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Meanwhile, Big Investors Quietly Slip Out The Back Door On Housing As "Stupid Money" Jumps In

Tyler Durden's picture




 

Last September, one of the original institutional investors in the housing-to-rent strategy, multi-billion hedge fund Och-Ziff called it quits on the landlord business. The reason: "the New York-based hedge fund is looking to sell now because the returns it is generating from rental income are less than expected and it is looking to take advantage of a recent rebound in home prices in northern California." As a reminder, the REO-to-Rental subsidized investment program, which led to an epic surge in demand for multi-family housing, i.e., rental, units was, together with offshore investors parking their cash in the US for safekeeping (taking advantage of the NAR's anti-money laundering check exemptions)  and the big banks Foreclosure Stuffing, the key reason for the recent, stimulus-fueled and quite transitory bounce in house prices in assorted markets.

Still, OZ's exit of the business did not spook too many of the other remaining investors who simply had no better investment options, and in a world of POMO and FOMO, they saw no choice but to become ever bigger landlords.

Today, another one of the original "big boys" has called it curtains: "We just don’t see the returns there that are adequate to incentivize us to continue to invest", according to the CEO Bruce Rose of Carrington, one of the first investors to use deep institutional pockets (in this case a $450 million investment from OakTree) and BTFHousingD.

Rose's assessment of the market? "There’s a lot of -- bluntly -- stupid money that jumped into the trade without any infrastructure, without any real capabilities and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible."

Of course, one can say exactly the same thing about virtually every other market where those gambling with "other people's money" have no choice but to ride the tide and dance as long as the music emanating from the Fed is playing. However, it is rare to see one (technically, another) voluntarily step out even as others are still locked into a market where the returns are no longer worth the effort.

One such gambler is Blackstone:

Blackstone Group LP (BX), the largest investor in single-family rentals, has spent $4.5 billion to amass more than 26,000 homes and continues to buy, according to Eric Elder, a spokesman for Invitation Homes, the rental housing division of the world’s largest private equity firm.

 

Blackstone’s net yields on its occupied houses are about 6 percent to 6.5 percent, Jonathan Gray, the firm’s global head of real estate, said during a May 3 conference call with investors. That’s before using leverage from a $2.1 billion line of credit the private-equity giant arranged in March from a lending syndicate headed by Deutsche Bank AG.

 

While about 85 percent of Blackstone’s renovated homes were leased, Gray said, “we’ve got an awful lot of homes to continue renovating.”

Blackstone can have its homes: it's a different question if it will have the rental cash flow also needs to make these investments a reasonable investment. According to Carrington at least, the answer is a resounding no. And if people think the bottom will fall out of the market when the Fed pulls the curtain, just wait to see what happens to housing when the day comes that Blackstone announces it is shifting from the net buyer to net seller.

Back to Carrington's rationale:

Carrington, which started in 2003 as a mortgage investment fund and has managed almost 25,000 rental homes for itself and others, has been joined by hundreds of institutional and international investors buying single-family homes after prices plunged following the housing crash. The firms are building a new institutional real estate asset class from the 14 million leased single-family residences that are worth an estimated $2.8 trillion, according to Goldman Sachs Group Inc.

Even as demand for rentals rises amid a falling homeownership rate, yields are declining and companies formed to buy the homes that have gone public haven’t yet been profitable.

 

Funds are buying property now, including homes sold by Carrington, for rents that yield 6 percent to 8 percent a year, before costs such as insurance, taxes and vacancies, according to Rose. Carrington’s model called for mid-single digit net returns on annual rents on an unlevered basis, according to Rose. While returns would vary by market, they would generally be in the mid- to high teens over the duration of the holding period, with the profit from home price appreciation.

Others' experience justifies the logic:

Colony American Homes Inc., a division of Thomas Barrack Jr.’s Colony Capital LLC, has found tenants for only 51 percent of the 9,931 homes it bought for $1.4 billion, according to a filing yesterday with the U.S. Securities and Exchange Commission.

 

American Residential Properties Inc. (ARPI), a Scottsdale, Arizona-based real estate investment trust, and Silver Bay Realty Trust Inc., a New York-based single-family REIT, both reported losses in the quarter ending March 31. Owen Blicksilver, a spokesman for Colony Capital, declined to comment. Silver Bay CEO David Miller was unavailable to comment, according to Tricia Ross, a spokeswoman at Financial Profiles Inc. American Residential CEO Steve Schmitz and President Laurie Hawkes didn’t reply to e-mails seeking comment.

If nothing else, everyone now knows where the incremental "bubble" demand for housing has come from: not from the distressed end user of thes properties, for whom as we showed yesterday, the disconnect between real income and new home sales has never been wider: it was all large institutions who invested OPM, and chased any upward moving price with the fervor of a rabid dog.

But all things come to an end:

“All the people who made money during the gold rush in California, they were selling the buckets and shovels,” Gordon said. “I think there is gold in them there hills, but you’re going to have to dig deep. And hopefully you’re going to need more than one shovel.”

 

Carrington may start buying rental homes again when other large investors decide to sell after learning they can’t make returns that justify the prices they paid, Rose said.

 

“We’ll sit back in the weeds for a while and wait for a couple of blowups,” he said. “There’ll be a point in time when we’ll be happy to get back into the market at levels that make more sense.”

If the Chairman is serious about tapering, or even hinting of tightening at some point in the future, those blowups won't take too long. And so will the blowup in the illusion that the housing market is "recovering" on anything more than yet another cheap-money fueled bubble afforded to a select few who now have no choice but to "hot potato" properties amongst each other first on the way up, and soon, going down.

 

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Wed, 05/29/2013 - 12:39 | 3607772 CrashisOptimistic
CrashisOptimistic's picture

Yes, there was some stupid money buying mold infested Florida foreclosures for renting out.  There was some stupid money buying all sorts of foreclosure trash the banks packaged to get rid of first all over the US.

And Carrington was some of it.

Wed, 05/29/2013 - 12:47 | 3607797 Midas
Midas's picture

+1 for the "model" home in Sudden Valley.

Wed, 05/29/2013 - 12:49 | 3607810 Big Slick
Big Slick's picture

There's always money in the banana stand.

Wed, 05/29/2013 - 12:55 | 3607821 Gene Parmesan
Gene Parmesan's picture

Too bad they burned it down.

Wed, 05/29/2013 - 12:57 | 3607831 Big Slick
Big Slick's picture

NO TOUCHING!

Wed, 05/29/2013 - 12:59 | 3607841 Hippocratic Oaf
Hippocratic Oaf's picture

"As stupid money jumps in"

At the request of Goldman I assume

Wed, 05/29/2013 - 13:55 | 3607972 CPL
CPL's picture

go long

13.02 

+3.28 (33.62%)

NASDAQ:STEI

Stewart Enterprises, Inc. is a provider of funeral and cemetery products and services in the death care industry in the United States. Through its subsidiaries, it provide a range of funeral and cremation merchandise and services, along with cemetery property, merchandise and services, both at the time of need and on a preneed basis. The Company operates in two segments: Funeral and Cemetery. As of October 31, 2010, its operations included 217 funeral homes and 140 cemeteries in 24 states within the United States and in Puerto Rico. It operates one or more of the death care facilities in each of its markets, which are in larger metropolitan areas in the Southern, Western, Mid-Atlantic and Mid-Western states. It operates its funeral homes and cemeteries in clusters. Clusters are groups of funeral homes and cemeteries located close enough to one another that their operations can be integrated. In October 2012, it purchased Garden Oaks Funeral Home in Houston.EI

Wed, 05/29/2013 - 14:27 | 3608107 knukles
knukles's picture

That's the Bluth house!

Sweet!
Kudos, Tyler!

Wed, 05/29/2013 - 16:07 | 3608419 eclectic syncretist
eclectic syncretist's picture

And I thought Bernanke and his butt-buddies were always slipping IN the backdoor.

Wed, 05/29/2013 - 13:13 | 3607886 the not so migh...
the not so mighty maximiza's picture

thank god she is not my cousin

Wed, 05/29/2013 - 14:52 | 3608196 asscannon101
asscannon101's picture

"I've made a terrible mistake..."

Wed, 05/29/2013 - 14:50 | 3608193 asscannon101
asscannon101's picture

"I have the worst fucking lawyer..."

Wed, 05/29/2013 - 13:19 | 3607900 TheEdelman
TheEdelman's picture

Dont care what ppl say.  Arrested Development has still got it.  The model home has all kinds of win.  No garage, no driveway and half the (1story) house is gawdly turret.  

Wed, 05/29/2013 - 13:29 | 3607918 PiltdownMan
PiltdownMan's picture

Households NOT jumping in. Look at MBA purchase applications. As smart money runs, dumber money flows in. See this guy's writeup.

http://confoundedinterest.wordpress.com/2013/05/29/mortgage-applications-decline-8-8-us-homeowership-lower-than-most-european-countries/

Wed, 05/29/2013 - 15:37 | 3608340 asscannon101
asscannon101's picture

Anybody else watching the new Season 4 episodes on NetFlix? Tobias needs ANUSTART!

Wed, 05/29/2013 - 15:52 | 3608383 Midas
Midas's picture

I'm two episodes in.

Only thing that picture needed was a stair-car. 

Better head out 10 minutes early, there's a headwind.  And look out for hop-ons, you will get some hop-ons.

Wed, 05/29/2013 - 20:50 | 3609028 Buck Johnson
Buck Johnson's picture

Arrested development house, lolololo.  Also this is the classic pump and dump in slow motion.  They needed the housing market to go up and the govt. helped to entice the big money people to buy bunches of houses to "rent".  Once people saw  big money funds buying everyone thought it was the new gold rush and where going in.  Now or last few months they have been selling their properties high (since they where the first ones in, just like a ponzi scheme) and take a profit and leave the others holding the bag.

When we thought individuals and companies wouldn't fall for it again, they did with the help of the govt..

Wed, 05/29/2013 - 12:48 | 3607799 Oh regional Indian
Oh regional Indian's picture

Homes, Education, healthcare and food..... these should never be considered asset classes or speculative investments.

The "home" story will end in tears when who-ever is goosing REITS finds a swan of a particulary dark complexion and/or rising interest rates.

Either-way, the front-end of the ponzi is now education and "homes".

ori

Wed, 05/29/2013 - 12:57 | 3607833 CrashisOptimistic
CrashisOptimistic's picture

"Homes" is real estate industry bullshit.

There are no "homes".  There are houses.

Wed, 05/29/2013 - 13:01 | 3607845 Oh regional Indian
Oh regional Indian's picture

Homes, Home-land Security... see?

House-land Security just does not have the same ring to it ;-)

Wed, 05/29/2013 - 14:26 | 3608092 JR
JR's picture

As in developing nations, the bankers have used debt to control even Americans’ most treasured possession – their home. By manipulating and accelerating the mortgage industry over the past 50 years, realtors, insurance companies, HUD/Fannie/Freddie, and every level of government from city to federal have been loaded onto the homeowner’s plate.

Young couples can only afford a house by joining this expanded debt industry.

Lately, however, the stage scenery has been changed. The banking cartel, using the leverage of government, can now almost completely control not only home prices but a home's financial security by turning homes into an investment casino manipulated by the Fed, Wall Street, and the government.

It turns out William Pitt would be mistaken about the American government's access to an American home, unlike in his England. In America, the King may enter; the King -the Fed - has the key:

"The poorest man may in his cottage bid defiance to all the force of the crown. It may be frail; its roof may shake; the wind may blow through it; the storms may enter; the rain may enter--but the King of England cannot enter; all his forces dare not cross the threshold of the ruined tenement." -- William Pitt, Earl of Chatham

Or, as the resultant proverb went: “The wind and rain may enter the cottage of the most humble Englishman, but the King with all his might and majesty may not.”

Isabel Paterson describes the critical connection between property rights and freedom when an American has no place that he can call his property:

"There was no place on earth where he had a right to be; which is to say, he had no right to be."

And also: "How can a man speak freely if there is no spot on which he and his audience have the right to stand?"

Wed, 05/29/2013 - 14:28 | 3608109 Ahmeexnal
Ahmeexnal's picture

Time to go short homes, long homeless.

Wed, 05/29/2013 - 14:59 | 3608221 object_orient
object_orient's picture

A house is made of brick but a home is made of love. Surely your grandma had that plaque hanging in her kitchen somewhere?

Wed, 05/29/2013 - 17:27 | 3608594 JR
JR's picture

After Bernanke cleaned out Grandma's saving account, Chase stole Grandma's house, er home, and took the plaque as well.

Wed, 05/29/2013 - 13:51 | 3607983 donsluck
donsluck's picture

Everything is flexible. Real estate profits cannot be realized by top-heavy corporations. You have to be small and nimble. My house is paid for due to careful buy/sell timing. I agree with your assessment of education, although not the way you insinuate. There is no longer any economic advantage to a higher education, and it certainly is not indespensible, like housing, healthcare (NOT insurance) and food. It is entertainment for the rich.

Wed, 05/29/2013 - 15:25 | 3608300 HedgeHammer
HedgeHammer's picture

Correction, you only paid off your loan for your house. You do not own it and most likely never will. You have only lessoned your payment, but most assuredly still pay property taxes. It you would like to test the theory then try not making any payments for the property tax in which you "own" and we shall see just how fast that property of yours is repossessed.

 

Not trying to start a fight just trying to open a few eyeballs is all.

Wed, 05/29/2013 - 15:32 | 3608321 SoCalBusted
SoCalBusted's picture

Yes - and the expenses/payments that last forever cannot be negotiated or shopped.

Wed, 05/29/2013 - 15:52 | 3608386 Promethus
Promethus's picture

Why wait to steal homes through taxes?  Thanks to the nine geniuses on the Supreme Court, anyone who wants your property can get government  to declare eminent domain and kick you out quick.

 

Wed, 05/29/2013 - 15:52 | 3608387 Promethus
Promethus's picture

Why wait to steal homes through taxes?  Thanks to the nine geniuses on the Supreme Court, anyone who wants your property can get government  to declare eminent domain and kick you out quick.

 

Wed, 05/29/2013 - 13:57 | 3608004 optionsman
optionsman's picture

education in the US is a speculative investment. actually not sure how it could be otherwise in the best of worlds when a student is making this investment. under other systems where a state would make such an investment it is less of a gamble but it prone to corruption. i dont think that either education or helthcare should be profit centers but thats a different conversation.

Homes or real estate is a different story. to the extent that investors can accurately assess all requisite premiums one should charge (liquidity premium for example) as well as on-going expenses associated with holding such an asset- i dont see why it cannot be speculative investment from an investor's point of view.

Wed, 05/29/2013 - 14:17 | 3608063 MachoMan
MachoMan's picture

education in the US is a speculative investment.

Holy fucking christ....  touchdown...  I get red arrows out the ass from stating the same thing (the obvious), but hopefully you get a free pass....

As a fundamental notion, if you borrow to do it, then it can't be anything other than speculation...  (if you have no intention to repay, then it's just stealing).

Wed, 05/29/2013 - 15:16 | 3608282 object_orient
object_orient's picture

 education in the US is a speculative investment.

There's broad agreement on this because it's true. Can't you just leave it at that?

 

(if you have no intention to repay, then it's just stealing)

^ this is why you get the red arrows. Why do you keep excusing the incompetence of lenders who have no inclination to do their due diligence? If you were a lender, would you make these loans? The borrowers who default face real consequences: lower credit ratings, increased borrowing costs, wage garnishment, bankruptcy court rulings, etc. The lenders, who took a risk in exchange for interest on the loan, are subject to losses. Why the morality moaning and groaning? Aren't you a lawyer?

Wed, 05/29/2013 - 16:05 | 3608416 MachoMan
MachoMan's picture

I don't ever make excuses for lenders...  my entire comments are directed at shared losses...  make all the fucking idiots eat their poor decisions...  this goes for the welfare queens from the top (banks) to the bottom (obama phones).  The problem is that everyone is eager to discuss bank write-offs without actually addressing the underlying issues...  that banks are merely drug pushers in an ocean of demand.  No one wants to talk about the irresponsibility of debtors...  only the big bad banks...  in my book, they're both worthless...  it's just that one is more politically connected and, thus, more equal.

Insofar as the comment on stealing is concerned, it's directed at those who wish to call speculation something else...  In other words, if you had the intention of repaying, then you're a speculator...  otherwise, you're just a thief.  Now, that does not entail, in the slightest, that you will be able to repay or that you should repay, regardless of what conditions transpire after receiving the loan proceeds.  However, it does pose a vice to those who choose to call borrowing significant sums to pursue financial gain anything other than speculation.

The borrowers who default MIGHT face real consequences...  so long as the foreclosure process is stalled, many of these consequences are likewise stalled.  What is a bad credit rating amongst an entire nation of deadbeats?  The only cost of having a bad credit rating is when there is an investment opportunity you can't capitalize on because of your poor credit...  well, I'm not sure if you've looked around lately, but good investments don't exist...  there's shit and there's frozen shit.  Wage garnishment?  That would entail that the people have a chance to repay the loans...  otherwise, all that gets flushed in BK. 

 

Wed, 05/29/2013 - 14:27 | 3608102 CheapBastard
CheapBastard's picture

Most markets are super-saturated with boxes---new, old, preused-- and yet they are adding over 8,000 new boxes north of me, mostly the no-money down type of stuff where the builder "finances" the deal thru "it's own lender" and pays all the title fees, etc. and throws in a BJ (as an added incentive).

 

However, I'll wait until the house market reverts to its norm and corrects somewhere near 40%. I'm in no rush and I would hate the feeling of living in a box that has lost 50% of its value (esp when you go to sell).

 

... and besides,

 

I'm a Cheap Bastard.

 

 

Wed, 05/29/2013 - 13:06 | 3607863 azzhatter
azzhatter's picture

I've owned a couple of rental properties for a long time. A lot of vaseline is required

Wed, 05/29/2013 - 16:10 | 3608425 TahoeBilly2012
TahoeBilly2012's picture

Hello Sacramento, goodbye Sacramento...though the Kings have a deal and they want to build a $300mil complex on the old K st mall...hmmmm.

Wed, 05/29/2013 - 12:40 | 3607774 camaro68ss
camaro68ss's picture

If you build it, they will come. no longer rings true in todays times.

Wed, 05/29/2013 - 12:55 | 3607825 augustusgloop
augustusgloop's picture

if you build it they will come never rang true. Here is the actual quote:

If a man has good corn or wood, or boards, or pigs, to sell, or can make better chairs or knives, crucibles or church organs, than anybody else, you will find a broad hard-beaten road to his house, though it be in the woods. —Ralph Waldo Emerson, Never anything about moustraps (until after his death), shitty subdivisions in the Inland Empire, NINJA 10 year car loans, or QE. 

Wed, 05/29/2013 - 13:15 | 3607891 astoriajoe
astoriajoe's picture

that's sure some fancy book learnin' you got there.

Wed, 05/29/2013 - 14:10 | 3608041 therover
therover's picture

"naught + naught = naught"

"Be quiet Uncle Jed....I'm a ciphering"

Jethro

 

Wed, 05/29/2013 - 13:16 | 3607894 Meat Hammer
Meat Hammer's picture

Unless it's a fake stock market and one is a sheep.

Wed, 05/29/2013 - 13:49 | 3607977 WakeUpPeeeeeople
WakeUpPeeeeeople's picture

Speaking of sheep, why do Scottish men wear kilts?

Because the sheep can hear the zippers.

As in the American people are the sheep and Bearded Ben is the one wearing the kilt.

Wed, 05/29/2013 - 17:38 | 3608620 12ToothAssassin
12ToothAssassin's picture

And velcro gloves too. What are the three biggest lies in Texas? Thats my truck, I wont cum in your mouth and I was just helping that sheep over the fence.

Wed, 05/29/2013 - 15:28 | 3608315 prains
prains's picture

Is there anything left in the american economy that doesn't depend entirely on a fantasy blown bubble? Could someone just invest money into making a useful product that isn't intended to kill,maim or injure either physically or financially.

Wed, 05/29/2013 - 12:45 | 3607783 Azannoth
Azannoth's picture

Single serve(throw away) property market any1? Kudos if u get the reference :)

Wed, 05/29/2013 - 14:15 | 3608056 Stoploss
Stoploss's picture

And i thought i was the only one who realized when they made everything a consumable, it started with houses.

If you own a "new" one bought in the 90's, you know exactly what i am reffering to.

 

Brand new to horse poo in under twenty years..

The structures don't last as long as the mortgage!!!   LOL!!

Wed, 05/29/2013 - 14:24 | 3608088 MachoMan
MachoMan's picture

Something the real estate bubble never forced anyone to do was realize depreciation for use of the home (or just the natural deterioration).  This is really the next leg down and keeps a ceiling on prices...  locally, a 20 year old home is selling as much as a new home with the same square footage...  it's fucking crazy.  The cost to rehab homes, even if built in the late 90s, plus the base cost is more than new construction (getting to build it the way you want it to boot).  Wild...

On the average home, I'd guess there would need to be an escrow of at least $200 set aside for maintenance and repairs every month...  obviously it's not going to cost that much every month, but if you keep it for 10 years, you'll end up having to rehab it to sell it...  presuming the market gets any dose of reality in the meantime....  and you can burn $25k in a hurry.

Wed, 05/29/2013 - 15:56 | 3608396 pursueliberty
pursueliberty's picture

Where you at?  Sounds like Arkansas to me.

I can build a brand new home in a nice subdivision for less money than buying a late 70's/early 80's home and just upgrading windows, flooring/painting.  Not only that, but the bashing of new homes is totally uncalled for unless you speak of these giant spec builders.  A brick home is still as structurally sound as ever, slab engineering requirements now in many areas, etc.  The problem might be shit light fixtures and appliances, but honestly everything that uses electricity has a short self life now a days.  My wife owns a brokerage that is over a sub division development and all these homes have really low utulity bills.

Wed, 05/29/2013 - 17:37 | 3608617 MachoMan
MachoMan's picture

Yes, Arkansas.  Our market never had the build-up, but it really hasn't had its comeuppance either (NW Arkansas is a different story)...  we're adding so many people that old homes are going for new home prices...  which is doing nothing but leaving a lot of bag holders.  I can also say that many of those vintage homes (mid nineties) are total shit construction, no different than today's spec house builders (or really spec house builders of any time, but some of the 60s houses are actually pretty solid...  around here anyway).

Wed, 05/29/2013 - 17:41 | 3608625 12ToothAssassin
12ToothAssassin's picture

Oh I get it. You think your clever dont you? Hows that working for you?

Wed, 05/29/2013 - 12:44 | 3607785 yogibear
yogibear's picture

Paying much more than the asking price in San Francisco. Dumb money always follows. 

When everyone is buying be a seller.  Plenty of bag holders out there racing to loose money.

Wed, 05/29/2013 - 13:03 | 3607852 Its_the_economy...
Its_the_economy_stupid's picture

I doubt there are enough bagholders in this case.

Wed, 05/29/2013 - 13:12 | 3607877 NotApplicable
NotApplicable's picture

Well, all you need is one named Bernanke.

Wed, 05/29/2013 - 14:24 | 3608089 Herd Redirectio...
Herd Redirection Committee's picture

I remember telling someone who owned rental properties a few years ago:  "They say its a sellers market right now, people are actually still buying houses at close to peak prices, are you thinking about selling?"

"No!  Of course not.  You have to wait a while..."

I think she meant prices are supposed to go up more first!

Wed, 05/29/2013 - 17:41 | 3608631 12ToothAssassin
12ToothAssassin's picture

It depends on what your definition of 'a while' is

Wed, 05/29/2013 - 12:45 | 3607787 The Heart
The Heart's picture

Meanwhile, the corruption is being exposed more and more. Give thanks.:

World Bank Insider Blows Whistle on Corruption, Federal Reserve:

http://www.thenewamerican.com/economy/economics/item/15473-world-bank-in...

Wed, 05/29/2013 - 12:57 | 3607835 Winston Churchill
Winston Churchill's picture

Hope she has plenty of linfe insurance , "accidents" happen.

Wed, 05/29/2013 - 13:07 | 3607869 azzhatter
azzhatter's picture

Fuck You Bernanke. Hope you die soon

Wed, 05/29/2013 - 13:12 | 3607883 syntaxterror
syntaxterror's picture

Bernanke is just a robotic puppet. Have you ever seen footage of him doing anything in real life?

Wed, 05/29/2013 - 14:16 | 3608062 The Thunder Child
The Thunder Child's picture

He's scared shitless and wants out very badly, you can tell everytime he goes in front of the camera.

Wed, 05/29/2013 - 13:22 | 3607913 Unprepared
Unprepared's picture

How soon?

Wed, 05/29/2013 - 13:58 | 3608009 Real Estate Geek
Real Estate Geek's picture

That's a nice dose of reality after this steaming pile of propaganda:  http://www.bloomberg.com/news/2013-05-29/fed-s-100-year-roots-grew-from-...

 

Wed, 05/29/2013 - 14:17 | 3608059 The Thunder Child
The Thunder Child's picture

Read the comments, everybody is awake I read at least 3 references to Jekyll Island.

Recent interview from Infowars with Karen Hudes, quite good actually because AJ wasn't involved so she was allowed to talk.

http://www.youtube.com/watch?&v=tKxyYZeaNxY

Wed, 05/29/2013 - 14:28 | 3608110 Herd Redirectio...
Herd Redirection Committee's picture

Wow, that is some powerful stuff they are smoking!

"the panic of 1873, the effects of which lasted for five or six years,"

Well, didn't we have a panic in 2008 and we are still experiencing the effects 5 years later?  And in fact, most of the consequences are still 'in the pipe' (loss of reserve currency status), meaning it will last 10-15 before its close to over.

I didn't see Bloomberg's article take into consideration manipulation of the economy.  Wonder why?

Wed, 05/29/2013 - 14:33 | 3608132 Herd Redirectio...
Herd Redirection Committee's picture

i also like how only a few comments are shown by default!

Bloomberg is going to have to start censoring, because the comments on there show people GET IT.  Which honestly, is great news.   It means people like us here at ZH have done a decent job of explaining the convoluted world of finance to many average Joes!  No small accomplishment...

Wed, 05/29/2013 - 14:38 | 3608150 The Thunder Child
The Thunder Child's picture

The daily info grind, I'm always hopping all over the net dropping info bombs. Been at it for years..I would start a blog myself but I find my daily routine of outward promotion better then centering around creating blog that may or may not get traffic.

I have a couple of unpublished articles maybe I should shoot one over to Tylers...

Wed, 05/29/2013 - 15:00 | 3608226 Herd Redirectio...
Herd Redirection Committee's picture

People my age are still pretty naive, not having been burnt (except by the education racket and job 'market').  That will change.

One thing I am not looking forward to, is that day where the news anchor says "No one could have seen this coming".   Really?  No one could foresee the USD losing reserve currency status?

Wed, 05/29/2013 - 16:03 | 3608408 Things that go bump
Things that go bump's picture

Yah, I used to try that over at Huffington Post, but they edited my comments.

Wed, 05/29/2013 - 12:47 | 3607794 ParkAveFlasher
ParkAveFlasher's picture

It's all fun and games, until someone loses a social order. 

PS I heart you Tylers :)

Wed, 05/29/2013 - 12:47 | 3607798 monopoly
monopoly's picture

There is no way The Bernank and the Fed will stop.They can't. It is like oxygen. Take it away and the patient or victim dies. It is that simple. Until the bond market takes away his electronic printing press he will never stop. Worse than crack or heroin. End of story.

Wed, 05/29/2013 - 12:54 | 3607822 CrashisOptimistic
CrashisOptimistic's picture

They won't stop because Q2 GDP is projected south of 1.5%  But you're off topic in this thread.  It's about foreclosured becoming rentals.  Bought for cash so . . . .

Wed, 05/29/2013 - 12:48 | 3607804 mademesmile
mademesmile's picture

In my area there are solid houses that sell for $40-$50K - you can't build one for twice that. Rents are $800 so it depends on the location.

Wed, 05/29/2013 - 13:12 | 3607878 CrashisOptimistic
CrashisOptimistic's picture

The real estate industry end to end is laden with bullshit.  Dont' quote $800 rents because that's what is advertised on craigslist.  Quote rent received.  How many month's are those hovels occuppied by someone who has a job who can pay that without missing a month?

Then when you evict them they take a sledgehammer to the walls and plumbing, and have no assets to grab to pay for it.  Make a claim on your insurance?  Go ahead, they will quadruple your premiums to recover it.

Wed, 05/29/2013 - 13:46 | 3607970 mademesmile
mademesmile's picture

That's not Cl price, that's the price my in laws charge and get paid 11 months out of 12. If you do background checks AND check out the current residence, you don't have the kind of people take sledgehammers to the walls. In their 25 year experience, not ONE has been destroyed like that. Regular maintenance, and having to evict occasionally, yes. $800 a month here is for a 3 bed 2 bath that has some updates in a decent area - not a 1 bed slum.

Wed, 05/29/2013 - 14:04 | 3608025 CrashisOptimistic
CrashisOptimistic's picture

Okie doke.  I don't want to get too enshrouded in the ZH meme that everything is a complete disaster.  ( I do think 90% of everything is at least 3/4 disaster).  But I'm not going to snipe at you because I think you're right. 

I do know of landlords who either lucked out or did something profoundly right and earn a small, steady, multi decade return.

It's area dependent, and most areas aren't your type.  Odds are poor on this whole thing.  We all quote our anecdotes and you happen to have a positive one. 

It's rare.  That's the fundamental point.  You only need one disaster tenant to eat up years of return.

Wed, 05/29/2013 - 14:34 | 3608136 CheapBastard
CheapBastard's picture

I have to agree with crash on this one. I had a rental one time not long ago...things went fine for two years...then I rented to a doctor with superb credit, etc.....then he had a fight with his hospital, wife left him, things turned sour for the guy and he started destroying things.....8 months to evict him and $22,000 in legal fees + lost rent + repairs.

 

Good luck! A landlord needs it these days.

Wed, 05/29/2013 - 14:54 | 3608207 Almost Solvent
Almost Solvent's picture

Yup. Like rotten shit & fish inside the walls, the ductwork, the sumpump turned off. Holes drilled in the roof. Real nasty shit that some people think they have the right to exact on their landlord because of an eviction or refusal to renew the lease at the same price.

Wed, 05/29/2013 - 14:00 | 3608017 Harbanger
Harbanger's picture

I don't know what location he's in but seccion ocho has a list of what the govt pays for rentals.  $800 doesn't sound far fetched.  The welfare and ebt money goes to the tenant and the rent check goes straight to the landlord.  Although I'm not sure the welfare state will last long enough for him to see a profit.

Wed, 05/29/2013 - 14:14 | 3608042 CrashisOptimistic
CrashisOptimistic's picture

Ya, note above I didn't bang on that guy.

ZH's comment threads, especially about rentals and oil, are where the value is for the site.  The articles are usually marginal, but in the comment threads, past the youtube quoters and website pimpers, there are some guys offering thoughts that have value.

This guy has an anecdote worth hearing.  So we heard it.

 

Here's another.  Tenant screening.  Income check.  Call the employer.  Employer says "Yes, that person works here and makes $20/hour".  Prop manager says thanks.  The additional question isn't getting asked -- is he part time or full time, and even if full time "what is your definition of fulltime?"

Wed, 05/29/2013 - 14:24 | 3608090 Harbanger
Harbanger's picture

A sharp landlord doesn't care where you get your money from.  He cares 1) you don't have a criminal record 2) you have a decent credit rating  3) he will talk to your last landlord to verify that you paid your rent on time and didn't destroy the apt.

Wed, 05/29/2013 - 15:07 | 3608240 Herd Redirectio...
Herd Redirection Committee's picture

ZH's value-added is in its community.  The articles are good.  Free speech and an educated community = priceless.

Wed, 05/29/2013 - 15:56 | 3608395 CrashisOptimistic
CrashisOptimistic's picture

Nod, if you're remote you have to have a property manager.  If you're old, and close, you may need one, too.

I was sort of addressing their screening norms, that may get a bit dated.  Criminal record, credit check, for sure.  Past landlord reference, I've been told, is getting dicey.  Lawsuit potential for that landlord if he bad mouths the tenant -- just like job references (Give dates of employment and ending salary and say NOTHING else, because of lawsuit risk).

Wed, 05/29/2013 - 12:48 | 3607806 MeMadMax
MeMadMax's picture

Finally. Housing is so unaffordable in california that its insane. They create multiple government programs, then pile on more government programs so that multiple FAMILIES are able to stay in a single bedroom apartment that is being rented out at $1200 a month when the damn thing is only worth $300 a month... I'm not talking about so called luxury apartments either. These apartments have NOTHING. Bare walls and a sink, thats it. And they wonder why downtown los angeles is the homeless capital of the world >_>

Wed, 05/29/2013 - 13:37 | 3607938 ghostfaceinvestah
ghostfaceinvestah's picture

6X median income in LA.  Totally unsustainable.  Once rates rise prices will come back down to 4X income at most, and it won't be because median incomes rise.

Wed, 05/29/2013 - 12:49 | 3607808 OpTwoMistic
OpTwoMistic's picture

"Och-Ziff".  Now that is not where I would put money.

Wed, 05/29/2013 - 13:31 | 3607922 onewayticket2
onewayticket2's picture

please elaborate.  help a brother out....

Wed, 05/29/2013 - 12:52 | 3607817 czarangelus
czarangelus's picture

And now the story of a country who spent way more capital than it could possibly produce and the one blogging collective who had no choice but to keep itself together.

Wed, 05/29/2013 - 12:53 | 3607818 Its_the_economy...
Its_the_economy_stupid's picture

Mid single digit returns sounds so-o-o-o-o-o-o-o-o good, doesn't it?

 

Now let's takeout overhead insurance, maintenance, dead-beats, 3-4 months to evict them, utter destruction that they leave uppon exit, and then let's se if what kind of return is left.

"Can you say negative returns, sure, I knew you could."

- Mr Rogers, daytime childrens show host

Wed, 05/29/2013 - 12:56 | 3607829 CrashisOptimistic
CrashisOptimistic's picture

Ya, did you catch the small print on that?  6% returns on **occupied** houses.  No blending in the vacancies.  85% of them are leased?  So what?  People sign leases and don't pay rent every single day.

Wed, 05/29/2013 - 13:36 | 3607937 Blano
Blano's picture

I had to reread that and my jaw still dropped.  6-8% BEFORE that stuff??  That means they're awful close to breakeven, or worse.  Not worth the effort.

Wed, 05/29/2013 - 15:27 | 3608309 Its_the_economy...
Its_the_economy_stupid's picture

Its worse than "not worth the effort".

 

These funds have got to try to sell this crap eventually. Easy to get in....a total bitch to get out. This is not a paper market. These guys just got "physical".

Wed, 05/29/2013 - 14:29 | 3608114 MachoMan
MachoMan's picture

If you aren't at 12% before that stuff, then you'll lose your ass...  It's possible to get that stuff, but only if you know particular areas really well and are incredibly disciplined.

Wed, 05/29/2013 - 12:53 | 3607820 laomei
laomei's picture

Pump and dump.  All over again... 

Wed, 05/29/2013 - 12:57 | 3607834 RSloane
RSloane's picture

".. we'll be happy to get back inrto the [housing] market at levels that make more sense" is code for "after the current housing market bubble bursts".

Wed, 05/29/2013 - 12:59 | 3607839 haskelslocal
haskelslocal's picture

Stupid is as stupid does...

Run Forrest Run.

Wed, 05/29/2013 - 13:00 | 3607842 Its_the_economy...
Its_the_economy_stupid's picture

The only way to make it w the rental market is sweat equity. You sweat the repairs, you sweat the upkeep, you watch the tenants like a hawk and you make them "feel" your presence. Otherwise, you're dogmeat. I doubt the 40th floor crowd can work that hard. Anyone they hire to do it for them will take a crap in their cornflakes

Wed, 05/29/2013 - 13:58 | 3608005 donsluck
donsluck's picture

Absolutely. Stay small, carefully track your expenses AND time. In two years, do a cost/benefit calculation and sell if it doesn't pencil out. No room for CEOs, CFOs or any other C you can think of.

Wed, 05/29/2013 - 13:00 | 3607844 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

When the MSM starts with articles like these you know they are prepping the masses for the next step and we know what that is. Of course they trot out some outside expert to spew the company line.

http://www.cnbc.com/id/100461159

Is the Dollar Dying? Why US Currency Is in Danger

 

..."Generally speaking, it is not believed by the vast majority that the American dollar will be overthrown," Dick Bove, vice president of equity research at Rafferty Capital Markets, said in a note. "But it will be, and this defrocking may occur in as short a period as five to 10 years."...

 

Wed, 05/29/2013 - 13:51 | 3607874 MrNude
MrNude's picture

Yup if you haven't been learning Mandarin, now is the time to start because the Chinese are definitely going to make a grab for the RC instead of sitting back and being taken for a ride like the rest of us by the USA.

The Elite can try and sabotage it all they want with XDR's and Cashless Society experiments but the Chinese won't let victory be pulled away from them that easily at the last hurdle.

Wed, 05/29/2013 - 15:11 | 3608259 Herd Redirectio...
Herd Redirection Committee's picture

Look at what Hollywood has lined up for us (no, I won't be watching this crap):

World War Z

Its The End

The Purge

I think the titles speak for themselves.  Coming soon!

Wed, 05/29/2013 - 13:12 | 3607880 Dr. Engali
Dr. Engali's picture

Five to ten years? I'll give it two years at best. I'm betting we see the next leg of the crisis this year beginning in late September or early October.

Wed, 05/29/2013 - 13:47 | 3607966 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

I totally agree max 2 years all fucking hell is going to break loose on the economic front. My gut feeling is they start it officially after Benny leaves but are prepping now along with testing the waters with hints and stealth moves not readily obvious when until later on. But remember this is the MSM, if they say 2 years people might start rejecting the system too soon before all the key players can loot as much as they can before executing their escape plans to safety. Don't think the overthrow won't be done in a controlled fashion since you have the longer term geopolitical factors to consider in all this. The musical chairs may rearrange every 100 years or so but the same players remain and they don't want new players in the game if they can control it.

Wed, 05/29/2013 - 14:33 | 3608000 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

Just remember the second deficits start mattering again when reality kicks back in with a vengeance you are going to see a major economic collapse and serious social unrest since too much is dependent on the government either directly like food stamps or indirectly like reserve currency and energy prices to contractors who do business with the government here in the US. Once the spending contracts so is everything else tied to it and that is going to have a global ripple effect on other governments being forced to do the same. Socialism has put the golden goose on terminal life support and is about ready to kill it outright now.

 

Here is the problem with tapering QE by the FED and why deficits will matter again especially if the world revolts against the US dollar. Assuming they cut off the funny money heroin drip, if the bond auctions tank at that point (forgot about economy itself) to avoid default they have no choice but to implement balanced budgets to avoid issuing new debt and we know there is not enough money on the sidelines or being generated in the economy to cover the current spending levels it will have no choice but to contract. Add to that a populace whose minds have been poisoned by the matrix how government is the one true god and self reliance skills neutered once that is proven false all hell socially is going break loose once the realization the party is over and their is consequences for actions. Best the FED can hope for is when the stock market is sacrificed and the tapering begins there is such a large rotation into bonds that this scenario doesn't happen for a year or so until the rotation finishes and in the best scenario the rotation is that great that they can also unload some of those Treasuries sitting on their books in the process.

Wed, 05/29/2013 - 14:35 | 3608139 MachoMan
MachoMan's picture

They're not cutting QE...  they have not a single plan of cutting QE...  nor would the Treasury allow them.  They're talking it up so that QE can get some traction again...  every so often, they have to flush out all the front runners...  diminishing returns dictates it.

Wed, 05/29/2013 - 14:58 | 3608179 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

They have no choice, the FED is backed into a corner, the guillotines are coming out soon and as matter of self preservation when the masses are out for blood they will do it now to deflect blame away from them since the people won't know they are fucked until the socialist government programs and general spending eases up. The best they can do is try to taper slow enough no one notices it until the government sufficiently fucks things up enough. Which it will, just give it time we are in the opening salvos of the economy killer called Obamacare.

If they can rig the ascent of the stock market with QE there is no reason they can't rig the rate of descent also with tapering. That remains to be seen though but my guess is they will make it descend fast enough to cause a panic and rotation into bonds but the duration is going to be milked for as long as possible to buy them time to unload Treasuries on their books and also in the process allow the Federal Government to avoid having to acknowledge that deficits matter and there is no such thing as a perpetual debt energy to keep the party going endlessly. The minute the US government has to acknoweledge deficits matter Keynesian economics is going to take a serious black eye to it's credibility and in turn so are people like Krugman.

Wed, 05/29/2013 - 15:51 | 3608380 MachoMan
MachoMan's picture

This is inherently contradictory...  The free shit army demands entitlements...  this necessarily means printing because the real economy cannot sustain the demands.  As a result, the free shit army demands money printing.

The FED is not backed into a corner...  it's driving an endurance race.  If you believe it is backed into a corner, then you've missed its entire purpose...  to siphon wealth.  You can't back it into a corner...  you can only try to chart its path and intercept it (hence the front running).

Also, why do you think there is ANY difference between the Treasury and the FED?  They are tied at the hip....  any blip up in rates and the U.S. is insolvent...  any lack of control on the part of the U.S. and the FED loses its charter (which is coming anyway, but the Treasury will just pick up where the FED leaves off).  The FED is not independent...  nothing of the sort.  It's the bad cop in the good cop/bad cop routine.

There is no backing out...  the FED is the bad bank...  it already made its buddies whole on their bad bets...  (either directly or by facilitating time/etc. to dump them on the GSEs, et al).  If the FED can offload its junk to the GSEs, then awesome...  but if you think that the private market is going to eat those turds, then think again...

 

Wed, 05/29/2013 - 16:37 | 3608429 Dewey Cheatum Howe
Dewey Cheatum Howe's picture

We shall see but the 401ks, pensions and such locked into paper with nowhere else to go will go running into T-bills if the market goes south. We know how the algos are programmed to act after the AP tweet hack. Don't think the herd won't follow suite. They have every reason to cause a stampede. The economy is fucked period as long as the Socialists are running the US government. The only recovery is going to be restructuring to away from a vibrant and self reliant private sector to a psychologically beaten down and dependent on the whims and handouts of the centrally planned socialist state private sector. That is the real story and the FED is enabling it here and in turn throughout the world with QE. The party is going to end one way or the other, either they do it voluntarily or the people who are tired of this shit are going to do it, the revolt has already started just in case anyone hasn't been paying attention to the gold markets, politics and spending habits of main street.

Wed, 05/29/2013 - 17:40 | 3608609 MachoMan
MachoMan's picture

Retirement money will go running wherever uncle sugar says it will...  or, alternatively, into whatever pays the manager the largest commission.  Simple as that.

The economy is fucked regardless of who is elected...  We have no choice in the matter.  Instead, our only choice is how to deal with moral hazard.  A vibrant and self reliant private sector does nothing to bridge the wealth gap...  it does nothing to ensure the efficient use of resources...  it does nothing to ensure political or economic stability (although the former is largely tied to the latter).  Your notions of the private sector are naive textbook fantasies that rarely see the light of day in the real world.

There is no revolt...  there is only complacency.  The rest of the world is jockeying for position to fill the power vacuum we leave, but to say that westerners are revolting is like saying oprah is losing weight...  I guess she might today, but tomorrow she'll be eating bon bons again.

Wed, 05/29/2013 - 13:01 | 3607846 edifice
edifice's picture

McCastle

Wed, 05/29/2013 - 13:06 | 3607860 Its_the_economy...
Its_the_economy_stupid's picture

Feeling lucky? Find a foreclosure in your neck of the woods. Have at it.

 

http://www.zillow.com/homes/for_sale/fore_lt/pmf,pf_pt/

Wed, 05/29/2013 - 13:09 | 3607873 Seasmoke
Seasmoke's picture

Hey Telly , how the hell did you know where my house is ???????????

Wed, 05/29/2013 - 13:22 | 3607911 Its_the_economy...
Its_the_economy_stupid's picture

Wild guess...hee-hee.

Wed, 05/29/2013 - 13:24 | 3607916 Toolshed
Toolshed's picture

Zillow? You must be high. Zillow is absolutely worthless. I was home shopping about a year ago and every single listing I was interested in on Zillow was very inaccurate in one way or another. One seller I contacted told me bluntly to skip using Zillow. He had sold the home I was interested in over 6 months prior to my contact and yet it was listed as currently available on Zillow. Zillow=Zero.

Wed, 05/29/2013 - 15:21 | 3608294 dogbreath
dogbreath's picture

I just went to that link to look at listings in an area I am curious about.   I did not register.  I noticed the street plan shot of the house with neighboring values was not the home in the picture at the top of the listing in a few.   Also tons of foreclosures near the municipal airport.  Its not JFK but who the fuck wants to have planes taking of all night.

My sister lives less that 300 yards from the city airport.  2 police choppers and air ambulance chopper coming and going all night.

Wed, 05/29/2013 - 13:06 | 3607864 The Proletariat
The Proletariat's picture

...."Funds are buying property now, including homes sold by Carrington, for rents that yield 6 percent to 8 percent a year, before costs such as insurance, taxes and vacancies, according to Rose."

 

Hahaha.....(excluded commentary):  However, after costs for expenses such as insurance, taxes, vacancies, property management, repairs, legal, accounting, etc....the rents yield approximately -0.25% to -0.50% a year. 


Wed, 05/29/2013 - 13:11 | 3607876 Seasmoke
Seasmoke's picture

Maybe these motherfucking Funds have enough juice to get the damn property taxes lowered .....i know i sure the hell do not !

Wed, 05/29/2013 - 14:02 | 3608022 donsluck
donsluck's picture

I read a study of looong term real estate, over hundreds of years in Brittain (the only place with records back that far). The looong term return on RE is....drum roll....-, that's negative, 0.25% per year, adjusted for inflation.

Wed, 05/29/2013 - 14:05 | 3607865 syntaxterror
syntaxterror's picture

So, let me see if I understand the "market" now:

All cash buyers are buying and flipping houses to each other at a furious clip. Makes perfect sense to me.

Wed, 05/29/2013 - 14:12 | 3608046 donsluck
donsluck's picture

The point is to get that money out of Cypress, Dubai or wherever. A small loss is tolerable.

Wed, 05/29/2013 - 14:13 | 3608050 Bear
Bear's picture

So Cal may be different, but real buyers (not investors) are tripping over one another to buy $600,000 homes. Open houses everywhere ... houses go on the market and zap they are sold with multiple backup offers at asking prices .... it looks like 2006.  

Wed, 05/29/2013 - 19:57 | 3608897 AynRandFan
AynRandFan's picture

We have a hot market in Colorado also, but more $400k and under.  I think it's an inventory issue.  Low inventory and buyers convinced that interest rates are going to rise.

Wed, 05/29/2013 - 13:08 | 3607871 stant
stant's picture

stoped to look at one of those outbuildings that look like a cabin with a porch and it was over valued

Wed, 05/29/2013 - 13:12 | 3607882 monopoly
monopoly's picture

Ya know, Slightly off topic, but....If I were short gold, miners here, i may not be covering yet but I would start getting a little nervous about my large short position. But as long as we stay below 1,400 + still an easy trade. Riigght!!!!!

Wed, 05/29/2013 - 13:33 | 3607933 Ronaldo
Ronaldo's picture

I say it is time for a squeeze!

Wed, 05/29/2013 - 13:14 | 3607889 Sleepless Knight
Sleepless Knight's picture

I thought big money was trying to slip IN my back door.

Wed, 05/29/2013 - 13:34 | 3607934 Ronaldo
Ronaldo's picture

That is Bernanke, be careful!

Wed, 05/29/2013 - 13:14 | 3607890 yogibear
yogibear's picture

The Fed is becoming more insanely extreme and reckless.

Wed, 05/29/2013 - 13:27 | 3607917 TheEdelman
TheEdelman's picture

Sensei Chairman: Sweep the housing market

Sensei Chairman: Do you have a problem with that?

K. Henry: No Sensei

Sensei Chairman: No mercy

 

We all know what happens with that script

Wed, 05/29/2013 - 13:54 | 3607994 LFMayor
LFMayor's picture

You get a + for Cobra Kai reference, Daniel-San.  Uush.

Wed, 05/29/2013 - 13:47 | 3607973 insanelysane
insanelysane's picture

I usually agree with you yogi but not with this.  I don't believe the Fed is more extreme or reckless but the junkies definitely are.  They are reading too much into every action because they know, deep down, that something is going to happen.

Wed, 05/29/2013 - 14:54 | 3608204 rustymason
rustymason's picture

That is why Bush and Obama run the fake "War on Terrace," and why all police departments have been militarized. They know the Zombie Apackolips is coming.

Wed, 05/29/2013 - 13:17 | 3607897 I am a Man I am...
I am a Man I am Forty's picture

In Raleigh, NC they are blowing a bubble in new apartment construction just like they did in condos 5 years ago.  It amazes me the centrally planned heard mentallity that goes on.  HIlarious if it was not so pathetic.

So I would be dumping houses too.  In Raleigh multiple offers going above asking in good homes in good locations.

Wed, 05/29/2013 - 13:32 | 3607923 russwinter
russwinter's picture

Below is an excerpt from my January article America's New Landlords: http://winteractionables.com/?p=255

Now we have a "whodathunk"  March 31 update, so much for 5% vacancy rates:  "Colony American Homes Inc., a division of  Thomas Barrack Jr.’s Colony Capital LLC, has found tenants for only 51 percent of the 9,931 homes it bought for $1.4 billion, according to a filing yesterday with the U.S. Securities and Exchange Commission." Now these pump and dumpers are trying to pawn this merda off on Aunt Millie.  http://www.scoop.it/t/precious-metals-investing

 

These landlords project a 6% cap rate on their rentals. In a corporate presentation, one REIT Colony Financial (CLNY) used the following optimistic chart on expected returns.  The expenses at $510 a month look too low. They are using 5% vacancy rates but are involved in many of the same high unemployment cities mentioned above.  Credit loss of 2% renting to middle class people (renting at $1,275 a month) is outright delusional.  In fact, households earning over $40,000 annually will be unsubsidized under Obamacare, are ineligible for food stamps, won't be covered under the big expansion of Medicaid and  will be paying more payroll taxes. I can't imagine a worse group to rent to, as they don't get the government handouts,  live in depressed cities and are asked to pay hefty rents. CLNY as of Jan. 4 had 5,382 properties in urban areas across six states and 42% were unleased. Most were bought in the second half of 2012.

Wed, 05/29/2013 - 17:43 | 3608638 CrashisOptimistic
CrashisOptimistic's picture

Stop pimping on someone else's traffic.

Wed, 05/29/2013 - 20:47 | 3609012 knowshitsurelock
knowshitsurelock's picture

That means they paid 140,000 a unit.  If they can't make money at that, well then, they are screwed. 

The fundamental problem lies in the fact that a Keynesian fiat based system requires ever so much more debt to enter commerce in order to keep the ponzi scheme going, and the Fed is only giving money to their cronies on Wall street to take to the derivatives casino and gamble it away.

No fiat is trickling down into the economy, creating any value added, or paying skilled workers to produce something of value, so where in hell are all these new up and coming middle class buyers supposed to come from?

We aint seen nothing yet.  The hammer hasn't even begun to fall, so the real stupid money is the Hedgies chasing non performing alledged assets, which are in fact liabilities!

There is no safe haven when deflation, low production, loss of consumers, no jobs, and shrinking of the money supply occurs

Wed, 05/29/2013 - 13:33 | 3607929 ghostfaceinvestah
ghostfaceinvestah's picture

Some of these companies went public.  Thanks Bernanke, you gave me more stocks to short.  It's like picking off the weak deer in the herd.

Wed, 05/29/2013 - 13:34 | 3607935 SheepDog-One
SheepDog-One's picture

Psst....hey buddy....wanna buy some stawks cheap cheap!!

Wed, 05/29/2013 - 13:45 | 3607965 q99x2
q99x2's picture

It takes at least 25 years for prices to stabilize in a balance sheet recession. Any tortured beyond all reconition Japanese investor knows that.

Wed, 05/29/2013 - 13:51 | 3607981 SmittyinLA
SmittyinLA's picture

I'm sure Blackstone is only employing , legal, licensed insured tax paying contractors with worker's compensation insurance in CA to fix up its pool of 26,000 rental properties. 

Wed, 05/29/2013 - 13:59 | 3608012 WhoMe
WhoMe's picture

 Why for the last year or two under ultra low interest rates did housing do nothing yet the minute there is a whiff of prices increasing, the price increases immediately pick up speed? Probably because all of the house Flipper, speculator idiots are jumping back in. So what happens the second they get a whiff of prices softening again, they will all once again bail.

Wed, 05/29/2013 - 13:59 | 3608014 buzzsaw99
buzzsaw99's picture

I guess they didn't get the memo. No such thing as dumb money anymore. buy buy buy bitchez the bernank has your back.

Wed, 05/29/2013 - 14:01 | 3608019 scraping_by
scraping_by's picture

The actual mechanics of the scoot part of loot 'n scoot are what interests me.

Are the hedgies going to sell to other hedgies, those who read the most recent business news articles? Or will they stuff pension funds, with a little grat for the pension fund manager who plays along? Foreign money? Will they create synthetic derivatives of CDOs and sell on that market? Or will they go the IPO route, as several commentators have speculated.

I don't think the insurance industry can finance that many mysterious fires.

So, 'how' is an interesting question...

Wed, 05/29/2013 - 14:07 | 3608034 donsluck
donsluck's picture

Simple answer, foreign drug/prostitution/arms money. Re-read the article, with particular attention to NAR money laundering exemption.

Wed, 05/29/2013 - 14:10 | 3608037 buzzsaw99
buzzsaw99's picture

hedgies get their 2 and 20 off the top. witness aapl, the roach motel, they ran that thing up, took a bonus, then moved on to the next roach motel. they don't care about their infestors, they're all in it together to jam this fuck "market" to the moon. all the while the fed winks and smiles.

Wed, 05/29/2013 - 14:48 | 3608185 Herd Redirectio...
Herd Redirection Committee's picture

Its pretty obvious they 'ran up' the price of gold and silver, or at the least, held off their usual price suppression for a couple months.  Profit on the way up, and on the way down.

Unfortunately (for them) it only works so many times till the weak hands have been shaken out.  Then the price can still be suppressed, but no one is selling their physical at spot, which makes it more difficult for the big boys to close out their short position.

Wed, 05/29/2013 - 14:06 | 3608024 Floodmaster
Floodmaster's picture

9.6 million people 85 and older by 2030, up 73% from today, baby boomers will be responsible for 25% of all fatal crashes. American cities need 30-story building, now we have rotten core cities made from the 60's era suburbia model.

Wed, 05/29/2013 - 14:08 | 3608038 dolph9
dolph9's picture

That's if the hospitals are still functioning, which is a big if.

Wed, 05/29/2013 - 15:06 | 3608235 Almost Solvent
Almost Solvent's picture

Who is buying these 400k+ homes? Young families? People in their 20s & 30s? How many boomers are living in their nest egg expecting to sell for 750k? When does everyone over 55 think it's time to sell their McMansion to those young people so they can retire? 

 

The shitshow has not even started. 

Wed, 05/29/2013 - 14:20 | 3608074 Magnum
Magnum's picture

Big investors don't really belong in this space because the little guy, the landlord who lives nearby and does the repairs, deals with tenants, he is in it for himself and makes the best of it.  I own a duplex and it's paying about 8% year year return on my investment.  Would like to have another one but for now, this is enough.

Wed, 05/29/2013 - 19:50 | 3608879 AynRandFan
AynRandFan's picture

Agreed.  Makes me wonder how large firms can make money on single family housing.  Apartments, yes, that I understand.

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