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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWall Street slumlords’ outrageous new scheme: How they could wreck the economy again
Wall Street slumlords outrageous new scheme: How they could wreck the economy again
Remember mortgage-backed securities and the financial crisis they caused? This latest gambit will put you in shock
By David Dayen Nov 6, 2013 http://www.salon.com/2013/11/06/wall_street_slumlords_outrageous_new_scheme_how_they_could_wreck_economy_again/
Over the past couple years, private equity firms and hedge funds have bought up over 200,000 single-family homes, mostly discounted foreclosed properties in communities wrecked by the housing crash, such as Phoenix, Atlanta, Tampa, Sacramento, Los Angeles and Riverside, California. They have spent billions to scoop up these vacant homes at fire-sale prices, renovate them, and rent them out, promising investors double-digit annual returns on the rental revenue. Private equity firms like Blackstone, which owns more than 40,000 single-family homes, think they can build an entirely new asset class out of this scheme, controlling the rental market for single-family homes. The irony is rich: Wall Street created the conditions for millions of foreclosures, then they sweep in to buy up the homes and rent them out, often to the same people they kicked onto the street.
In order for this to work, firms need cash to outbid the competition. So Blackstone teamed with Deutsche Bank, Credit Suisse and JPMorgan Chase to put together the first-ever rental revenue bond, named Invitation Homes 2013-SFR1. ......
SoCalDem
(103,856 posts)Truth be told, this is what ALWAYS happens in a downturn.. Banks stop lending, so even foreclosed/cheap houses mostly get sold for cash.. Who has cash? wealthy people..
During the depression my grandfather almost bought this beauty for $5K..
He chose instead to build homes for his brothers/sisters & kids.
VanillaRhapsody
(21,115 posts)commercial real estate....told me that he made it by buying up commercial property in the early 80's when there was "blood in the streets" and he could snap up property for pennies on the dollar.
Jacoby365
(451 posts)I live in northern California in a rental house that was purchased by Blackstone (Invitation Homes) in May of this year. When the house was listed for sale, it was advertised that the owner would be taking offers for five days only. There were at least 20 offers, some from young couples with children. Of course they never had a chance against the cash offer from Blackstone, a hedge fund manager with over $50 billion in assets. Blackstone's offer was made prior to their agent even coming to look at the house. Single family homes in this area are increasing in value by double digits and are expected to next year as well. It is in fact, these investment companies that are driving up the prices. What happens when they quit buying?
I received a letter that basically indicated my rent would increase by about 30% if I didn't sign a lease, in which case it would go up by only 10%. I'm not sure if the 30% increase would have been legal, but I opted for the lease instead of checking into it. It would be unfair to call Blackstone or Invitation Homes slumlords, as they upgrade the vacant houses before they rent them out, and twice I have called them with maintenance issues this year, and both times they had someone here the next day to fix the problems.
badtoworse
(5,957 posts)Besides, if investors hadn't stepped in to buy the foreclosed properties, they might have sat vacant and the neighborhoods would have gone down the crapper. Properly structured, this arrangement would be a good thing since the investors that own the properties are motivated to maintain them in order to stay competitive in the rental market.