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Blackstone (BX) gets into the residential landlord business, buying up $250M worth of foreclosed...

Blackstone (BX) gets into the residential landlord business, buying up $250M worth of foreclosed single-family homes with the intention of renting them out, according to sources. The firm joins what can now be called a mad rush of deep-pocketed investors trying to take single-family rentals out of the mom-and-pop category and into a major asset class.
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Comments (24)
  • Tack
    , contributor
    Comments (14394) | Send Message
     
    More good news for housing markets, as the "corporatization" of home rentals will only lead to faster and higher rent increases, which will make home ownership look even better, alternatively.
    3 Jul 2012, 09:50 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    Its hard for me to believe that this is going to be a high margin business tho. I'm not sure how well economies of scale will be able to built up buying single family homes scattered across different towns, let alone different counties or states.

     

    Either way, these investment firms taking out large chunks of supply should help the market find equal footing.
    3 Jul 2012, 10:02 AM Reply Like
  • Poor Texan
    , contributor
    Comments (3533) | Send Message
     
    "Its hard for me to believe that this is going to be a high margin business tho."

     

    Cash flow, cash flow, cash flow. Depreciation.
    3 Jul 2012, 04:30 PM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    I'm more worried about maintaince and the vacancy and collection loss rates. I'd imagine both are going to be higher than a standard apartment building, so its going to cut into the cap rate.
    3 Jul 2012, 09:20 PM Reply Like
  • youngman442002
    , contributor
    Comments (5131) | Send Message
     
    I see it as Government housing....they will lobby for tax abatements..rent help...etc etc etc...
    3 Jul 2012, 10:15 AM Reply Like
  • Vuke
    , contributor
    Comments (1666) | Send Message
     
    Good thinking Youngman. In essence, subsidized housing for the millions of unemployed. A standard vote buying move by the "socially minded" political candidate. Let's turn the entire USA into Detroit.
    3 Jul 2012, 11:33 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    All US housing is subsidized. That's the whole problem. Fannie, Freddie, the mortgage interest deduction on your taxes, all exist to lower the cost of housing.
    3 Jul 2012, 01:04 PM Reply Like
  • Ray Lopez
    , contributor
    Comments (1611) | Send Message
     
    Yes, and it distorts the market. Ask any maize farmer in Africa trying to compete with some corporate farm in Iowa which is dumping corn (though at the moment corn is heading up due to drought).
    3 Jul 2012, 09:18 PM Reply Like
  • berloe
    , contributor
    Comments (1887) | Send Message
     
    I'm concerned BX can't find more lucrative investments; so will stand aside.
    3 Jul 2012, 01:07 PM Reply Like
  • baseballman24
    , contributor
    Comments (331) | Send Message
     
    Good for BX, these are good investments, love the comments from people who think they can run the business better than BX. Faster we get these homes off the market the faster the Fed can raise rates, crush gas prices and boost GDP. As far as I'm concerned the reason the FED is sitting on rates like a 1000 pound gorilla is because our big bank are in-solvent. If made too "mark to market" they would be toast, thats what allowed the market to heal the suspension on "Mark To Market" in 2009... Once we get housing prices back up we can raise rates stamp out high gas prices and grow again.
    3 Jul 2012, 01:25 PM Reply Like
  • Covingtonium
    , contributor
    Comments (459) | Send Message
     
    You think rising interest rates will cause a rise in GDP? I don't think so.
    11 Jul 2012, 01:19 AM Reply Like
  • Russ Winter
    , contributor
    Comments (688) | Send Message
     
    It is all about the cap rate, as foreclosed housing needs to be brought up to snuff to rent out to folks with poor credit ratings.

     

    I owned 61 units of vintage apartment buildings at one point, and the key is a high cap rate 8, even 9%. 5 or 6% just to substitute for over priced bonds won't cut it, too tough of a business.
    3 Jul 2012, 03:08 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (2007) | Send Message
     
    Getting back to what they are doing, buying cheap real estate to rent, it is a grand scheme. I have been posting more than once recently that I was looking for a REIT who was investing in residential rentals. I know mortgages are getting hard to find, and rentals WILL be going up from here. Just as the present REITs we have been talking about, the ones keying on rentals I think will be great. Now we buy a little bit of all we can find, and slowly winnow out the ones who don't get it, and can't keep up, [like CIM recently].

     

    I did the same thing with Jr. Miners. I bought a little bit of several, kept selling the losers and putting the money into winners, then to the ETF. This time I am going to skip the middleman, and go right to the REITs. Let them do the work.
    I am gonna lQQk into BX and there is another.

     

    Happy house hunting
    Capt. Brian
    The Lost Navigator
    3 Jul 2012, 05:16 PM Reply Like
  • Brian Bobbitt
    , contributor
    Comments (2007) | Send Message
     
    I lQQked @ BX, and not really interested at this time. The yield is 2.99%, and that does not keep up with inflation, taxes etc., I need better. In fact, their 5 year chart is kinda wishy washy, and I am gonna pass at this time. Thanx to the author for shining a light on it though.

     

    Capt. Brian
    The Lost Navigator

     

    I just can't see folks who tout and buy an asset that is dropping in value, and not paying enough to keep up [dividend wise], maybe I am missing something. I appreciate any positive input.
    5 Jul 2012, 10:25 AM Reply Like
  • Mike Maher
    , contributor
    Comments (2732) | Send Message
     
    The actual yield is higher, their Q4 distribution is variable, so the $.040 that Yahoo Finance quotes as the yearly dividend is not correct. Go to the IR section of the BX website and calculate it from there.
    5 Jul 2012, 11:48 AM Reply Like
  • Ray Lopez
    , contributor
    Comments (1611) | Send Message
     
    I got a bad feeling about this one. I think BX is going to 'securitize' these residential rentals then package them to ignorant pension fund managers in Dusseldorf...
    3 Jul 2012, 09:17 PM Reply Like
  • Poor Texan
    , contributor
    Comments (3533) | Send Message
     
    Ray,

     

    You may be on to something. Maybe the TBTFs at home.
    3 Jul 2012, 10:07 PM Reply Like
  • berloe
    , contributor
    Comments (1887) | Send Message
     
    Good call!
    4 Jul 2012, 04:57 PM Reply Like
  • rick flair
    , contributor
    Comments (369) | Send Message
     
    of course they are. thats where the juice is. does anyonre really think hey werre gonna become landlords?
    4 Jul 2012, 12:05 AM Reply Like
  • rick flair
    , contributor
    Comments (369) | Send Message
     
    as soon as it fails, they'll rely on the Fed and the fine print to get out of paying anything near what the tranche buyers think they'll be getting...
    4 Jul 2012, 12:24 AM Reply Like
  • razor44
    , contributor
    Comment (1) | Send Message
     
    I am a mom & pop SFR landlord, with under a dozen houses in AZ. I purchased almost all of my houses, distressed properties of course, in the last 2 years. I am experiencing cap rates of over 20% on these units. No shortage of good tenants. That seems to be what is attracting the big boys. I can't image that this can be scaled up easily to maintain such high rates of return, unless the houses are purchased in the same locality. I think they will get poorer returns than expected (or at least their "investors" will) because you can not operate residential rentals with such high returns from the 50,000 foot perspective, especially if spread over a large geographic area. Good luck, wall street!
    4 Jul 2012, 02:12 AM Reply Like
  • berloe
    , contributor
    Comments (1887) | Send Message
     
    Just curious- who handles the properties in AZ? Do I understand you live in Frisco? Just curious.
    4 Jul 2012, 05:00 PM Reply Like
  • Covingtonium
    , contributor
    Comments (459) | Send Message
     
    What is cap rate?
    11 Jul 2012, 01:22 AM Reply Like
  • jjmc2001
    , contributor
    Comments (1313) | Send Message
     
    I did this for over 20 years and sold all of them from 2003 to 2007 (pure dumb luck). When you get upwards of 20 units it becomes a lot of management work which eats up a lot cash flow. The profits are made when you buy them so perhaps their timing is good.
    4 Jul 2012, 11:28 PM Reply Like
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