Wednesday, January 25, 2012

CNBC: Case Against Hedge Funds as Your Landlord


Foreclosure

Today's Post courtesy CNBC's Herb Greenberg

In recent weeks CNBC’s Diana Olick has outlined plans by hedge funds and private equity to buy up foreclosed houses, fix them and then rent them out—and maybe even create a big REIT.





Sounds good on paper, especially for neighborhoods the houses are in.   But is it really? 

One of my best guys on housing and mortgages is Mark Hansen, who advises hedge funds and others. 

His take is this that the sales of foreclosures help neighborhood only when investors buy low, rehab and sell high. 

He says they're also good when they're sold to owner occupants.
But he also says foreclosures actually lower neighborhood values and create little economic benefit when they're sold to professional investors to rent. 



Herb GreenbergSenior Stocks
Commentator
Not only are they usually the worst maintained homes in a neighborhood. But Hansen's bigger concern is that these bulk purchase by so-called Real-Estate-Owned to Rental merely “kicks the can on a true housing recovery”—especially in states like Arizona, California, Florida and Nevada, where distressed sales make up the majority of all sales—and “will crush house sales volume, prices and other sector employment and income.” 

Alarmist? That’s what a bunch of people said when he was raising all kinds of red flags about the subprime crisis before it became one.

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