Categories: Pound Ridge

Consolidation Creates Megalandlords Dominating Single Family Rentals | Pound Ridge Real Estate

“Now we’ll sweep up everybody over the next two years who got stuck, who says I have home price appreciation, which they do. They bought right, but now they are stuck.”

The chief executive officer of the second largest hedge fund landlord articulated in an interview with Bloomberg why a handful of megalords are the process of dominating the single family rental business.

Rising value, soaring rents, atmospheric demand and difficulties finding new properties at below market prices are providing smaller players, includng small investors and “accidental” investors who rent out a property or two an ideal opportunity to cash in.

Consolication is underway across America. American Homes 4 Rent, the second-biggest REIT in the industry, this month bought Beazer Pre-Owned Rental Homes Inc., gaining more than 1,300 houses. Barrack’s Colony American has made four bulk purchases this year, reported Bloomberg in the story by John Gittelsohn and Heather Perlberg.

Another factor for consolidation is the challenge of managing hundreds, thousands of single family homes. Bigger may not always be better for single-family rental operators. Institutional funds that have internalized property management have to be able to maintain thousands of properties that were initially serviced by local and regional groups, said J.D. Asbell, a landlord with about 175 houses in Kansas and Missouri who also renovates and sells homes to Wall Street-backed firms, according to the Bloomberg piece.

“This is a hard business to run,” said Asbell, who has been renting homes since 1993. “The management is always going to be an issue for the big funds. That’s the key to this long term, keeping the houses occupied and getting out bad tenants that aren’t paying.”