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December 20, 2014

Investors Likely to Curb Buying in 2014

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Investors Likely to Curb Buying in 2014

Institutional investors who have been buying up thousands of foreclosed single-family homes will likely take a “more restrained” approach in 2014, according to a new report by RealtyTrac and Pintar Investment Co., a single-family rental investment company. 

Over the past two years, institutional investors have been scooping up thousands of single-family homes to turn into rentals. But as the number of distressed homes in many markets falls, investors’ presence is expected to slip too. RealtyTrac defines institutional investors as firms that purchase at least 10 single family homes within a calendar year. From January 2011 to November 2013, institutional investors purchased a combined total of 366,206 single-family homes.

“Investors will expand their holdings now and into 2014, but this expansion is likely to be decidedly more restrained than the binge of the past 18 months,” according to the RealtyTrac/Pintar report, “Back to Reality with Buy and Rent."

Markets such as Memphis, Fresno, Charlotte, Atlanta, and Phoenix had seen a large spike in institutional investors in 2012, but a limited distressed inventory is prompting more investors to move on to other markets. According to the report, investors will most likely seek to acquire more homes in secondary markets. Many of those markets are expected to be in the southeast, in places such as Jacksonville, Fla.; Winston-Salem, N.C.; Tampa, Fla.; Lakeland, Fla.; and Macon, Ga. 

Also in the new year, institutional investors will likely focus more on managing their geographically diverse, existing portfolios. Some investors are facing the realities that yields that may have looked good on paper aren’t always so favorable when it comes to often-overlooked factors such as rent delinquency and collection issues as well as unforeseen maintenance, according to the report. 

Source: “Back to Reality with Buy and Rent,” Realty Trac/Pintar (December 2013) and “Higher REO Prices May Slow Investor Buying in 2014,” National Mortgage News (Dec. 24, 2013)

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