Category: Real Estate Investing
Posted: 7/25/2012
Wall Street demand for homes good news for investors, banks
By John Dixon
Bidders at John Dixon auctions frequently hear the bid caller say something like, “Buy yourself rich.”

Now, that message is starting to catch on -- not only among small investors, but among some on Wall Street as well. And the bigger investors especially seem to be focused on single family residences.

Fortune this week noted that one major private equity firm now owns 2,000 homes, reportedly one of the biggest portfolios of homes ever accumulated (excluding Fannie and Freddie).

And some are reaching even higher. Also quoted was a UC Berkeley professor and consultant who advises real estate investors. He said he knows of two dozen investment funds currently buying up single family homes, and some hope to own as many as 10,000 homes around the country.
If this trend continues to build the way it appears it might, it’s good news for banks who are still sitting on large inventories of real estate -- and for the individual investors who’ve been quietly building up their own portfolios of homes for rental or resale.

While it’s true that institutions have lots of buying power and armies of analysts, they’re not especially nimble. Investors who are ahead of the curve may see nice increases in values because of this new and significant source of demand. My guess is that there’s still time for smaller investors to accumulate properties before the institutions begin to bid up values.

For banks, it makes auctions smarter than ever. When prices are starting to rise, an auction is the surest way to make sure investors pay the current market value.

Meanwhile, our advice continues to be the same as always: Buy yourself rich!
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