The new American Dream: rent your home from a hedge fund.
The new American Dream: rent your home from a hedge fund. by Simon Black – Sovereign Man
About a month ago I joined the Board of Directors of a publicly-traded company that invests in US real estate.
The position brings a lot of insight into what’s happening in the US housing market. And from what I’m seeing, the transformation that’s taking place today is extraordinary.
Buying and renting out single-family homes has long been the mainstay investment of small, independent, individual investors.
The big banks and hedge funds pretty much monopolize everything else. They own the stock market. They own the bond market. They own all the commercial real estate. They even own the farmland.
Single-family homes were one of the last bastions of investment freedom for the little guy.
(Real estate is how I got my own start in business and investing so many years ago; I was a 21-year-old Army lieutenant fresh out of the academy when I bought my first rental property.)
But all that’s changing now.
Last week a huge merger was announced between Invitation Homes (owned by private equity giant Blackstone Group) and Starwood Waypoint Homes (owned by real estate giant Starwood Capital).
If the deal goes through, the combined entity would be the largest owner of single-family homes in the United States with a portfolio worth over $20 billion.
And this is only the latest merger in an ongoing trend.
Three years ago, for example, American Homes 4 Rent bought Beazer Pre-Owned Rental Homes, creating another enormous player. A few months later, Starwood Waypoint bought Colony American Homes.
And of course, Blackstone was one of the first institutional investors to start buying distressed homes, forking over around $10 billion on houses since the Great Financial Crisis.
At one point, Blackstone was reportedly spending $150 million a week on houses.
There are some medium-tier players coming into the market as well. A friend of mine runs a fund that owns about 2,000 rental homes in Texas, and he’s buying every property he can find.