Ok talk to me like I’m a third grader

[happyhoix]

Let me start by saying I am not a financial expert. In fact I would say I’m financially challenged. I stick my money in my 401K and forget it. 

So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

[billisonboard]

Not sure either but this link seems to suggest they are renting them out:

Wall Street joined the single-family rental market after the Great Financial Crisis of 2008. By June 2022, institutional investors owned 3% of all single-family rental properties nationwide. In Charlotte, NC, they owned a whopping 20% of all single-family rentals. 

By June 2023, they owned 26%, despite the slowing housing market. 

[haapai]

I won't speak to you like you are a third-grader.  I'm scratching my head too. 

Reading the linked article from Yahoo! Finance hasn't been much help.  A part of me thinks that I have just read an advertisement for an opportunity to invest in last decade's money-spinner with a very low stake. 

Maybe some of the soon-to-be-retired small-time landlords that used to hang out here can shed some light on what is going on. 

[Opti]

Dec 12, 2023 21:37:35 GMT -5 happyhoix said:

Let me start by saying I am not a financial expert. In fact I would say I’m financially challenged. I stick my money in my 401K and forget it. 

So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

I don't know why hedge funds are buying single family homes. What I do know is the real estate market changed significantly during the pandemic and the return to a new normal has been slow. Hedge funds likely plan to buy up various areas, tear them down, and put something new in its place. 

And generally they would not buy just one house, they would buy several together so they could tear them down and put up apartment buildings, condos, or grocery stores or what not.

[resolution]

They are mostly renting them out. www.reviewjournal.com/business/housing/why-does-wall-street-want-to-buy-your-house-2911641/

Some of them, like Bezos's company, are buying rentals and then selling shares of them as investments. I'm not sure what the advantage would be to investors as opposed to just buying shares of a REIT.

finance.yahoo.com/news/bezos-backed-company-surpasses-100m-175917368.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAA63emNSi0Zm0TMolqL4LcG-x5d8pBsYk1qOAtz1fSRqu0scEDMtItWxo0hTuceWE6_606WhkDF0IO73EogT2jaq2IR0NFt_rMJakuNu6yH5mCRTB9yqQclK2r1SwsR3Fn1vZn1tY0ApLRfcFXf_BiRmg_F2BXDTt3cBCa6i_1Lt

[Opti]

Dec 12, 2023 22:41:34 GMT -5 resolution said:

They are mostly renting them out. www.reviewjournal.com/business/housing/why-does-wall-street-want-to-buy-your-house-2911641/

Some of them, like Bezos's company, are buying rentals and then selling shares of them as investments. I'm not sure what the advantage would be to investors as opposed to just buying shares of a REIT.

finance.yahoo.com/news/bezos-backed-company-surpasses-100m-175917368.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAA63emNSi0Zm0TMolqL4LcG-x5d8pBsYk1qOAtz1fSRqu0scEDMtItWxo0hTuceWE6_606WhkDF0IO73EogT2jaq2IR0NFt_rMJakuNu6yH5mCRTB9yqQclK2r1SwsR3Fn1vZn1tY0ApLRfcFXf_BiRmg_F2BXDTt3cBCa6i_1Lt

Your article is very regional and a slanted piece of journalism. REITs are the ones most likely doing the rental thing for their hedge fund and this article states the impact on various areas in Las Vegas. 

From the article -

However, since 2021 the share of homes purchased by investors exceeded 20 percent in 20 different ZIP codes in Southern Nevada — three in particular making up the bulk of the purchases, 89149 (northwest Las Vegas Valley), 89031 (north Las Vegas Valley) and 89113 (Enterprise).

In total, since 1988, 91,644 single-family homes in Clark County have been purchased by investors. McCoy said many investors often use different LLCs to purchase properties to limit liability, so his data may in fact be a conservative estimate and the number of investor purchases higher.



“And since 1988, 77 percent of homes that were purchased by investors were never sold again suggesting that roughly three quarters of homes that are purchased by investors are held as long-term rentals,” he said.

That is supposition and a real need to check to make sure its even close to true thing IMO. If you tear it down and combine it with other lots, of course that home will never be sold again. The article is concerning Nevada and listed a few other typical retirement destinations.

The housing market needs to correct after the glut of over buying by the rich work from home types. Work from home jobs remain higher than they were pre pandemic but likely considerably lower than say 2021. Not sure what Shark Kevin O'Leary's spin and interest is, but big cities like NYC are considering letting developers turn former office buildings into housing. The lack of office workers has collapsed businesses that depended on lunch traffic etc. 

I probably need one of those websites that evaluate the reading level of what you post. 
 

[Opti]

Dec 12, 2023 21:37:35 GMT -5 happyhoix said:

Let me start by saying I am not a financial expert. In fact I would say I’m financially challenged. I stick my money in my 401K and forget it. 

So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

From that article,


Elon Musk has reportedly bought 6,000 acres of land just outside of Austin. Here’s how to invest in the city’s growth before he floods it with new tech workers.


Can I say I am going to enjoy Musk's possibly only paper losses as people flee Austin and Texas in general because of the anti abortion laws?

What is his next flop or major financial loss going to be? <Goes off to start Bingo card>

[resolution]

Dec 12, 2023 23:46:04 GMT -5 Opti said:

Your article is very regional and a slanted piece of journalism. REITs are the ones most likely doing the rental thing for their hedge fund and this article states the impact on various areas in Las Vegas. 

REITS have been around for a long time and they typically hold a lot of different properties and may be traded on the stock exchange. The investors returns are based on the returns from all the properties.

The new type of business is fractional ownership, where investors own a small piece of a specific property and their returns are based on the specific property. In theory they could buy pieces of a bunch of different properties through the company to diversify, at which point I don't understand why we would need this as opposed to a REIT. Also I don't think they are publicly traded, so not sure how easy it is to divest as opposed to a REIT.

ETA REITS have way more of the market than fractional ownership companies, I just thought it was an interesting new type of business that just entered the real estate market.

I probably need one of those websites that evaluate the reading level of what you post. 
 

I typically try for around the 5th grade level, which is a habit based on my employer's plain language standard. I am not always successful, but it's pretty ingrained at this point.

[Opti]

Dec 13, 2023 8:43:36 GMT -5 resolution said:

Dec 12, 2023 23:46:04 GMT -5 Opti said:

Your article is very regional and a slanted piece of journalism. REITs are the ones most likely doing the rental thing for their hedge fund and this article states the impact on various areas in Las Vegas. 

REITS have been around for a long time and they typically hold a lot of different properties and may be traded on the stock exchange. The investors returns are based on the returns from all the properties.

The new type of business is fractional ownership, where investors own a small piece of a specific property and their returns are based on the specific property. In theory they could buy pieces of a bunch of different properties through the company to diversify, at which point I don't understand why we would need this as opposed to a REIT. Also I don't think they are publicly traded, so not sure how easy it is to divest as opposed to a REIT.

ETA REITS have way more of the market than fractional ownership companies, I just thought it was an interesting new type of business that just entered the real estate market.

I probably need one of those websites that evaluate the reading level of what you post. 
 

I typically try for around the 5th grade level, which is a habit based on my employer's plain language standard. I am not always successful, but it's pretty ingrained at this point.

My preferred jobs were with the technical IT people on large computer projects, step by step. Many of them having masters or bachelors degrees. They are the ones that had to read and understand my testing plans, read my code, etc. ... so not accomplished at all in speaking to 5th graders nor at that level.

[resolution]

Dec 13, 2023 8:54:19 GMT -5 Opti said:

My preferred jobs were with the technical IT people on large computer projects, step by step. Many of them having masters or bachelors degrees. They are the ones that had to read and understand my testing plans, read my code, etc. ... so not accomplished at all in speaking to 5th graders nor at that level.

I do a lot of translating from the tech IT people into plain language that the staff can implement.

[Opti]

Dec 13, 2023 9:08:49 GMT -5 resolution said:

Dec 13, 2023 8:54:19 GMT -5 Opti said:

My preferred jobs were with the technical IT people on large computer projects, step by step. Many of them having masters or bachelors degrees. They are the ones that had to read and understand my testing plans, read my code, etc. ... so not accomplished at all in speaking to 5th graders nor at that level.

I do a lot of translating from the tech IT people into plain language that the staff can implement.

I've done way too many customer front desk etc. jobs in my downscale life. I have gotten better at matching whoever is talking, but I could not pin it on grade level. I am being taught how to keep it to only what's needed unless a longtime client wants to engage as customer service is one of our calling cards because we are small. 

[happyhoix]

Dec 12, 2023 23:54:39 GMT -5 Opti said:

Dec 12, 2023 21:37:35 GMT -5 happyhoix said:

Let me start by saying I am not a financial expert. In fact I would say I’m financially challenged. I stick my money in my 401K and forget it. 

So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

From that article,


Elon Musk has reportedly bought 6,000 acres of land just outside of Austin. Here’s how to invest in the city’s growth before he floods it with new tech workers.


Can I say I am going to enjoy Musk's possibly only paper losses as people flee Austin and Texas in general because of the anti abortion laws?

What is his next flop or major financial loss going to be? <Goes off to start Bingo card>

There are tech companies and individuals fleeing Texas due to their far right government, but I’m sure there are others flocking to Texas because they want to live in a Christian theocracy. I wonder if those two trends balance out.

My niece lives there, and due to some issues will only be able to get pregnant if she uses IVF. Usually, though, they use multiple fetuses each time, to increase the odds at least 1 will be successful, and the remove the extra ones if two many to safely carry succeed. Which I’m guessing is now illegal. So I doubt she’ll try to get pregnant soon.

[Opti]

Dec 13, 2023 8:43:36 GMT -5 resolution said:

Dec 12, 2023 23:46:04 GMT -5 Opti said:

Your article is very regional and a slanted piece of journalism. REITs are the ones most likely doing the rental thing for their hedge fund and this article states the impact on various areas in Las Vegas. 

REITS have been around for a long time and they typically hold a lot of different properties and may be traded on the stock exchange. The investors returns are based on the returns from all the properties.

The new type of business is fractional ownership, where investors own a small piece of a specific property and their returns are based on the specific property. In theory they could buy pieces of a bunch of different properties through the company to diversify, at which point I don't understand why we would need this as opposed to a REIT. Also I don't think they are publicly traded, so not sure how easy it is to divest as opposed to a REIT.

ETA REITS have way more of the market than fractional ownership companies, I just thought it was an interesting new type of business that just entered the real estate market.

I probably need one of those websites that evaluate the reading level of what you post. 
 

I typically try for around the 5th grade level, which is a habit based on my employer's plain language standard. I am not always successful, but it's pretty ingrained at this point.

To make it riskier than a REIT and make those who invest in the hedge fund feel more like they are investing in real estate?
I suppose it has the added advantage that the investors are more exposed to the downside and the hedge fund is more protected.

Aren't investors in hedge funds considered educated investors?

[Opti]

I guess since the Timeshare market is no longer thriving you can own fractional shares of home rentals to underfunded people? 
Or is it upcoming neighborhoods? 

[Tiny]

Dec 12, 2023 21:37:35 GMT -5 happyhoix said:

 
So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

One word: Slumlords.    it's a very profitable thing to do... especially when people have few choices for where to live or what they can afford to rent. 

I don't think the hedgefunds buy individual homes - but rather buying businesses that own individual homes.   

What happens in 5 or 10 years when all those rented single family homes start needing "maintenance" - new appliances, roofs, deck repairs, general house repairs? What happens? Nothing. No money is spent. Rent doesn't go down. The people renting the new slums just live with it - because they can't afford to rent or buy something better.


Remember there are a lot of levels of "management" that need to be paid (or not paid).    A rented house probably has a property manager, who possibly has a general contractor or other business hired to hand the day to day "maintenance" of the rented properties.     At some point to keep the houses generating income - either higher rents OR lower quality (or none) maintenance needs to happen. 

That's what happens.

[resolution]

Dec 13, 2023 11:15:59 GMT -5 Opti said:

Dec 13, 2023 8:43:36 GMT -5 resolution said:

REITS have been around for a long time and they typically hold a lot of different properties and may be traded on the stock exchange. The investors returns are based on the returns from all the properties.

The new type of business is fractional ownership, where investors own a small piece of a specific property and their returns are based on the specific property. In theory they could buy pieces of a bunch of different properties through the company to diversify, at which point I don't understand why we would need this as opposed to a REIT. Also I don't think they are publicly traded, so not sure how easy it is to divest as opposed to a REIT.

ETA REITS have way more of the market than fractional ownership companies, I just thought it was an interesting new type of business that just entered the real estate market.

I typically try for around the 5th grade level, which is a habit based on my employer's plain language standard. I am not always successful, but it's pretty ingrained at this point.

To make it riskier than a REIT and make those who invest in the hedge fund feel more like they are investing in real estate?
I suppose it has the added advantage that the investors are more exposed to the downside and the hedge fund is more protected.

Aren't investors in hedge funds considered educated investors?

There was a rule change that gives non-accredited investors more access to invest in fractional ownership and other startups now, although it is still a lot more limited than for accredited investors. They also changed the definition of accredited investors to make more people eligible.

Some crowdfunding investments are now available to people with very little to invest. I don't think any of them are big enough yet to impact the rental market the way that the private equity funds are doing, but single family rentals seem to be transitioning from mom and pop to big business.

 moneywise.com/investing/real-estate/fractional-real-estate-investing#:~:text=Crowdfunding%20companies%20have%20made%20real,broker%20to%20invest%20in%20REITs

[Opti]

Dec 13, 2023 11:41:07 GMT -5 Tiny said:

Dec 12, 2023 21:37:35 GMT -5 happyhoix said:

 
So someone explain to me why hedge funds are buying 26% of all single family homes? 

finance.yahoo.com/news/stay-markets-kevin-oleary-urges-174044883.html

Buying them and holding them to see if their value increases? Do the houses just sit there empty? I’m just having a hard time wrapping my head around hedge funds going out and buying individual houses, I’m used to thinking about them buying up businesses. 

One word: Slumlords.    it's a very profitable thing to do... especially when people have few choices for where to live or what they can afford to rent. 

I don't think the hedgefunds buy individual homes - but rather buying businesses that own individual homes.   

What happens in 5 or 10 years when all those rented single family homes start needing "maintenance" - new appliances, roofs, deck repairs, general house repairs? What happens? Nothing. No money is spent. Rent doesn't go down. The people renting the new slums just live with it - because they can't afford to rent or buy something better.


Remember there are a lot of levels of "management" that need to be paid (or not paid).    A rented house probably has a property manager, who possibly has a general contractor or other business hired to hand the day to day "maintenance" of the rented properties.     At some point to keep the houses generating income - either higher rents OR lower quality (or none) maintenance needs to happen. 

That's what happens.

Yes. Condemned apartment buildings in Plainfield NJ. The recent collapse of a 7th floor rental in the Bronx. (Low income area, specially designated per Wikipedia)

Related but different, condo collapses in Florida and recent law changes as a result.

[haapai]

Dec 13, 2023 11:48:07 GMT -5 resolution said:

Dec 13, 2023 11:15:59 GMT -5 Opti said:

To make it riskier than a REIT and make those who invest in the hedge fund feel more like they are investing in real estate?
I suppose it has the added advantage that the investors are more exposed to the downside and the hedge fund is more protected.

Aren't investors in hedge funds considered educated investors?

There was a rule change that gives non-accredited investors more access to invest in fractional ownership and other startups now, although it is still a lot more limited than for accredited investors. They also changed the definition of accredited investors to make more people eligible.

Some crowdfunding investments are now available to people with very little to invest. I don't think any of them are big enough yet to impact the rental market the way that the private equity funds are doing, but single family rentals seem to be transitioning from mom and pop to big business.

 moneywise.com/investing/real-estate/fractional-real-estate-investing#:~:text=Crowdfunding%20companies%20have%20made%20real,broker%20to%20invest%20in%20REITs

Who does the maintenance and repair?  Specifically, what prevents all of the profit (or more than all of it) from going to the entity that manages the properties? 

[resolution]

Dec 13, 2023 12:17:58 GMT -5 haapai said:

Dec 13, 2023 11:48:07 GMT -5 resolution said:

There was a rule change that gives non-accredited investors more access to invest in fractional ownership and other startups now, although it is still a lot more limited than for accredited investors. They also changed the definition of accredited investors to make more people eligible.

Some crowdfunding investments are now available to people with very little to invest. I don't think any of them are big enough yet to impact the rental market the way that the private equity funds are doing, but single family rentals seem to be transitioning from mom and pop to big business.

 moneywise.com/investing/real-estate/fractional-real-estate-investing#:~:text=Crowdfunding%20companies%20have%20made%20real,broker%20to%20invest%20in%20REITs

Who does the maintenance and repair?  Specifically, what prevents all of the profit (or more than all of it) from going to the entity that manages the properties? 

Presumably that information would be provided to the potential investor before they made a decision on purchasing. However, I don't know how much due diligence the average person actually does before spending. We own some VGSLX (the Vanguard REIT) in my husband's IRA, and really all I looked at was the expense ratio on it, so personally I didn't do that kind of research.

[bean29]

Dec 13, 2023 10:07:26 GMT -5 happyhoix said:

Dec 12, 2023 23:54:39 GMT -5 Opti said:

From that article,


Elon Musk has reportedly bought 6,000 acres of land just outside of Austin. Here’s how to invest in the city’s growth before he floods it with new tech workers.


Can I say I am going to enjoy Musk's possibly only paper losses as people flee Austin and Texas in general because of the anti abortion laws?

What is his next flop or major financial loss going to be? <Goes off to start Bingo card>

There are tech companies and individuals fleeing Texas due to their far right government, but I’m sure there are others flocking to Texas because they want to live in a Christian theocracy. I wonder if those two trends balance out.

My niece lives there, and due to some issues will only be able to get pregnant if she uses IVF. Usually, though, they use multiple fetuses each time, to increase the odds at least 1 will be successful, and the remove the extra ones if two many to safely carry succeed. Which I’m guessing is now illegal. So I doubt she’ll try to get pregnant soon.

Just told my husband last night that I had asked my DD not to move to Texas for this very reason.  DD does not plan on children at this time, so if she would get PG, it would be an accident.  She is in a committed relationship, so I think an abortion would only be considered if there were issues, but I always felt if it was my life or the baby's my life comes first.  The other way around just makes no sense to me.

[Tiny]

Let's not forget that owning and renting residential properties was often done by "small investors" - as in Mom and Pop Landlords. They are the ones who would often hold their investments long term. It was a way to build wealth (often while also holding down a full time job).


Think of someone who purchases a 3, 6, or 9 flat (apartments) or someone who builds up their holdings to a bunch of SFHs. My nephew was working toward being a small time landlord. PreCovid (and before the goofy run up in RE prices) my nephew and his wife were working a plan to have a primary home and 5 to 6 rentals (to be completed over 5 to 10 years). They had gotten thru the 1st two rentals and had bought the 3rd (and were living in the third) when prices started going up (2019) and then Covid hit... Time has passed. Their lives have changed somewhat on schedule (new baby, job changes) they just couldn't complete the 5 to 6 rentals plus primary home plan. They are sticking with the 2 rentals and are making the 3rd house their primary home. The plan to own 5 to 6 rentals has been put on the back burner.


Back in the 2000's the large apartment complexes started being converted to "condos" as the investor with 30 or more apartments sold off their holdings.

Back in the 2000's I also saw local 60 year old (and older) apartment buildings 9 to 12 apartments (vintage apartments) start to go condo as well. And then new 9 to 12 townhouse/condo buildings were also being built. More "small landlords" leaving....


Currently a lot of new SFH's are built in more or less gated communities - it's a community of 50 or 100 homes with one road in and one road out - no main streets, no business district, maybe even no school or fire house/police station. I can totally see these kinds of houses only communities being built as 'rentals' only OR existing communities being targeted by a large corporate investor who buys houses as they come on the market. Remember there's the old saw about homeowners only owning for 5 years before they sell and move... so there could predictably be a lot of turnover of owners.

[bean29]

Chiver, DD said she normally orders a medium or large from Shein, depending on the style.  She said you really have to look at the sizing. I know she wears about a 4 in jeans and I just bought her 6 Petite pants from Ann Taylor, but I don't think she has tried them on yet.  I bought for the training for her new job, she has to have black suiting with white collared shirts or a black cardigan.  She said she has some 4P pants from Ann Taylor that may be a bit tight so she thinks the 6P might fit or might not.  I have been bugging her to try them on.  Has not happened yet.  I know when ordering lately I have been trying to use my tape measure, but I still have not always been successful in getting the sizing right.  This is what held me up from ordering from them.  I was questioning if I should order a M or a L.  I guess the question s/b do I need a L or an XL.  ETA.  Shein also sells clothing in larger sizes.  I know this b/c I was part of groups for Petites and Curvy Petites on Reddit and the Curvy Group buys from Shein as much as anyone else.  

[The Walk of the Penguin Mich]

I suspect some of this is similar to what’s happening in Vancouver.  Property prices have been going nuts, and if you look around the city, there are a lot of older houses that have just been boarded up to be razed some time in the future.  Many of these houses are among rows of similar style, single family homes currently lived in.  

What happens is investors buy these houses at estate sales and hold onto them.  Since they are ‘neighborhoods, the residents are largely the same age and are in the process of dying off.  Get enough of these houses and the company has a block of land to put multifamily housing on.  The bad part about this is that just holding onto these houses for the land is taking housing out of the housing market……housing desperately needed.  As a result, BC/Vancouver has jacked up property taxes on unoccupied units considerably.  Despite this, these holding companies still think it’s worth their while to hold out.  Considering the value of my MIL’s condo, in the 5 years she has lived there, her condo has doubled in value.  Her 900 sq ft condo is now worth more than the 3800 sq ft house she sold when she downsized.  Watching housing prices up there is alarming, way more than anything I have seen in the US.