‘Real Estate Weekly’: Foreclosures give rise to a new industry in bubble cities

Investors are pioneering a new approach to making money from the housing crash in the cratered suburbs stretching from California to Florida, The Washington Post reports. Since 2007, investors have increasingly been picking up cheap houses to turn into single-family rentals. The home rental market boasts a total property value of $3 trillion, according to Morgan Stanley housing analyst Oliver Chang. Yet institutions have long shunned it as too scattered and impractical to be profitable. Not anymore. With many suburban homes selling for half their peak values and demand for rentals climbing, some investors are seeing returns of up to 9% on their capital—easily beating the average 6.3% gain in an index tracing performance of 27 of the largest apartment-building operators. That’s because the cost of renting in the United States reached an all-time high compared to the cost of buying a home at the end of last year, indicating that it’s a good time for investors to buy, according to Deutsche Bank analysts. And should property values rebound as expected, investors will make even more from the appreciation in an eventual sale. “We are at the birth of a new industry,” says Ken Major, a buyer for Oakland-based investment firm Waypoint Real Estate. It’s one of the pioneering firms in this new industry, which is primarily emerging in states that saw the biggest post-recession housing busts, including California, Florida and Nevada. Check out the rest of this story and the complete Real Estate Weekly e-newsletter here.