Wallstreet Enters Single Family Housing Market… Again

Single family American home

 

REITS are Eating Homes

“The American dream no longer includes homeownership,” said Jordan Kavana, chief executive of Transcendent Investment Management LLC. Transcendent Investment Management is buying up rental homes, and expects Americans to transition into all being renters to drive profits for his and other similar companies.

This type of corporate incursion into housing was popular back in 2013 when houses were dirt cheap, but it’s starting to ramp up yet again. A few publicly traded companies involved in this type of business include Blackstone (BX), and American Homes 4 Rent (AMH). American Homes 4 Rent has been the largest player in the single family homes arena until Blackstone and Starwood properties merge their operations to join Blackstone’s existing single family division Invitation Homes (INVH). The merger will see Invitation Homes landlord almost 100,000 single family homes spread across the United States.

The Giants are Coming

These massive REITs may be part of some of your 401k mutual funds already, and are driving up prices for single families and potentially forcing them to buy more expensive homes. This is not unexpected due to the historically low interest rate the US still supports – and the benefits that come with scaling up operations. My problem with this is that by investing in these REITs you could be inadvertently encouraging Wall Street investors to drive up home prices around you putting the younger generation at more risk of lifelong homelessness (you get what I’m saying).

Traditionally most REITs focused on multifamily apartment buildings, we shall see how this foray into single family housing impacts the US economy for years to come. For millennials, this does not bode well for their home ownership prospects. I would prefer to be an owner of my own residential property than invest in these types of REITs, and if anything I would stick to multi-family apartment focus REITs as they should yield better returns. For more information on REITs and how to make money on real estate, check out my real estate page.

Getting the ROI on Rental Properties

Everyone knows that Real Estate is one of the major ways to make income. Like stocks, you have to put money in to get a return which will either be positive or negative. Unlike stocks, it isn’t so simple to figure out how much your return is. Online brokerages like Fidelity, Merrill Edge, and Charles Schwab have nifty graphs and reports that can tell you exactly how well you’re doing over a specified time frame.

If you have considered buying a real estate property, measuring your return is one of the most important factors to identify your successes and failures. I found a great video by BiggerPockets.com which goes through the process in a simple way that will help you manually compute your return on investment. Of course, as you build your real estate portfolio it is important to find a good way to keep all the information together which can be done using a myriad of tools out there.