Right now the single biggest trend in Real Estate is private equity moving into the single family house market.
What exactly does this mean for the “Mom and Pop” operations that buy sell lease manage and renovate single family homes all over the country? Well, it could mean any number of things. If you are paying attention and are aware of what the Big Boys are doing you can use this information to your advantage. If you live in one of the popular markets like Phoenix AZ then you have already felt the impact.
As SFH investors and property managers we may find ourselves bidding on the same property as a major fund. You might get a call from a fund that wants to buy your portfolio. You could end up partnering with a fund as its local operator. You never know.
Phoenix was the first city that had just about all the major private equity firms investing in single family houses. Private equity helped drive prices in Phoenix up by 34% as you can read about in this Bloomberg article here. The next city that attracted just about all the major private equity firms was Atlanta GA. Other popular markets are CA, Chicago and Florida. PE firms are looking for markets that have experienced the biggest bubbles that have resulted in the biggest swings in values.
We call those non-linear markets. The goal is to hold properties as rentals and wait for a housing recovery. These funds are averaging about an 8% return on investment where most major multi-family / apartment funds return about 5 or 6%. Linear markets like Tulsa OK, Louisville KY, Indianapolis IN, Fort Worth TX, Columbus OH, and Kansas City have been some what over looked by the biggest players. However, there are plenty of funds coming into the linear markets with up to $50 million (which is considered a small fund) to spend on houses.
The Biggest Buyers
1. Blackstone Group is by far the biggest buyer of single family houses with an estimated $2.5 billion totaling up to 16,000 single-family houses and they are currently in Atlanta GA, Chicago IL, Las Vegas NV, Phoenix AZ, and Inland Empire, LA, Sacremento Valley, Bay Area, Central Valley California, Miami Orlando and Tampa, FL. Charlotte NC. They Started a Company called Invitation Homes that leases and manages their portfolio. Blackstone has an additional $10 Billion or so that they intend on investing in houses.
2. The Alaskan Permanent Fund has raised over $600 million to invest with American homes 4 rent and so far they have purchased around 3,100 single-family houses. and they are looking to bring their total number of houses up to 4,700. American homes 4 rent is in the following marketplaces: Cincinatti OH, Phoenix AZ, Atlanta GA. The Alaskan fund has about $40 billion in total assets.
3. Carrington Holding Company and Oaktree Capital Management have partnered up to purchase and manage single family rentals as you can read about in this business week article. With almost $600 million invested into a total of 4,500 single-family houses and they are currently in Chicago IL, Miami FL, Phoenix AZ and Las Vegas NV.
4. Colony Capital has about $500 million invested into 5,500 single family houses and they are in Arizona, Nevada, California, Georgia, Colorado, Texas and Florida. Colony American homes is the name of their Property Management company.
5. Waypoint Real Estate Group and GI Partners have somewhere around $400 million invested into 4,000 single-family houses and they are currently in Atlanta GA, Phoenix AZ, Chicago IL, and California. Waypoint Homes is the name of their operator.
*Numbers are just my estimates based on information provided via articles on the internet.