Buy-to-Rent or Rent-to-Sell

The entry of corporate buyers and private equity firms into the housing market in 2012 and 2013 was hailed as a way to soak up the over-supply of foreclosed homes and get the housing market back in shape.  One result were higher home prices as seen in the 10.8% year-over-year gain reported in the most recent S&P/Case-Shiller Home Price indices release.  The New York Times reported last weekend on a new development in the story: corporate buyers are looking to sell some of these homes.  The Times reports that Waypoint Real Estate Group is looking to sell about 2,000 of the 4,000 units they own. Most are currently rented and are being shown to other companies in the buy-to-rent games.

A number of other companies which purchased large numbers of homes are also slowing their purchases or considering sales.  One factor is the rise in home prices: buy to rent is less attractive now that prices are up 10%-15% or more in the last couple of years. Supplies of foreclosed homes are also falling which is a positive sign for housing and the economy.  The next step could be consolidation among buy-to-rent operations. Success and profits will depend on efficient operations, scale economies and concentrating properties in a few geographic areas. All these are likely to encourage mergers and acquisitions among the buy-to-rent leaders.  As prices continue to recover and the supply of foreclosures dwindles, buy-to-rent may become buy-to-rent-to-sell.

The posts on this blog are opinions, not advice.
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