents no doubt have gone up and with those increases rents, expectations have gone up too. Gone are the days where you provide a “fresh coat of paint and new carpet” and call it rent ready. I have learned with my own properties that certain upgrades such as ceramic tile in kitchen and baths, new decorative faucets, new electrical fixtures with ceiling fans in certain rooms, new counter tops and other nice upgrades make for happier tenants, higher rents and longer occupancy. There is no way funds can keep up with market trends in every single market. Also, by nature, tenants are not patient, they want their repairs done immediately. It is my opinion, but I do not think Property Management can be put in a cookie cutter type model. Just in Memphis, the method of management varies by the part of town. Some homes are more management intensive then others, with routine drive by’s necessary. I can’t speak of other markets, but in Memphis, there has been so much undeserved negative press (which is a whole blog topic in itself), that local code is getting involved to make sure these properties are in good working condition. There are going to be a lot of problems created by fund ownership and they are too many problems in a blog response to go into detail. But I will say one thing, fund ownership of single family homes has to be the biggest point of hypocrisy by the current President. He says he is looking out for the everyday American, but at the end of the day, this is another example of Wall St controlling financial markets. This time it is the housing market. The housing rebound is most certainly being driven by fund ownership. A owner occupant buyer is having to bid against these funds. For the individual local investor, the price of the investment property is also being driven up. On paper, it looks great. Inventory is declining and prices are going up, but when housing markets are driven by funds, it is an artificial inflation of the value. If I were buying a house, I would make sure the area did not have a lot of rentals, otherwise one could be overpaying for a house. With new lending underwriting guidelines and higher down payment requirements for FHA going into effect in 2014, I can only think this will hurt home values when the funds stop buying, thus returning to an owner occupant driven market. Hopefully the FED has some clue to this, b/c rates need to stay low when funds stop buying.
Alex,
Thanks for your perspective on things.
For those of you who do not know, Alex is a local turnkey provider directly competing with these funds here in Memphis. So he has first hand experience and knowledge of what is going on in our local market.
Thanks again for reading and writing in,
Kevin