BlackRock said to start financing rental-home investors
BlackRock Inc. is the latest company planning to finance investors who buy single-family homes, capitalizing on soaring rental demand as the U.S. homeownership rate sits at a five-decade low.
BlackRock, the world's largest money manager, will buy loans from a network of partners that offer financing to the firm's specifications starting as soon as next month, said two people with knowledge of the plans, who asked not to be identified because the information is private. Its lending partners also will offer funds to renovate homes that will become rental properties, one of the people said.
Tara McDonnell, a spokeswoman for BlackRock, declined to comment on the investment.
BlackRock joins Cerberus Capital Management, Blackstone Group LP and Colony Capital Inc., which have been competing to finance smaller landlords of the 14 million rental houses across the country and bundle the loans into bonds to juice returns. The new type of debt may make even more money available to single-family home landlords as many Americans struggle to get mortgages and opt to rent instead.
"The market could certainly bear to have more entrants," said Ryan McBride, chief operating officer at Colony American Finance LLC, an affiliate of Colony Capital. "This is a largely untapped opportunity in a huge potential market."
Investors such as Alex Sifakis, president of Jacksonville, Florida-based JWB Real Estate Capital, estimates he'll need about as much as $30 million a year to fund home purchases. In the past two years, he's borrowed $13 million from Colony and affiliates of Cerberus to finance some of his firm's 430 rental houses. Interest rates on the loans range from about 5.25 percent to 6.5 percent.
"More competition drives rates down," Sifakis said. "The more people that are in market, the more I can leverage them against each other."
Investors who buy at least 10 homes a year have spent about $110 billion to accumulate more than 620,000 properties since 2007, according to propertyresearch firm RealtyTrac. Rental demand has surged as many Americans struggle with getting a mortgage due to tight credit standards, slow growth in wages and the lingering effects of the real estate collapse.