All Things Money
off from private equity giant Blackstone Group — and Starwood Waypoint Homes. The combined entity will be the largest owner of residential homes in the United States, with a portfolio of 82,000 properties worth over US$20 billion ($27b).
Blackstone was one of the first financial institutions to buy residential homes, spending over US$10b on distressed homes following the global financial crisis. At one point, Blackstone was reportedly spending US$150 million a week on houses.
All up, it is estimated that hedge funds and financial investors have spent US$30b on more than 200,000 working-class, single-family residential homes across the US, in markets including California, Seattle, Phoenix, Las Vegas, Florida, Chicago and Minneapolis.
Initially, these financial owners purchased homes under threat of foreclosure, scooping up large swathes of housing stock when few average people were brave enough, or cashed up enough, to buy.
Their initial objective was to capitalise on depressed prices, with rental income as their secondary goal. They expected to dispose of these properties after about five years, pocketing a capital gain.
However, their residential home ownership experience has been fruitful and their objectives and appetite have changed over recent years.
What began as a buy-and-flip plan has become a long-term proposition. Most of the hedge funds now intend to be long-term landlords, making more money over time by raising rents.
They’ve also created new securi-