Need to preface this so I don't get burned at the stake. I DO NOT support corporate Single Family Landlords. I firmly believe single family homes should either be owned, or be the realm of small and medium scale family owned LLC landlords. The largest one of those I've EVER seen was about 15K houses, and it wasn't in a single metro. It was spread over 17 states. and 24 metros. And that was a large exception, rather than the norm.
Now with that out of the way. This isn't as big a problem as people think it is. Yeah it sucks in the short term, but medium/long term, this isn't a big deal.
There's the 2022 Annual report for Invitation Homes (2023 Annual report isn't available yet), the largest Single Family REIT in North America that owns over 80K Single Family homes in the USA and Canada.
If you look inside of it you'll notice a very important detail. They own about $17 Billion worth of property, but have just under $9.5 Billion in Debt. That means they're using 56%~ leverage.
Now why is the important? Because from what I can tell they use a very basic real estate investment strategy that a lot of normal people use, just scaled to infinity. BRR (Buy, Refinance, Rent). It's one of the simplest strategies. You buy a house in all cash, to simplify the process and lure in the seller with a quick sell, then you just simply refinance the house after it's legally yours to get your money back while renting it to pay off the mortgage and pocket the difference as your income.
It's literally the most simple Real Estate Investment Strategy. Looking back, I'd say that the 56% debt ratio is probably only because they chose to wait until the end of the new year to refinance their properties to further invest. Most of these types of companies will typically use at least 75% leverage to maximize profits.
Now why is all this important? Because in the medium-long term, they're gonna lose their shirt on those houses. It's no secret that real estate is INCREDIBLY overpriced. We're due for more than just a correction. We're probably looking at a crash on the scale of the great depression or worse. Most people worth listening too are saying AT LEAST 70% drop in value, up to 90%.
So yeah, these guys are gonna lose their shirts on these houses, and then they're gonna flood the market, and further drive down home prices. Which will make the entire market infinitely more affordable to the common man.
Now I have seen something like this in 2008. We refinanced in 2011. It was a great investment. Without doing that, we wouldn't be able to afford this right now.
Once the crash happen, buy if you have the money. The housing markets will readjust.
That's kind of the point. The Wallstreet landlords DO have the cash, hence why they're able to buy up entire neighborhoods at once. Then they refinance it to get their money back out. Rinse and repeat.
But in doing so they're perpetually taking on massive amounts of debt in a bloated value market. So when the house of cards crashes, they're gonna go belly up.
Some of these folks have been in America so long they got old and passed away already! In my area, there’s whole suburban neighborhoods with nice houses with 90% Mexican demographics. Most of those guys are Trump supporters too though! Somehow!
Need to preface this so I don't get burned at the stake. I DO NOT support corporate Single Family Landlords. I firmly believe single family homes should either be owned, or be the realm of small and medium scale family owned LLC landlords. The largest one of those I've EVER seen was about 15K houses, and it wasn't in a single metro. It was spread over 17 states. and 24 metros. And that was a large exception, rather than the norm.
Now with that out of the way. This isn't as big a problem as people think it is. Yeah it sucks in the short term, but medium/long term, this isn't a big deal.
https://s28.q4cdn.com/264003623/files/doc_financials/2022/ar/invh_2022_ar_web_bmk.pdf
There's the 2022 Annual report for Invitation Homes (2023 Annual report isn't available yet), the largest Single Family REIT in North America that owns over 80K Single Family homes in the USA and Canada.
If you look inside of it you'll notice a very important detail. They own about $17 Billion worth of property, but have just under $9.5 Billion in Debt. That means they're using 56%~ leverage.
Now why is the important? Because from what I can tell they use a very basic real estate investment strategy that a lot of normal people use, just scaled to infinity. BRR (Buy, Refinance, Rent). It's one of the simplest strategies. You buy a house in all cash, to simplify the process and lure in the seller with a quick sell, then you just simply refinance the house after it's legally yours to get your money back while renting it to pay off the mortgage and pocket the difference as your income.
It's literally the most simple Real Estate Investment Strategy. Looking back, I'd say that the 56% debt ratio is probably only because they chose to wait until the end of the new year to refinance their properties to further invest. Most of these types of companies will typically use at least 75% leverage to maximize profits.
Now why is all this important? Because in the medium-long term, they're gonna lose their shirt on those houses. It's no secret that real estate is INCREDIBLY overpriced. We're due for more than just a correction. We're probably looking at a crash on the scale of the great depression or worse. Most people worth listening too are saying AT LEAST 70% drop in value, up to 90%.
So yeah, these guys are gonna lose their shirts on these houses, and then they're gonna flood the market, and further drive down home prices. Which will make the entire market infinitely more affordable to the common man.
Now I have seen something like this in 2008. We refinanced in 2011. It was a great investment. Without doing that, we wouldn't be able to afford this right now.
Once the crash happen, buy if you have the money. The housing markets will readjust.
Most people can’t get the cash to buy it in the first place though.
That's kind of the point. The Wallstreet landlords DO have the cash, hence why they're able to buy up entire neighborhoods at once. Then they refinance it to get their money back out. Rinse and repeat.
But in doing so they're perpetually taking on massive amounts of debt in a bloated value market. So when the house of cards crashes, they're gonna go belly up.
unless the plan is to get illegals in those houses when the inevitable crash happens
You do realize that by the time this all goes down, Trump will be back in control and mass deportations will start right?
Some of these folks have been in America so long they got old and passed away already! In my area, there’s whole suburban neighborhoods with nice houses with 90% Mexican demographics. Most of those guys are Trump supporters too though! Somehow!