REO To Rental Market Emerging As Institutional Asset Class
The single family rental market has historically been a fragmented market funded with capital from smaller mom and pop type investors. Institutional investor interest has increased significantly as the large foreclosure inventory combined with a secular shift toward renting has created the possibility of larger-scale investments in the space. Private Equity and Institutional investors interested in acquiring bank-owned properties are currently flooding the market throughout the country and had been estimated they have raised anywhere from $6 to $8 billion.
The private-equity firms entering the residential space are spending hundreds of millions buying foreclosed single-family houses with the intention of renting them out. The goal is to acquire enough assets to potentially take public as a real estate investment trust, or sell to another company or even to tenants.
This is a brand new asset class for institutions and when Wall Street likes something they tend to really like something, residential is hot . Real Estate has always been popular as REIT’s have loaded up on strip malls, office buildings and apartment buildings. Now we are seeing institutions for the first time turning to residential real estate after a 34 percent plunge in prices since the 2006 peak. They see an opportunity to enter the single-family leasing market as rents climb and the U.S. homeownership rate sits at a 15-year low.