Apr 16, 2021

Real Estate Investment Trusts (REITS) Buying Up Homes To Rent

Huge Real Estate Investment Trusts (REITS) are buying up homes to rent.  The trend began back in the 2008 - 2009 Financial Crisis when so many homes went into foreclosure and or lost significant value.  The sharks on Wall Street swooped in to buy the bargains for cash.  They attracted investors into huge funds seeking a good return like any other investment.  And, boy have they gotten it in the last ten years as values have sky rocketed and so have rents.  

The problem is the sweet spot for these REITS are middle class housing in great neighborhoods with great schools.  REITS pay cash so no mortgages needed to qualify.  They work with national property management companies some of which they actually set up when they bought thousands of homes in key markets during the last financial crisis.   They operate their REITS like any business looking for economies of scale to cut cost to generate more profit. 

Now that this investment modality has been discovered, it is not likely to go away any time soon.  It is just another way to diversify a portfolio.   Real Estate is generally a good hedge against inflation and has very favorable tax treatment.  So buyers today need to realize that they are competing with multi billion dollar REITs in the marketplace making it harder to buy a home.  Renters need to understand that there is a pretty good chance that they are renting from one of these REITS that will regularly raise rents and process evictions as allowed by law for failure to pay rent.  To REITS, this investment is strictly business with nothing emotional about it.