A Closer Look At The Decrepit World Of Wall Street Rental Homes

Tyler Durden's picture

Submitted by Michael Krieger of Liberty Bitzkrieg blog,

This new incursion by hedge funds and private equity groups into the American single-family home rental market is unprecedented, and is proving disastrous for many of the tens of thousands of families who are moving into these newly converted rental homes. In recent weeks, HuffPost spoke with more than a dozen current tenants, along with former employees who recently left the real estate companies. Though it’s not uncommon for tenants to complain about their landlords, many who had rented before described their current experience as the worst they’ve ever had.

 

A former inspector for American Homes 4 Rent who worked in the Dallas office said he routinely examined homes just prior to rental that were not habitable. Though it wasn’t his job to answer complaints, he said he fielded “hundreds of calls” from irate tenants.

 

- From the Huffington Post’s excellent article: Here’s What Happens When Wall Street Builds A Rental Empire

This is a topic that I have been writing extensively on since the beginning of the year. In fact, I don’t think there’s another topic I have focused so intently on in the whole of 2013, with the exception of the NSA revelations. It all started back in January with my post titled, America Meet Your New Slumlord: Wall Street, which received a huge amount of attention in the alternative media world.

I knew from the start that this whole “buy-to-rent” thing would be a disaster. Over the last decade or so, everything that Wall Street touched has turned into a scheme primarily focused on parasitically funneling wealth and resources away from society at large to itself. This is no different. They call it a “new asset class.” I call it Wall Street serfdom.

What makes this article even more interesting is that it’s not simply greed, it is also obvious that these Wall Street firms have no idea what the fuck they are doing. For example:

Former employees of the companies, who spoke on condition of anonymity because they worry about jeopardizing their careers, said their former colleagues can’t keep up with the volume of complaints. The rush to buy up as many homes as possible has stretched resources to the point of breaking, these people said.

My advice to people out there in the rental market, is they should try to avoid Wall Street rentals. The three main companies highlighted in this article are: Invitation Homes (owned by Blackstone), Colony American and American Homes 4 Rent. Unfortunately, it appears these companies may try to hide their presence in certain markets so you may have to do additional digging. For example, WRI Property Management is the local agent of Colony American in Georgia.

More from the Huffington Post:

There’s no escaping the stench of raw sewage in Mindy Culpepper’s Atlanta-area rental home. The odor greets her before she turns into her driveway each evening as she returns from work. It’s there when she prepares dinner, and only diminishes when she and her husband hunker down in their bedroom, where they now eat their meals.

 

For the $1,225 a month she pays for the three-bedroom house in the quiet suburb of Lilburn, Culpepper thinks it isn’t too much to expect that her landlord, Colony American Homes, make the necessary plumbing repairs to eliminate the smell. But her complaints have gone unanswered, she said. Short of buying a plane ticket to visit the company’s office in Scottsdale, Ariz., she is out of ideas.

 

“You can not get in touch with them, you can’t get them on the phone, you can’t get them to respond to an email,” said Culpepper, whose family has lived with the problem since the day they moved in five months ago. “My certified letters, they don’t get answered.”

 

Most rental houses in the U.S. are owned by individuals, or small, local businesses. Culpepper’s landlord is part of a new breed: a Wall Street-backed investment company with billions of dollars at its disposal. Over the past two years, Colony American and its two biggest competitors, Invitation Homes and American Homes 4 Rent, have spent more than $12 billion buying and renovating at least 75,000 homes in order to rent them out.

 

Most who spoke with HuffPost said they moved into their rental homes only to find that renovations they were assured were comprehensive amounted to little more than a fresh coat of paint and new carpeting. Tenants said they immediately discovered major mechanical and plumbing problems: broken water heaters and air conditioners, broken toilets and in some cases even vermin infestations, including fleas, silverfish and rodents.

 

Several weeks after Rosemary moved into the Raleigh, N.C., house she’s renting from American Homes 4 Rent, her hot water tank exploded. Rosemary, who declined to use her last name for fear of losing her security deposit, said she couldn’t shower for days. It took constant calls and emails to the rental company before they sent someone to replace the tank.

 

Former employees of the companies, who spoke on condition of anonymity because they worry about jeopardizing their careers, said their former colleagues can’t keep up with the volume of complaints. The rush to buy up as many homes as possible has stretched resources to the point of breaking, these people said.

 

A former inspector for American Homes 4 Rent who worked in the Dallas office said he routinely examined homes just prior to rental that were not habitable. Though it wasn’t his job to answer complaints, he said he fielded “hundreds of calls” from irate tenants.

“It’s just a slumlord,” Culpepper said of Colony American. “A huge, billion-dollar slumlord.”

Indeed, and it shouldn’t be a surprise to anyone.

Full article here.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
TeamDepends's picture

There is a house (for rent) on Wall Street

They call the rising sun

It's been the ruin of many a young man

And God I know I'm one

NOZZLE's picture

As is routinely pointed out on these pages, absent Jamie's access to .00123 o/o Cash that he lends at 25.1675 apr. JP Moran's whales would have crushed that bank years ago.

Thomas's picture

Wall Streets next investor scam is already loaded in the chamber and ready to be fired.

Peter Pan's picture

We have gone from a capitalist system of value added to a system of syphoning off value. Predatory behaviour is not self sustaining particularly when the economy is struggling.

Diogenes's picture

Why do you think the economy is struggling? The big interests no longer consider the US a going concern to be milked for profits. They regard it as a worn out shell to be junked and stripped of assets. The first stage was sending manufacturing jobs overseas in the seventies. Then followed bubble after bubble. They have just about finished syphoning off the old peoples' savings and pension money. They have sold the young generation into debt slavery for the college degrees they need to get the good jobs that no longer exist. Now they are coming back and scavenging the scraps from the real estate bubble.

They may have over reached themselve with Obamacare, putting everyone in a hammerlock to extract every dime of disposable income for "insurance" that pays for nothing and that you can never collect on. But don't worry, next year they will do worse.

jbvtme's picture

this is what happens when the bottom of the gene pool rises to the top of the food chain

The Alarmist's picture

Sorry, but for a moment you had me focused on the fact that it is the light-weight turds that float to the top of the bowl. And that had led me down the rabbit hole of who ends up in the Senate and the House and how they get there.

MarcusLCrassus's picture

Like termites, the banks have hollowed out the economy of the United States of America, leaving a dying, dried up husk, a mere shell of its former self. 

 

 

The Alarmist's picture

Sorry, but having just torn into the walls of my US house, I realise that they are hollow and am not surprised when similar structures are blown down in hurricanes and tornados.  Speaks volumes for a society.  Hate to say it, but my home in socialist Europe has solid concrete walls.  BTW, a country with socialist medicine, e.g. Obamacare, is a socialist country ... welcome to the club.

Careless Whisper's picture

The hedge funds will securitize the rental income of their house portfolios and sell the future income stream as an asset backed security. The hedge funds will get their money back that way. Then, knowing that the rental stream will dry up when the tenants repairs aren't done, and the properties are completely mismanaged, they will short the securities they just sold. They may even short the case-shiller index knowing that the real estate market will be re-flooded with all those houses, for part deux of the housing crash.

El Vaquero's picture

There was an article on here a few months ago alerting us to the fact that one of the wall street companies was securitizing the rental stream.  Given the whole squid MBS-CDS ordeal, I suspect you are spot on.  Everybody saw how it was done, and more importantly, everybody saw nobody go to jail. 

socalbeach's picture

This may be the article you were thinking of.

 

Step Aside RMBS, Rent-Backed Securities Are Here, And With Them The Beginning Of The End

Also, don't forget the possibility of selling synthetic rent-backed securities if the demand for real RBS outstrips supply.  Wall St could probably engineer a hundred billion dollar scam with just a few thousand actual rentals.  If you need a primer, see this.

"Synthetics thrived for a brief time because they were cheaper and easier to create than traditional CDOs, whose raw material, mortgages, was beginning to dry up... the counterparties providing the payment stream were primarily hedge funds or investment banks hedging, or often betting that certain debt the synthetic CDO referenced ... would default."

Seasmoke's picture

Last one out, wreck the house. 

Real Estate Geek's picture

It's "Last one out, turn on the gas." Insurance policies typically exclude casualty from earthquake.  But a fire after the earthquake would be covered.

shovelhead's picture

My thoughts exactly.

When whole neighborhoods of these rentals start burning down, people might start to notice.

ebworthen's picture

What?  Wall Street Witches and Warlocks fucking over the common person?

Hell, they get us coming and going.  Suck cash out of IRA's, 401K's, the government, fees and bullshit and deposit/withdrawal jiggering to increase fees, LIBOR rigging, MERS home stealing, etc., etc., etc. - all with the blessing of the Supine Court, bailouts from the CONgress, and zero jail time courtesy the spineless DOJ, other law enforcement, and may I say the military.

Jesus H. Christ we are lambs to the slaughter seemingly bleating aimlessly just letting the wolves cull us.

DISGUSTING.  We need a hanging, guillotine, blood in the streets revolution so bad it hurts.

Miffed Microbiologist's picture

Bedford Falls America is now morphing into Pottersville. Political and financial empire-building are subsumed into greed, ill will,blind destructiveness and a never ending lust for power. Prepare accordingly or be forever at the mercy of those blood sucking parasites.

Miffed;-)

geekgrrl's picture

This seems like the perfect metaphor for what's going on.

g'kar's picture

Clarence may be our only hope

 

Seriously

GMadScientist's picture

At least they're playing the part of the arrogant ignorant feudal lord to a fault, insuring the riots will be plenty and violent.

ElvisDog's picture

But, I don't understand why the woman who lives in the rental house smells like shit stays in that house. Something is missing from that story. Wall Street doesn't own all the rental housing or apartments in Georgia. Why doesn't she find a new house? Seems like losing your deposit would be worth not living in a house that smells like shit. I suspect the missing piece in that story is that the Wall Street rental is cheaper than comparable rentals and Ms Culpepper has chosen to stay in the house.

daveO's picture

Contract? That's how they (landlords) back their securities, my guess.

Wahooo's picture

$12 billion in real estate is a lot of property to be torched, but it can be done.

GMadScientist's picture

You don't need to burn all $12B, they'd get the message after the first 3 or 4 complexes went up, but they're also heavily insured and would love to take the money instead.

RSloane's picture

You just hit the ball, again, out of the park. Thanks, Ebworthen.

Bangin7GramRocks's picture

Fuck you renter! if you would've worked harder, you'd be an owner.     Ayn Rand

LetThemEatRand's picture

Another good Rand quote:  "sucks to be you."

Pike Bishop's picture

Fucking Ayn Rand.

It's always amazing to me how people half-assed quote Adam Smith's Wealth of Nations. They worship it but never read it. Otherwise they would know the Invisible Hand was mentioned once, and in the context of the surrounding paragraphs, it was about not letting the fruits of your labors get too far way from you. A great argument against globalization and off-shore labor arbitrage. Add in that he stated that it was also the Gov't's responsibilities to help provide eduation and fight poverty. Ask him. He was a Moralistic/Philopspher first, then an Economist.

Then there is this plague of Randroids. It must be the same people who wanted Iraq, because they completely forgot about Viet Nam.

There was no one in her immediate personal life who Rand didn't fuck up. Just because they were Svengalied and didn't have the bitch shot is incidental.

Rand and her starboy Nathanial Branden were fucking. They were doing it with the full knowledge of their spouses. Explained away as a requitment of their self-intertest. Rand's husband Frank O'Connor reacted normally and became a deadly drunk. Branden's wife had been sucking in too much retardant, and in some fucked-up way thought this was great. So great, that she was keeping from Rand the fact that Branden had started to sport fuck a sweety on the outer edges of The Collective.

In 1968 Rand found out and went nuclear. Under a thin veil, she disavowed anything Branden was teaching and anything Barbara was writing. It was like a teen-ager who got a dose of her own medicine. The Brandens went into arrested development and have spent the rest of their lives trying to validate the fucked-up thinking which went into that episode.

John Galt is Ayn Rand. Ayn Rand is John Galt.

A fictional character who has nothing to do with real people and the real world of human beings.

Ayn Rand was wrong. John Nash was right.

Wahooo's picture

Yep, fuck the mythologies. All of them.

yatikto's picture

Philosophy should not be separated from the person that originated it.

MisterMousePotato's picture

On the other hand, out of the mouths of babes ... (probably not referring to Ayn Rand).

Stanley Lord's picture

 

She wrote the whole book on a bet, not unlike L Ron Hubbard.

Freewheelin Franklin's picture

That's about the dumbest thing I've read in the comments section here. Objectivism has its faults. Unfortunately, you touched on none of them, and instead, insisted on focusing one the personal behaviors which have nothing at all to do with Objectiviem.You sound like a clueless leftwing liberal that doesn't understand the non-aggression principle or the right of property and self-ownership. I suggest you go back to the DailyKos.

 

The quality of comments where at ZH have really gone in the crapper. Thank god the quality of the articles hasn't.

LetThemEatRand's picture

It hurts when someone tells you that your religion is a big lie.  Might cause a guy to say something childish like "go back to the DailyKos!"

booboo's picture

"Obama gonna make my house payment."    Peggy Joseph 

http://www.youtube.com/watch?v=P36x8rTb3jI

LetThemEatRand's picture

The ter'ists took down the towers 'cause they hate our freedums.  -W

We can find stupid people to quote all night.

GMadScientist's picture

"Why we haven't made a mortgage payment in months." - White bitch from the suburbs who drove her golfcart straight to the 19th hole

LetThemEatRand's picture

Another example of giant corporations fucking it up for small businesses and individual investors and their (former) customers.    

therevolutionwas's picture

And how do 'giant corporations'  get to fuck it up....?   Everone now,.....G O V E RN M E N T!!!  Yes!  Without government power corporations couldn't do diddlie-squat.

LetThemEatRand's picture

The corporations control the government because they have grown powerful enough to be able to buy and sell it and convince the population to elect their shills.  Without the government, they would merely cut out the middle man.   The mob exists outside the government and without government keeping it in check, it would probably take over the world.  Mobsters don't play nice and they don't follow the rules, free market or otherwise.

booboo's picture

"without government keeping it in check, it would probably take over the world."

ha..haha... hahaha........

BWAAAAAAAAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHAHA!

 

Fiat Burner's picture

Corporations only control the government because we the people have failed to hold the government accountable for suspending the rule of law. 

Government power is the problem.  If government followed the rule of law and was fearful of the consequences for not following it, then there would be nothing for corporations to lobby.

bunnyswanson's picture

http://storyofstuff.org/movies/story-of-citizens-united-v-fec/

http://www.youtube.com/watch?v=k5kHACjrdEY#t=33

Maximize profit for shareholders at any and all cost is the result of  Citizens Unites V FEC decision.

GMadScientist's picture

In a sense, government exists to give multinational corporates coverfire and plausible deniability; the illusion of choice is an important element of the subjugation of the sheople.