Jun 24, 2021

Big Investment Companies Buying Rental Homes

Wall Street discovered the residential real estate market after the 2008-09 Fiscal Crisis.  As real estate markets in many cities collapsed and values went down by as much as 50%, big Wall Street Investment companies put real estate investment trusts in place to buy thousands of rental homes for cash.  The trend even continues today with home prices going through the roof.  Matter of fact, Wall Street money is helping drive prices up and making it tough for first time home buyers to buy a home.  They just can't compete with all cash offers.  

This trend is good and bad.  These big companies will be able to weather a storm if real estate markets suddenly start to slide as mortgage interest rates go back up.  Since homes are typically paid for in cash, they are not subject to the mortgage market.  And as long as they are collecting rents, which they continue to raise, they can hold on to homes longer until markets recover so no short selling.  On the other hand, all cash buyers distort the real estate market, since most buyers will need a mortgage to buy a home.  All cash buyers tend to result in higher home prices, which makes it difficult for low or middle income people to buy homes at higher prices.

It is what it is.  Now that Wall Street has discovered this investment vehicle as an opportunity for them to makes lots of money, they are not going away anytime soon.  Expect some government regulations to come into play as average people start to complain that they are being pushed out of home ownership.