The thread about rental house parties reminded me to post this article. Discussion about it on another board prompted me to look up rentals in my area, and was surprised to see how many of those ordinary 3-bedroom rentals are owned by investors and corporations, both in and out of state.

https://www.wsj.com/articles/if-you-sell-a-house-these-days-the-buyer-might-be-a-pension-fund-11617544801

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If You Sell a House These Days, the Buyer Might Be a Pension Fund
Yield-chasing investors are snapping up single-family homes, competing with ordinary Americans and driving up prices

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The Amber Pines at Fosters Ridge subdivision in Conroe, Texas, was sold to online property-investing firm Fundrise in December.

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D.R. Horton Inc. DHI -3.13% built 124 houses in Conroe, Texas, rented them out and then put the whole community, Amber Pines at Fosters Ridge, on the block. A Who's Who of investors and home-rental firms flocked to the December sale. The winning $32 million bid came from an online property-investing platform, Fundrise LLC, which manages more than $1 billion on behalf of about 150,000 individuals.

The country's most prolific home builder booked roughly twice what it typically makes selling houses to the middle classan encouraging debut in the business of selling entire neighborhoods to investors.

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The consulting firm found Houston to be a favorite haunt of investors who have lately accounted for 24% of home purchases there. Investors' slice of the housing market growsas it does in other boomtowns, such as Miami, Phoenix and Las Vegasamong properties priced below $300,000 and in decent school districts.

"Limited housing supply, low rates, a global reach for yield, and what we're calling the institutionalization of real-estate investors has set the stage for another speculative investor-driven home price bubble," the firm concluded.

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Here's an interesting thread for you:

Thread.

Blackrock is buying every single family house they can find, paying 20-50% above asking price and outbidding normal home buyers. Why are corporations, pension funds and property investment groups buying...https://t.co/uTagTOQQgI

— CulturalHusbandry (@APhilosophae) June 9, 2021

I'm curious whether this seems to be happening more for homes that would be considered starter or first homes? If the goal is to ultimately get renters, I don't think it would make a lot of sense to gobble up homes in the price range where people aren't considering renting

Thought the same thing

Honest question, what happens when the property taxes on those assets are so high it eliminates any profit?

AlaskanAg99 said:

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I get calls at least once a month. And I say sure I'll sell.

They get happy.

$1M

Your house isn't worth that much.

No, but you can buy it for $1M!

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I do the same thing.

There are no limits on property tax deduction or interest deductions for rental properties. Private owners have caps at $750,000 and $10,000, respectively. Rising valuations, even with a larger tax bill, allow larger deductions, higher rent, and even tax free loans to stay at 75% LTV. Also, if the owners gobble up the property early in the up-cycle, they can afford to keep rents lower, knowing they'll make money on equity and appreciation, and have full occupancy.

Yeah, I make it sound like a bed of roses. It's not; I'm just addressing the issue.

I just say 100 more than last appraisal. If someone ever bites i guess I'm moving.

AlaskanAg99 said:

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Ag_N_Houston said:

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AlaskanAg99 said:

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I get calls at least once a month. And I say sure I'll sell.

They get happy.

$1M

Your house isn't worth that much.

No, but you can buy it for $1M!

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I do the same thing.

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It's so much fun to hear the excitement in their voices.

Then dash it away and listen to them sometimes even get angry. Well jackass, if I wanted to sell there'd be a sign in my front yard.

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I don't throw out numbers like a round million. I usually toss out 900k or 1.2m. Still usually get the same result but its pretty funny. I wonder if one day someone will say yes.

SnowboardAg said:

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Even with property taxes going up, the corporations have ways to fight it legally, lobbying, etc. I feel bad for those trying to buy their first home. I will hold RE for my family and purchase more as opportunities present themselves. Unfortunately, cash is trash

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That's the way to go.....even with prices going up, I think it's foolish to sell unless you are investing in another home or piece of real estate.

I live not too far from that DR Horton development. If you look at the site plan and the website, you can tell they built it to be all rentals.

I'm on the fence about this. On one hand, small houses could be better than apartments (which are going up everywhere in my area, and most of them are an eyesore). And since it's clear this was meant to be a rental-only community, you don't have the same concern about obnoxious renters destroying a privately owned home. On the surface this seems like it could be a better deal for renters, especially if you are past the point of wanting to live in an apartment.

But that section is part of a larger development with houses up to $600k-ish. I would not think that this rental-only section would help property values of the homes that are privately owned. I certainly would think long and hard before buying in any other section of Foster's Ridge.

I'm curious to see how MCAD has these properties listed. If the houses are all individually owned by the investment company or if it's deeded as one big property.

Edited to add that each home and the lot it sits on are shown as individually owned by the investment company. It will be interesting to see how they are valued over time. MCAD isn't any more consistent in their valuations than HCAD is.

It certainly is strange times. I live in a 2300 sq ft patio home. Neighbor down the street just listed her house, which is the same floor plan as mine.

I thought for sure she'd list at $450k because a house with about the same square footage in another part of our same neighborhood recently listed for $499k and went under contract within 3 days. That's house was different in style (two story with a rear-entry garage) and is (theoretically) on a more "desirable" street. But still a decent comp.

Neighbor's house popped up this week at $389k, which is only a few thousand more than what it listed for just over 2 years ago when she bought it.

I'm not sure if I should be disappointed or relieved.

So are these corporations driving out the individual investors/house flippers too?

The property in that link was built to be what it is. So, it wasn't even available to single investors.

However, I've lived in The Woodlands since 2013. At one time, about 20-25% of the properties in my neighborhood/development were owned by investors, most of them in Mexico and South America. I don't think there were a lot of multiple properties owned by the same one, I think the individual owners were just purchasing the properties through a business/LLC (I think this gave them advantages on getting a visa). Many of these properties would stay empty for all or most of the year. Sometimes they were short-term rentals. We've had a few minor incidences of break-ins and some issues with property maintenance.

After Trump was elected, a lot of the owners started selling the properties off because they didn't like his immigration policies. There are still some left, but it doesn't seem to be as many as a few years ago.

If you were/are renting in the Harris Co area of The Woodlands, there is a good chance some of your rent money is going overseas. I would think this would have a bigger impact on local landlords than the scenario in the article.

Don't think there aren any green card advantages to owning single family. EB-5 was a popular program for a while but it was hamstrung a few years back and is commerical only.

The Woodland's marketed very well to wealthy Latinos so it became the defacto spot for people fleeing Mexico during the narco wars and just generally looking for a safer place to park their money. I would doubt vert much that money earned by renting is going back to latin America as that would defeat the purpose of getting money out.

It may have dropped off a bit during the Trump administration, but it's still the hot spot in the Houston area for Latin investors.

Agreed that it's still a hot area...there are still a lot of houses owned by foreigners. I've just noticed that quite a few have come up for sale in the last couple of years. And there aren't quite as many empty homes.

What I had heard was that your visa got fast-tracked if you made a business investment of over a certain amount of money ($500k comes to mind, but I don't recall exactly). I always wondered if purchasing a house with an LLC and then running it as a rental qualified as that business, or if people were just parking their money in houses. Sounds like no.

Regardless, the rental market in my area is strongly influenced by foreign investors and has been for years.

My comment about sending money out of the country was more directed at the point that it's getting harder and harder to rent from local/self-employed (for lack of a better term) landlords. It's not a "family" business, at least not in my area.

For decades people in less stable countries or people who had ill gotten gains parked money in US real estate because it was tangible, safe and stable.

Even with all the insanity of late, I don't see it slowing down.

The debate between my mom and my old man was living in town or out on some acreage in the "country" and they both grew up on farms. Dad wanted the country. Mom wanted in town.

Sadly Mom won on that one.

I believe the E visa program will get people fast tracked to the US as a foreign investor which may be what was happening here.