Guest Post: It’s About Time - JP Morgan To Enter The Housing Slumlord Trade

Tyler Durden's picture

Via Michael Krieger of Liberty Blitzkrieg blog,

It was just a matter of time before the most powerful crony capitalist bank in America decided to join the housing trade.  Making money running the food stamp program just wasn’t enough for Your Crony Highness Jamie Dimon and company, it’s time to join his financial oligarch brothers in the bidding war to corner the housing market and become your overlord.  That way they can control how you eat (food stamps) and where you sleep.  It’s become very clear what the large financial interests in these United States are attempting.  Funnel all the low interest crony American money, with a dash of Chinese laundered money, into the “housing recovery.”  From Bloomberg:

JPMorgan Chase & Co. (JPM) is giving its wealthiest clients the chance to invest in the single-family rental market after other investments linked to the U.S. housing recovery jumped in value.


The firm’s unit that caters to individuals and families with more than $5 million, put client money in a partnership that bought more than 5,000 single family homes to rent in Florida, Arizona, Nevada and California, said David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank. Investors can expect returns of as much as 8 percent annually from rental income as well as part of the profits when the homes are sold, he said.


The bank’s wealthy clients are joining a growing number of private-equity firms and individuals buying rental homes in the regions hardest hit by the U.S. housing crash. Blackstone Group LP (BX) has spent $2.7 billion, and said last month it accelerated purchases as home prices rise faster than anticipated. Even after home values in November gained by the most in six years, investors are wagering on rental properties as an alternative to housing-related stocks and mortgage debt that’s already soared.


The strategy is similar to institutional buyers including Blackstone, the world’s largest buyout firm, Thomas Barrack’s Colony Capital LLC, and Oaktree Capital Group LLC. (OAK) They’re aiming to profit from low prices on distressed properties, often those in foreclosure and sold at auction — and the demand for rentals from people who don’t want to own a home or can’t qualify for a mortgage.

Now here’s where the article gets really interesting.

“It’s hard to find a private-equity firm on the planet that doesn’t have a strategy in this space,” Gary Beasley, chief executive officer at Waypoint Homes, said last week at the American Securitization Forum’s annual conference in Las Vegas. The Oakland, California-based company has bought homes in California, Arizona, Illinois and Georgia.

Sure seems like the right time to buy housing.  You know, after every single pool of aggressive private capital in the nation and abroad is already bidding.

Now take a look at how poor the returns are.  This is what happens when things get too crowded.

“If you look at some of the really beaten down areas — Miami, Orlando, Vegas, Tampa — we do think the return on that asset, if you just buy a home, collect the rent and do whatever you need to do on the cost side, you’re getting a return of somewhere between 6 percent and 8 percent,” Bordia said. Non- agency mortgage-backed securities are generally yielding 4 percent to 6 percent, he said.


Even as the housing market probably will do well across the nation, areas where property prices already are high such as San Diego, Los Angeles, Denver and San Francisco, will see lower rental yields, of 4 percent to 5 percent, Bordia said.

Are you kidding me?  A 6%-8% yield is all you get for taking on all the responsibilities of upkeep, rent collection as well as the risk of capital depreciation.  I’ll take the check please.

Finally, just when you thought the lunacy couldn’t get any more extreme…

While buying single-family homes to rent is among “the smarter ways to invest going forward,” Pastolove advises wealthy clients to buy the properties to rent themselves if they are able. Morgan Stanley isn’t purchasing homes or managing them; instead it’s making loans to high-net-worth customers at rates lower than a typical mortgage, and using their investment portfolios as collateral. That provides people the capital to purchase investment properties, he said.

This. Will. Not. End. Well.

Full article here.

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francis_sawyer's picture

Housing Bubble = Biggest 'land grab' of all time...


Besides gold & silver... They literally PRINTED land & houses for themselves...

bobthehorse's picture

Jamie Dimon!

What a thief.

We all die.

And you can't take it with you.

So what's the point of acting like a douche bag?


your neighbor's picture

should someone tell the guy that sent the bullet that the bankers will be at the courthouse steps?

TruthInSunshine's picture

Talk about muppet bait.

Investments that will flow into this newly offered JP Morgan investment "vehicle" rivals some of the dumbest money on planet earth at present.

Good luck, and make sure to thank JP Morgan on the way into this investment "opportunity," AND also when JPM kicks you in the balls on your way out of it, too, Muppets.

AlaricBalth's picture

"David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank said Investors can expect returns of as much as 8 percent annually from rental income as well as part of the profits when the homes are sold."

Profits? That is assuming housing prices increase.

To paraphrase Ben Bernanke, I guess I don't buy your premise, Mr. Lyon.

Mark123's picture

So if they value this poptential income stream like Amazon, FB etc it could result in 35,000% profit?  Count me in JPM!!!


I'll bet this one is targeted at the Asian investor...

trav777's picture

you can find resource MLPs that yield near that...8%??  And that was the HIGH water mark.

Yields have collapsed.  This phenomenon is a warning omen of heavy inflation coming, btw.  Money is going to start competing for yield and that means prices on things that have any kind of yield potential go up.  Paradoxically, that could be house prices.

Money is already chasing the stock market and its pitiful yields well beyond what would be expected.  The price of yield is simply a LOT higher now than we're accustomed to.  This is how people like Durden can look at market returns against historical PE and yield averages and say WTF.  It's just cheap money chasing scarce yield.  Yield is supply and demand as well.  It's why people like Gross are whining so loudly; he's having to pay A LOT MORE than he's accustomed to or he thinks is fair for his yield.

There's MORE than enough money out there to hyperinflate nearly everything.

Zer0head's picture
Blackstone Group on property buying spree


November 8, 2012

Giant real estate investment firm Blackstone Group has launched an ambitious campaign to buy distressed properties in Southwest Florida, so far doing it all with cash.




Blackstone intends to convert the single-family homes it acquires into income-producing rentals, then reportedly package them into real estate investment trusts to sell to investors.



Blackstone has spent more than $2.5 billion on 16,000 homes to manage as rentals, deploying capital from the $13.3 billion fund it raised last year, said Jonathan Gray, global head of real estate for the world’s largest private equity firm. That’s up from $1 billion of homes owned in October, when Blackstone Chairman Stephen Schwarzman said the company was spending $100 million a week on houses.

“The market is moving much faster than anybody thought possible,” Gray said during an interview in Blackstone’s New York headquarters. “Housing is much stronger than people anticipated.”

Blackstone has been purchasing through foreclosure auctions and short sales, in which banks agree to accept less than is owed on the mortgage, after more than 5 million homeowners lost their homes since the market’s peak in 2006.

It’s bought so quickly it’s “warehousing” more than half of the homes it’s acquired as it completes the purchase and hires staff and contractors to renovate and rent the properties, Gray said. It takes about 30 days to fix each home and then as much as 30 days to lease the property, he said.

“Renovating the 16,000 homes is an enormous job,” Gray said.


In other news

Authorities say Titusville FL slaying victim dismembered, beheaded


ebworthen's picture

So the FED low interest rates and $85 Billion per month MBS purchases and gravy to banks not only punishes retierees and savers, crushes home values, devalues the currency, and puts our children and grandchildren into debt slavery but also greases the wheels for monied crony capitalists to put us all into rent slavery?

What these fuckers don't know is that the renters are going to MESS UP the houses and properties they rent; and when the "riot in every city" happens when the ponzi collapses they won't have a fucking penny left.  These bankers and Ben and all the other criminals should be choosing which tree or lamp post they want to be hung from.  Kind of like reserving a cemetary plot, but different.

The entire thing is high treason, and Jamie Dimon, Ben Bernanke, and all the other complicit actors deserve to be hung.

Lore's picture

Is there such a thing as an MBS for tent cities?  Has that been tried yet?  Seems to me there is an opportunity in there somewhere --


Thomas's picture

Single family property rentals are arguably non-economic in the best of times. This will be carnage for whichever clients get sucked into this fiasco. It also shows the shadow inventory is still very large.

Can we finally get going and put some of these guys in jail? Christ. These guys are just riding rough shod over the financial system. I keep hoping somebody shows Dimon that knowing how to box is not enough.

FEDbuster's picture

For $5 million they could buy every house in Detroit, but it didn't make the list.  Neither did Gary, East St. Louis, Camden, Compton, etc...  Guessing that they still hold out some hope that poverty line white folks will still make their rent payments, good luck.

TruthInSunshine's picture

The Muppets can expect a return of 8%? That's not Madoff level good (12%) in NOMINAL terms, but it's actually better in RELATIVE terms given the ZIRP-Environment we're now in!

Go, Muppets, Go! Get some!

p.s. -

  • 04 Feb 2013 at 4:03 PM
Which Federal Reserve Official Would Totally Pee In Bed If He Didn’t Have To Strip The Sheets Afterward?

“Devaluing a currency,” one senior Federal Reserve official once told me, “is like peeing in bed. It feels good at first, but pretty soon it becomes a real mess.” In recent times, foreign-exchange incontinence appears to have been the policy of choice in capitals from Beijing to Washington, via Tokyo. The resulting mess has led to warnings of a global “currency war” that could spiral into protectionism. [WSJ via DI]



francis_sawyer's picture

 "should someone tell the guy that sent the bullet that the bankers will be at the courthouse steps?"


Somebody should give him my address... He's welcome to mail ME all the free bullets he wants...

Citxmech's picture

"Morgan Stanley isn’t purchasing homes or managing them; instead it’s making loans to high-net-worth customers at rates lower than a typical mortgage, and using their investment portfolios as collateral."

Are you fucking kidding me?  Who would actually go for this deal?

They are really scraping the bottom of the barrel at this point. . .

trav777's picture

we're in an economic reality where money is cheap but real yield ISN'T.

All this cheap cash will start to chase, and when it does, it's like when a member of herd breaks in front of predators, there's basically a mass stampede.

You don't want to move your money too aggressively toward the herd, because they will spook and then you get run over.

The bond welfare queens of the past 100 and whatever years are now looking at portfolios which are no longer magically growing...this money is going to be chased out into the open as it is forced to look for a home that can support its growth needs.  And we haven't even gone to NIRP yet lol.

This is what happens when economists and bankers get to mess with money instead of tying it to REAL BILLS, which self-regulate.

Cosimo de Medici's picture

I can see the chase for yield becoming the great wave of privatization, where the government sells off many of its services.  They already do it for war, or at least security (Academi).  Over time, the Blackstones and MetLifes of the world are going to be taking over Interstates, bridges, the Post Office, even National Parks.  There's where some of your inflation will come in, because even if private companies made all these entities efficient, they'll still cost the average citizen more once they are made economically viable.

TruthInSunshine's picture

This is what the PIIGS are being forced to do now (and some U.S. states/counties/cities, as well-- think Jefferson County, Alabama, or Inland Empire, California).

The fiat conjured boom-bust cycle allows those who are the best friends forever of central banks to swoop in and buy toll roads, water/sewage treatment facilities, islands (e.g. Santorini; is it still on the table?) for a token (pun intended) gesture.

Voila. Harvest cometh.

Groundhog Day's picture

only after they have squandered the Pensions of the police.  Until then, the police will protect them against their better judgement.  Because the only thing that pisses cops off these days is a threat to their pension or annual 2.5% expected raise

cornflakesdisease's picture

Bob, I think we have a problem.  You make too much sense.

cornflakesdisease's picture

Bob, I think we have a problem.  You make too much sense.

Buck Johnson's picture

This isn't going to end well, when they find out that rents won't be able to hold even that small percentage.

FEDbuster's picture

Yes, there will be an outcry for more section 8 funding, and bankster pressure for .gov to provide it.  This steady flow of rental income will insure their 8% return.  Plus with section 8, landlords have better control of the tenancy.

JPMorgan's "Section 8, 8% Return Fund"

monoloco's picture

Now they're sowing the seeds for the second harvest.

Mentaliusanything's picture

No I think its the third Horseman of the apocalypse.

8% return are you kidding me. Once the house is trashed about and looks like a 40 year old hooker it will be worth just as much. Houses are never investments, like Airlines they chew money.

Houses are a discretionary purchase which ties you forever to the blood sucking margin takers that grew out around it. One thing for sure It won't end well.

All Risk No Reward's picture

That's just it...  Not only did the Big Finance Capital criminals use globalism to reach around the world in order to steal all the more wealth from all the more people, they also used the credit bubble to literally reach into the future to steal even more wealth from more people.

Debt pulls demand forward and leaves a gaping demand hole surrounded on all sides byt "fiscal cliffs."

And many in the chumptocracy think these Art of War operators "dumb."

Little do they know that's all part of the freakin' plan!

"Pretend inferiority and encourage his arrogance."
- Sun Tzu, Art of War

Buckaroo Banzai's picture

Wow, how did the mainstream media miss this guy???

Oh that's right-- they are worthless, biased, Libtard shitbags.

Boozer's picture

That guy gets my vote Buck.

Widowmaker's picture

They're all faggots, run by faggots, and faggots author all their fag content.

If it's not about fags or dick-sucking fag pride its not news.

FEDbuster's picture

He's not going to be invited on CNN anytime soon.

BTW, Piers Moron is going to be in TX tonight facing a double barrel of "Teds", Sen. Ted Cruz and Ted Nugent.  Alex Jones is on his way from Austin, with megaphone in hand.  Should be interesting.

MisterMousePotato's picture

If you have never heard Ted Nugent speak on the second amendment, you should make the effort, not just because he is incredibly knowledgable on the subject, but also because he is a pleasure to listen to (articulate, devoid of disfluencies, etc.) - kinda like William F. Buckley (who even cares what he's saying? It just sounds so good.)

All Risk No Reward's picture

They get paid to push an agenda of the people who can maximize their profits and paychecks - Big Finance Capital.

Who are these people?

Debt Money tyrants, by definition.

Buckaroo Banzai's picture

What a stupid, giant clusterfuck our economy has become. I weep for my country.

unrulian's picture

dry your eyes and get angry

FEDbuster's picture

Dry your eyes and take steady aim.  Remember to squeeze, not pull.

Bad Attitude's picture

No time to weep. Now is the time to prepare. Now is the time to buy shelf-stable food. Now is the time to buy emergency medical supplies. Now is the time to make sure you have an independent supply of drinking water. Now is the time to top off your ammo supplies (much harder now than two months ago).

Don't feel overwhelmed if you can't do everything at once. Do what you can. Any preparation is better than no preparations. An extra week of food and water puts you in a better position than the majority of your neighbors.

You have seen what has happened to the ammunition, firearm, and magazine inventories after one pronouncement from Dear Leader. Just imagine what will happen if there is an economic hiccup and most people decide there may be food shortages.

Soon, the ride is going to get real bumpy.

Here is an Argentinian's account of what he experienced and lessons learned from the 2001 economic collapse in Argentina:

klockwerks's picture

Another thing that is very important is your medication. When you get your 30 day supply, take out 7 pills and put them in your old bottle. You run out in 21 days and they will let you reorder for the next script. In 4 months you have saved up 30 days of meds. Been doing it for 4 years now so when it goes over the cliff you won't be out of your meds. Read a study the other day and they claimed medicine could last 20+ years and it would still be good

All Risk No Reward's picture

First of all, make sure you need the medication.  Statins are essentially a hoax that damage the brain, cause muscle deterioration and diabetes.

Big Pharma is a subdivision of Big Finance Capital.  They run it with the same way they run the Debt Money Tyranny.  High IQ doctors are subjected to the latest brainwashing and propaganda immersion techniques - now you know why they make sure they are sleep deprived.  Those who question "the authority" meet stiff resistance.

Your TG/HDL ratio is important, so make sure that you know what it is and what value is ideal...

In more recent years, scientists discovered two types of LDL cholesterol. One type consists of large, fluffy LDL particles that appear to have no potential to cause atherosclerosis or the development of plaques on the large or medium-sized arteries. The other type consists of small, dense LDL particles that are strongly associated with arterial plaques and this can increase the risk of heart disease. So now you have good “bad” cholesterol (large, fluffy LD particles) and bad “bad” cholesterol (small, dense LDL). Getting confused? Well, so is everyone else who is fighting the cholesterol wars, because we now know that the more bad “bad” cholesterol you have, the more likely you are to have a heart attack, whereas having a high level of the good “bad” cholesterol isn’t likely to have any adverse health effects.

How can you tell which type of LDL you have? All you have to do is determine your ratio of triglycerides to HDL cholesterol, which would be found as part of the results of your last cholesterol screening. If your ratio is less than 2, you have predominantly large, fluffy LDL particles that are not going to do you much harm. If your ratio is greater than 4, you have a lot of small, dense LDL particles that can accelerate the development of atherosclerotic plaques – regardless of your total cholesterol levels.

The importance of this TG/HDL ratio was confirmed by studies from the Harvard Medical School. This research found that the higher your TG/HDL ratio, the more likely you would be to have a heart attack. How much more likely? In one study, those with the highest ratio had sixteen times the risk of those with the lowest ratio. That’s a huge increase in risk of for the most common cause of death!

In contrast to our national wars on smoking and high cholesterol, you hear nothing of our battle plan for reducing elevated TG/HDL levels. Since a high TG/HDL ratio is a surrogate marker for elevated insulin, you can see why I was making my plea to launch a national war on elevated insulin many years ago. (MSM won't pick up former MIT lipid researchers debunking their profitable deceptions)

A cash cow based on bad science

"One recent article has studied all the published studies with some 65,000 patients who had high cholesterol but no evidence of heart disease to see the effect that statin drugs have on their mortality (2). The answer was virtually none. In fact, in all the statin trials published since 2005, there has been a striking lack of benefits in populations that simply had high cholesterol levels but no evidence of any cardiovascular disease"

De Lorgeril M, Salen P, Abramson J, Dodin S, Hamazaki T, Kotucki W, Okuyama H, Pavy B, and Rabaeus M. “Cholesterol lowering, cardiovascular diseases, and the rosuvastatin-JUPITER controversy.” Arch Intern Med 170 1032-1036 (2010)

"The drug industry developed a great marketing pitch for statins: “If your cholesterol is high, you are going to die”. Unfortunately, the data never supported that spiffy slogan. Epidemiological studies do indicate that if your cholesterol levels are high and you are less than 50 years of age, then there is an increased risk for mortality. After age 50, that risk of increased mortality with high cholesterol disappears"

Rise P, Ghezzi S, and Galli C. “Relative potencies of statins in reducing cholesterol synthesis and enhancing linoleic acid metabolism.” Eur J Pharmacol 467:73-75 (2003)

"The best way to reduce the production of “super-sticky” LDL is to reduce blood sugar levels. This helps explain why individuals with diabetes are two to three times more likely to develop heart disease. The best way to reduce elevated blood sugar is the Zone diet. That’s why the latest dietary recommendations for the treatment of diabetes by the Joslin Diabetes Research Center at Harvard Medical School are essentially identical to the Zone diet."

TruthInSunshine's picture

It's the great statin scam, a multi billion dollar annual theft, sponsored by Deep Capture & Big Pharma. The pharma/medical establishment has intentionally tortured the data to do that old correlation = causation Jedi mind fuckery:

Americans derive 33% of their calories (in the form of refined sugar) from sugar-saturated beverages, on average.

Sugar and simple carbs are far more a health threat than saturated fats are, given that regular intake leads to the dreadful pancreatic stress known as the insulin spike roller coaster, where your body has to produce more and more insulin, at more frequent intervals, in order to regulate blood sugar levels, which leads to insulin resistance (and then Type II Diabetes as well as other serious, adverse cardiovascular and even pulmonary conditions).

Google Gary Taubes if you want to learn more about how the medical establishment and big pharma have either unintentionally or intentionally led people down the causation/correlation trap with their conventional theories on LDL cholesterol causing cardiovascular disease, rather than being a consequence of it. Cholesterol is produced in response to high C-reactive protein levels, aka inflammation. Statins?  They reduce inflammation. They do not prevent it.

Inflammation is the most under-appreciated cause of disease, whether cardiovascular or otherwise, in current times, and it's the primary cause of that which is mistakenly attributed to high LDL cholesterol levels.

Cut out the sugar & simple carbs (especially in the form of soda and refined/processed foods), do moderate exercise. and you'll do more to improve your health than 100 years of taking statins and cutting out saturated fats will ever accomplish.

Remember when "they" told us eggs were bad for us? Remember the hundreds of other things that were allegedly bad, but since have been proven to be actually good? Remember when there was no mention of sugar intake as inducing highly inflammatory and insulin adverse systemic consequences and changes?

All Risk No Reward's picture

Truth, it is funny how all these hoaxes all increases profits of Big Finance Capital.

Not a single establishment hoax benefits the chumptocracy at the expense of Big Finance Capital.

Thanks for the links.

Eggs are a tough one.  The egg white is excellent (organic), but the yolk has some good points and some bad points.

The yolk is high in nutition value (good), but also high in arachidonic acid - the precurser for pro inflammatory eichosanoids.

I love the nutrition, but I don't like the arachidonic acid.  For healthy people, moderation is good - I might toss one yolk for every two eggs (tossed yolk ends up in the garden eventually).

Anti-Inflammamtory Medicine Monograph

Everyone should also note that statins damage your brain, they promote diabetes and they don't even extend your life unless you are 47 and under and have already had a heart attack.

Fish oil is worth looking into.  Not health food store fish oil - that's not the good stuff.

OmegaRX (children can easily ingest the liquid)

OmaPure (about 40%-50% the cost and the quality is similar)

You get a volume discount with OmaPure.

Curiously_Crazy's picture

"... you hear nothing of our battle plan for reducing elevated TG/HDL levels"


If you're a Pilot you sure as heck do. It's up there with a dozen or so other things they test for annually as part of your bloods in order to maintain a Class 1 medical. 

Great post btw.

Sudden Debt's picture

instead it’s making loans to high-net-worth customers at rates lower than a typical mortgage,


Well, Obama is doing what he said he would do. Dividing the spoils of war between his citizens.

Of course the slaves won't get anything. Unless paying takes is something of course :)




hannah's picture

6-8% is pure bullshit. no way these people are so damn efficient. they might be making negative 6-8%.....

Citxmech's picture

They're trying to scam folks who have portfolios with a pulse.  Sucker them into the new housing bubble using low interest rates and the "recovery"as a carrot, and then the marks sign their portfolio over as collateral.  When the bubble pops - Profit!

DR's picture

JPM isn't keeping the homes..they are selling them to the investors at a markup.

The investors are taking the risk, not JPM who is in the business of flipping assets for a profit...



All Risk No Reward's picture

>>JPM isn't keeping the homes..they are selling them to the investors at a markup.<<

I think you mispelled "taxpayers" as "investors."  Unless we are investing in toxic trash...  then you have a point.

A blast from the gang bankster past...

"Gentlemen! I too have been a close observer of the doings of the Bank of the United States. I have had men watching you for a long time, and am convinced that you have used the funds of the bank to speculate in the [homes and] breadstuffs of the country. When you won, you divided the profits amongst you [essentially tax free], and when you lost, you charged it to the bank tax payer. You tell me that if I take the deposits from the bank and annul its charter I shall ruin ten thousand families. That may be true, gentlemen, but that is your sin! Should I let you go on, you will ruin fifty thousand families, and that would be my sin! You are a den of vipers and thieves. I have determined to rout you out, and by the Eternal, (bringing his fist down on the table) I will rout you out!

- From the original minutes of the Philadelphia committee of citizens sent to meet with President Jackson (February 1834), according to Andrew Jackson and the Bank of the United States (1928) by Stan V. Henkels - online PDF

We are such chumps - they are running the very same con game on us for almost 200 years.  They did learn they needed to hijack and capture the government in order for their plans to work out.

D*mn we are chumptocracy.

thewhitelion's picture

And 30 days to rehab?  Not likely in my experience.