Rental Nation – Wall Street Journal Perspective
I posted my blog “Rental Nation” four days ago (7/31). I am very surprised and also excited to find that Wall Street Journal published today (8/4) had an article titled “Big Money Gets Into Landlord Game” by Robbie Whelan discussing the very same topic. In his article, Robbie presented the cases of large amount of capital flowing into real estate rental market (single family home).
Case 1: according to Robbie, in San Francisco Bay area, an investment company Mckinley Capital Partners, which had acquired more than 300 foreclosed single-family homes and put them in the rental market, recently teamed up with another investment firm to set up a plan to buy at least 500 more foreclosed home in the next year for rent.
Case 2: “G8 Capital, a private-equity fund based in Landera Ranch, California, has bought 3,000 homes across the country since 2008, mostly to flip them. It decided last year to begin pursuing a hold-and-rent strategy. It has since bought 250 foreclosed homes as rentals.”
Case 3: according to Robbie, Carrington Property Services LLC is in talk with investors to raise fund to buy as many as 5,000 rental homes in markets including Chicago, Miami, Phoenix, and Las Vegas.
As I discussed in my previous blog, buying distressed single-family home and holding for rental is an EXCELLENT strategy for retirement investment, which should have long term perspective with focus on stable streams of dividend (rental income) and appreciation of the assets. Robbie’s research confirms that point of view. In his article, he reported “In November, hedge fund manager William Ackman’s Pershing Square Capital Management LP released a report arguing that single-family rental properties are an “under-owned asset class” that would make “an intelligent investment for institutional investors.” Pershing Square predicted that investing in single-family homes and holding them as rentals for 10 years could produce double digit investment returns, even if U.S. home prices only improved marginally.” If we argue in the context of Dow Jones Industrial Average sinking for more than 500 points today, this strategy looks even prettier.
One thing that Robbie did pointed out is that this type of investment does not fit all the institutional investors because of maintenance, legal, and other issues. The same problems also apply to individual investors. However, if one has the resource to manage it well, I have little doubt that he will find that this investment can bring outstanding performance to his retirement asset portfolio.