In the wake of the housing crash, private-equity firms, hedge funds and real estate investment trusts have bought more than 100,000 houses to build rental businesses, transforming an industry dominated by mom-and-pop owners.
Compared with outright purchases of homes to rent by fund managers such as Blackstone Group LP, the world’s largest private-equity firm, the “operating costs are very, very low because the homeowner is really the property manager,” Sponholtz said.
Homeownership Rate
The U.S. homeownership rate fell to 65 percent this year, its lowest level since 1995, according to Census Bureau data, as fewer people were able to qualify for a mortgage. About 47 percent of renters hoping to become homeowners say saving enough for a down payment is a major barrier, according to a 2012 survey by Harris Interactive for Trulia. A total of 12 percent who plan to buy someday would consider borrowing money from friends or family for a 20 percent down payment to get a “dream home,” a June survey for the firm found.
The benefit for home buyers extends past those without enough funds to those wanting to diversify, according to Sponholtz.
“For a young person it could easily be 80 to 100 percent of their net worth tied up in a single asset,” he said.
Other Investments
Uter, who bought his California home in March, said he had enough money for a down payment after selling his previous property. By giving up some home equity now, he said he can later tap other investments that he expects to return more in retirement.
“We’re going to stay for a while,” he said.
Clients could include young doctors or lawyers who “have the potential to make a lot of money down the road but they may want to buy the large home now, to get access to schools or other reasons,” said Rich Walton, a senior vice president at RPM.