Investing in Housing Recoveries: Is It Worth the Risk?
The extensive overbuilding and economic despair brought about by the upsurge of foreclosures in Atlanta, Georgia has inspired Wall Street to be a landlord of all times.
Apartments For Rent Atlanta, GA
According to CNN Money reports last month, the local rental market of Atlanta came to a point wherein it can no longer absorb all the displaced owners. Atlanta home prices rebounded from a 12.7% decline in 2009 to flat in 2010.
Realty Trac, a real estate information company and an online marketplace for foreclosed and defaulted properties in the United States, said that in January of this year, one in every four homes sold in Atlanta went to a large investor, four times the national average. Wall Street, the second wave of housing investors is spending billions to turn over foreclosures into single-family rentals.
Certainly, this buying binges, not just of Wall Street, but also of other housing investors like Blackstone (who spent $8 billion to buy 43,000 homes nationwide and American Homes (who spent $3.5 billion to purchase 21,700 homes) is now being converted to investments.
Four single-family home real estate asset trusts were sold to individual investors starting December 2012. This approach is similar to REITs (Real Estate Investment Trust) who own rental buildings or shopping centers. Waypoint united with the home division of Starwood Property to found Starwood Residential Trust (owning approximately 5,800 homes). And the largest investor since then is American Homes 4 Rent. Institutional investors like mutual funds of pension managers produce a new class of bonds which bundle rents from single-family homes. Blackstone, for instance, had a $479 million worth of bonds backed by 3,207 homes in five states. According to Deutsche Bank, there is an estimated $5 billion in home rental bonds that will hit the market this year.
However, this new business model is quite new, according to Brad Thomas, Editor of iREIT Investor. “So far investors have not been enthusiastic. Some of Blackstone's bonds are selling below the offer price, and most of the REITs have underperformed their index.”
With the current state, Bank of America predicts that the biggest investors would generate 5% to 7% annually in return from rents. But the costs in maintaining far-flung homes must be lessened.
Neighbor states of Atlanta has also started to pick up on investing where foreclosures are still on the market.
About JAMCO Properties
Founded in 1992, JAMCO Properties, Inc. specializes in acquiring and renovating metro Atlanta apartment rental communities. Their multifamily apartment investment firm proudly offers affordable, clean, spacious rental homes in Fulton, Dekalb, Cobb and Clayton counties. Locally owned and operated, JAMCO Properties remains a long time member of the Atlanta Apartment Association and the Atlanta Business Chronicle recognizes JAMCO Properties in its annual list of "Top 20 Atlanta Apartment Property Management Companies."
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