Have you noticed that single family homes are hard to find? There are a lot of things wrong with the housing market right now. We’ve talked recently about the housing shortage, but today I want to cover one facet of this problem that isn’t talked about often—and it’s one that affects investors directly.
Big money is cashing in on rental real estate. Specifically, pension funds, investment firms and Wall Street banks are snapping up homes left & right. On this episode of Investing in Real Estate, we’re going to talk about why this is happening, what it means for investors, and the implications on the housing market at large.
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Why are pension funds buying up single-family homes? Residential real estate is an obvious alternative to commercial real estate, which is harder to come by, and the pandemic proves what I’ve been saying all along: people will always need a place to live.
Over the past year and half, shopping malls, strip malls, and offices have struggled. What’s the alternative? Residential real estate. With more people than ever working from home, single-family housing is a safe investment.
So big money is buying (and building) properties… is that a good or bad thing? Well, the jury is still out on that. Analysts claim that it COULD improve industry standards and offer more choices. More housing is good right?
However, tenants who rent from these big companies beg to differ. They claim worse services and increased pricing. I think this is valid: would you rather rent a place from a regular person or a big company? There’s a human aspect in this business that is important. For me and the investors I know, rental real estate is a great means to building wealth—but that’s not all. It’s also about providing a great home. A pension fund can not offer compassion to a veteran who is late on rent, or a mom who is struggling around the holidays.
What about the effects of pricing? It depends. Previously on the show, we’ve the housing shortage and how supply and demand is at play. If these large institutions are building new homes, that could be a good way to bring prices and rents down.
Alternatively if they’re just buying up existing properties, that could squeeze out a lot of small mom & pop investors and first time homebuyers—just contributing further to shortages and pricing issues.
There is a lot that goes into this, so I’m going to link a couple articles in the resources section for you to check out if you’re interested. I’d love to hear your thoughts on this. Click on the video below to leave me a comment on YouTube.
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