“As returns have come down, now it makes sense to hit the tertiary markets,” Grabowski, whose company has invested $100 million in single-family homes, said in a telephone interview.
Precise, which buys homes for cash, is selling to institutional investors who are able to pay a higher price because they have a lower cost of capital, Grabowski said. He declined to name the buyers, citing confidentiality agreements.
Prices in Nevada, Florida, Michigan and Arizona have the largest peak to current drop, according to CoreLogic. That still makes them attractive to investors who are betting on home-price appreciation in addition to cash flow from rents.
Las Vegas ranks fifth, Atlanta seventh and Phoenix 14th on RealtyTrac’s list of the 20 best markets for buying single- family rentals and eight of the top cities are in Florida.
‘Still Opportunities’
“There are still good opportunities even though we’re past the bottom,” RealtyTrac’s Blomquist said.
Institutional investors should focus on factors beyond rental yields and the cost of becoming a landlord, such as crime rates, job growth, and proximity to retail, when selecting homes to buy, according to Jordan Kavana, director of Aventura, Florida-based Transcendent Investment Management, which has been acquiring single-family homes since 2008.
Transcendent, which plans to spend $500 million on rentals by 2014, is looking at where it can invest for the “long run and not just a quick flip,” Kavana said in an e-mail.
Carrington Holding Co. LLC, one of the first single-family investors to receive institutional financing with a $450 million commitment from Oaktree Capital Group LLC announced last January, has “slowed acquisitions because the market seems to be so frothy,” said Rick Sharga, executive vice president of Aliso Viejo, California-based Carrington.
‘Huge Imbalance’