Institutional Investors in the Rental Market

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A great deal of money from the Federal Reserve aimed at improving the real estate market had a somewhat unexpected result for those with an eye toward the rental market. The prime mover in this surprise was the fact that large investors started to buy houses and rent them out. 

Tens of thousands of homes ended up in the rental market in many locations.

This, according to some, accounts for much of the “improvement” in the real estate market in many locations.
Corporate investors have been increasing in parts of the country impacted by the real estate crash and comparatively few new mortgages have been granted by lenders. In spite of this, prices rose 23 percent in the Phoenix region. Countrywide, prices have risen more than 8 percent in the past year.
Most experts agree that that there has been an upturn in institutional investors in the areas that were hit hardest when the housing bubble burst. That includes the home rentals in Phoenix as can be seen in the line graph below.

The half full glass perspective relative to corporate investors entering the hard hit markets holds that they can help stabilize prices.  Stable markets are generally safer and more predictable. While the present market environment does require a new approach for smaller investors, there is still room for them, especially in markets like the Phoenix rental market. One factor to consider, for example, is the viewpoint that as the price of homes goes up, the more people will turn to renting their home.

Not all renters will be those who are dealing with corporate investment firms. Consider the fact that big investment companies tend to like opportunities such as those involving the federal Section 8 program, which subsidizes the rents of low-income tenants. Smaller investors generally offer more individual rental services. Those that do will not be impacted by larger firms, but can capitalize on the steady demand for rental housing.

Overall the picture is still one of opportunities for those willing to put cash into the rental home sector. Small investors tend to be those who know their niche and that niche is not the same as huge investment firms.
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