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Market Reaction

to the boom?

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#16 <Steve>

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Posted 18 June 2013 - 03:12 PM

LoL.  I've been reading around that those corporations that have been buying up single families are pulling back as the returns from a lower than expected rental rates are not brining in the returns; not to mention the repair / maintenance needs.


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#17 MichaelC

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Posted 18 June 2013 - 03:22 PM

True dat.  Rental rates have been pulling back somewhat as many of the houses and condos being purchased are by investors, not owner occupants.  So many of the units hit the market as rentals and the result is falling rents.  Bubble, v2.0



#18 Doug Pretorius (ON)

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Posted 18 June 2013 - 07:43 PM

Good to see you, Steve.

 

MC, I heard something about the US government pushing banks to do all the same subprime lending that caused the trouble. Is that true? Here in Canada the government-controlled mortgage insurer did the opposite and drastically increased restrictions on investor loans and refi's in an effort to prevent what happened in the states.



#19 MichaelC

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Posted 18 June 2013 - 07:47 PM

In an effort to stimulate the housing market and thus take credit for a great economic recovery, the Obama administration and Congress are leaning on lenders to loosen credit once again.  I can't imagine they are going to lower the bar to where it was back in '04 - '05, but politics makes for strange bedfellows.  I suggest we all pull up a lawn chair, pop a cold adult beverage, and watch the sitcom that is the federal government.



#20 Doug Pretorius (ON)

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Posted 18 June 2013 - 09:24 PM

I ran into a realtor at an open house a few years back who was a recent immigrant from China. We got talking and his face dropped and he just shook his head: "I can't believe I came to the 'land of opportunity' and what I found was a place even more communist than what I left behind."



#21 <Steve>

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Posted 18 June 2013 - 10:05 PM

Well I didn't vote for (4) more years of the same, "Change". 3 1/2 to go. . .


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#22 MichaelC

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Posted 19 June 2013 - 05:56 AM

Comrade Doug, I always suspected you'd look good in Red.

Steve, followed by 4 years, (at least), of the Clinton's once again.  Unless something drastic happens, the outcome of 2016 is a foregone conclusion.  The media will not allow Hill and Bill, v2.0, to lose. :(



#23 <Steve>

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Posted 22 June 2013 - 04:14 PM

I just left a SLO house I have as the t/b is moving forward with the purchase.  The increase in the interest rate has motivated them to obtain financing and buy.  They mentioned that there has been a large corporation scooping up houses in the area.  The house next door was just purchased and is up for rent.  The corporation is http://www.americanhomes4rent.com so I pulled up their site.  It is interesting as the billionaire is from California and is the one that started Public Storage.  Anyway, they are not just buying distressed properties, but also paying full retail from sellers.  They are all over my market and across the country.  They are said to have the second largest portfolio of residential single families.  I know Blackstone Investment Corp. is the country’s largest who have put in 5 billion dollars and purchase 29,000. single family homes in 13 markets.

 

The rents they are charging are well above market.

 

For example: I have another SLO and found an Americanhomes4rent property on the same street and the house is comparable.  My rent is $995. at market, and theirs is $1,200.  No way it is going to move.  I have had my house on this street for about 5 years and L/O some other properties around that area and I know it will not support their over market rent amount.

 

Pricing in my market is not shooting up, although there are pockets of slight increases.  But basically we've dropped another - 6.8% over all.  So, when reality sets in and the returns these corporations are trying to realize in rentals don't happen then what?  I know their model was to hold 5 to 7 years.  So, do the big boys end up packaging these properties up and selling them off?  What kind of affect will this have on the market and the smaller investor?

 

Also, am I to assume that the lack of inventory is do to the mega corporations buying spree?  My instinct was just the slow economy.  Maybe it is a combination?

 

I am glad to hear reports that these mega corporations are starting to back off in some markets, but also hear that the mid-west and north-east is next.  Just not sure what the damage will be?  First it was the banks, then Obama nonsense and now mega corporations.  What a mess.


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#24 MichaelC

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Posted 22 June 2013 - 04:32 PM

Steve, we've talked about this before and I know we are in agreement that this "Seller's Market" is bogus and hyped by the media to promote the policies of their heartthrob in the White House.

It's ironic, because the very folks who Obama and the media criticize and blame for all of this country's problems, (Wall Street, big business, etc), are the very ones now artifically running up prices and making obscene profits.  But now it's OK because the numbers make for good headlines. 



#25 <Steve>

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Posted 22 June 2013 - 05:36 PM

It kinda freaked me out to see these corporations in my own backyard I guess.  My market is small.  Maybe I am over reacting, but the cool thing about RE investing, and specifically L/Os, is that the average Joe (me) can get in, hustle at it, and make it work.  It’s a great business model.  Just not sure when looking at these mega corporations what’s to come.  They are buying up the nice bread & butter properties too.


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#26 MichaelC

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Posted 23 June 2013 - 08:55 AM

I don't know what to make of these hedge funds and mega-buyers, either.  They are here in south FL in full force, too, but we have a much bigger market than your area and so their impact isn't as evident, at least not yet. 



#27 <Steve>

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Posted 05 November 2013 - 11:02 PM

. . . 6 months later

 

Looking back at this thread I can see how freaked out I was last spring when I looked up to see hedge funds scooping up properties.  Well, I'm still freaked out. :wacko:  The house I mentioned in the above post #23 that American Homes 4 Rent has purchased to rent out is 20% above market rents. It has not been leased and is still sitting on the market 6 months later.

 

Here is a map of some of the houses purchased by AH4R and are currently available for rent.  A few of these would have been my typical CA and SLO deals for this year.

Attached Files

  • Attached File  AH4R.JPG   65.84KB   0 downloads

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#28 MichaelC

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Posted 06 November 2013 - 09:57 AM

I'm wondering what their end game is?  Scooping up properties by the thousands, then putting them on the market for rent at prices no one is accepting isn't a business model I understand. :blink:



#29 <Steve>

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Posted 06 November 2013 - 07:44 PM

Me either MC, Seems their goal is to group these rentals as "Rental Backed Securities" and sell off the risk to others on Wall Street.

Smart Asses <_<  Or Smart Assets B)   Time will tell.  It's kill'n me though, but hang'n in there.

 

Can't wait for Dodd-Frank coming in January, just what the market needs. :wacko:


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#30 MichaelC

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Posted 06 November 2013 - 08:58 PM

I see an ugly ending to all this, Steve.  I hope I'm wrong, but just in case I'm practicing my Spanish and preparing phony documents for passage to Bolivia. :ninja:






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