WALL STREET MAKING IT MORE DIFFICULT TO FIND GOOD DEALS LEX LEVINRAD
Prices on properties had been discounted to such ridiculous levels that major Wall Street players like private
equity funds and hedge funds began purchasing billions of dollars of single family homes. According to a
recent Forbes article, “these funds were buying distressed homes directly off of bank’s balance sheets in
discounted bulk packages”. This same article mentioned that “Institutional investors have been focusing their
buying on cities that were hit hardest by the foreclosure crisis”. The cities where there have been a lot of
institutional investor purchases are Atlanta, Detroit, Las Vegas, Nevada, Phoenix, Los Angeles, Tampa and
Miami. Many of these markets have had significant price increases. Phoenix, Arizona prices were up almost
23% in 2012 according to the National Association of Realtors. All of this institutional investor buying is
pushing prices up significantly for mom and pop investors and making it much more difficult for the individual
investor who is looking to purchase a few properties to fix and flip, or fix and rent out.
According to a March 18, 2013 article in Forbes Magazine, “the five states that are seeing the most buying by
private equity and hedge funds are Florida, Georgia, Arizona, Nevada and California.” This same article states
that “in 2012 the most active metro area for institutional investors was Miami, with 30% of all sales going to
institutional investors”. Institutional investors are not the only ones taking advantage of this buying opportunity.
In 2012 the National Association of Realtors issued a report stating that 31% of all REO’s purchased in the
state of Florida were made by foreign buyers purchasing properties for cash.
The investment strategy for Wall Street investors is simple. Purchase hundreds or even thousands of single
family homes, fix them up and rent them out. JP Morgan Chase recently estimated that institutional investors
have amassed a combined total of $10 billion worth of single family homes as rental properties.