Publicly traded REITs for residential real estate

[Hamlet]

Are there any publicly held REITs that purchase large quantities of single-family homes?

I look around at home prices, and I think I see good opportunies for investment, but I am way too lazy to buy them directly.

 

[Nords]

Are there any publicly held REITs that purchase large quantities of single-family homes?

I'm sure there's a Bank of America punchline in there somewhere.

The National Association of Real Estate Investment Trusts (NAREIT) will be happy to help you fulfill your ambition. They like lazy investors. However REIT funds tend to concentrate on apartments and mobile homes... which technically are single-family but perhaps not what you had in mind?

I've seen several privately-held REIT companies starting up operations that loosely translate to "We buy houses for cash!" billboards and bumper stickers. The difficulty is what most professional landlords have already discovered- landlording single-family homes does not scale as well as apartments or as cheaply as trailer parks.

However you probably have at least one REIT entrepreneur in your area looking for "private investor" funds.

 

[Hamlet]

What got me thinking about this is that there now seems to be a fair amount of opportunity in my local real estate market (Minneapolis) for investors who aren't as lazy as me.

My buddy owns a duplex in south Minneapolis that he wants to sell, but it sounds like the market is bad enough that he's better off keeping it (which is very inconvienent for him family/work-wise). There are several similiar duplex's in the area that are priced so low that they would cash-flow enough to interest even a lazy bum like me.

I'd like an option to buy a publicly traded REIT that bought up stuff like this, but you're probably right that it doesn't scale to a size that makes being public feasible.

I'm reluctant to dive into the private market as a noobie.

I guess I will just stick to stocks.

I'm sure there's a Bank of America punchline in there somewhere.

The National Association of Real Estate Investment Trusts (NAREIT) will be happy to help you fulfill your ambition. They like lazy investors. However REIT funds tend to concentrate on apartments and mobile homes... which technically are single-family but perhaps not what you had in mind?

I've seen several privately-held REIT companies starting up operations that loosely translate to "We buy houses for cash!" billboards and bumper stickers. The difficulty is what most professional landlords have already discovered- landlording single-family homes does not scale as well as apartments or as cheaply as trailer parks.

However you probably have at least one REIT entrepreneur in your area looking for "private investor" funds.

 

[james7]

What got me thinking about this is that there now seems to be a fair amount of opportunity in my local real estate market (Minneapolis) for investors who aren't as lazy as me.

My buddy owns a duplex in south Minneapolis that he wants to sell, but it sounds like the market is bad enough that he's better off keeping it (which is very inconvienent for him family/work-wise). There are several similiar duplex's in the area that are priced so low that they would cash-flow enough to interest even a lazy bum like me.

I'd like an option to buy a publicly traded REIT that bought up stuff like this, but you're probably right that it doesn't scale to a size that makes being public feasible.

I'm reluctant to dive into the private market as a noobie.

I guess I will just stick to stocks.

I think you have made a very wise decision.

 

[haha]

I'm reluctant to dive into the private market as a noobie.
I guess I will just stick to stocks.

Buying/managing a well built not too old duplex is a pretty easy thing. If you are in a market where it makes sense go ahead. It's probably less risky than taking a drive in the country. Your real return will come when the dollars that have been turned loose in our banking system start to fly and inflation gets going. I looked into buying 2-4 plex, but it sucks in the Seattle Market. Sucks less than before, but not a viable deal for a hard nosed buyer.

Ha

 

[Hamlet]

It makes sense in this market, but it is work.

I was hoping for a more hand's off way of investing in this area, but it doesn't look like is a real option.

Buying/managing a well built not too old duplex is a pretty easy thing. If you are in a market where it makes sense go ahead. It's probably less risky than taking a drive in the country. Your real return will come when the dollars that have been turned loose in our banking system start to fly and inflation gets going. I looked into buying 2-4 plex, but it sucks in the Seattle Market. Sucks less than before, but not a viable deal for a hard nosed buyer.

Ha

 

[ziggy29]

It makes sense in this market, but it is work.

I was hoping for a more hand's off way of investing in this area, but it doesn't look like is a real option.

Financial markets aren't 100% efficient, but they are close enough that there aren't going to be any low-risk, low-effort investments that are likely to produce a hefty yield today. If any such investments existed, there would be enough money flowing into them that raised their prices to the point where it wasn't such a good deal any more -- especially in an environment where investors are desperate for *any* yield at all.

 

[samclem]

Hamlet,
FWIW, I've been thinking along the same lines you've discussed. A way to take advantage of the present low home prices and spread out the risk (among hundreds of different properties in various markets rather than 5-10 with a small local "I buy houses" guy). There'd probably be very low return on investment now, but maybe something close to break-even with the potential for a payoff when prices rebound.

But, I haven't found anything. Like you, I don't want to do the work myself or manage the properties.

There are a lot of homes out there and it could be quite awhile until the markets rebound. And, if we've learned our lesson we'll see much less involvement in helping "everyone" become a homeowner. If shaky borrowers have to come up with a 10-20% down payment, the rise in prices could be very slow and I'll be happy I never got into the game.

 

[Hamlet]

This real estate market doesn't appear to be even close to efficient though. Six year ago people were falling over themselves to buy these duplexes at twice the price. They were willing to get into substantial negative cash-flow situations because of the irrational belief that prices would always go up.

We appear to have the opposite issue now. If you were to rent both halves of my buddy's duplex out, you would get about $1850/month (he's got one half rented for $975 currently, and lives in the other slightly smaller half). His real estate agent is saying that $125k is about the most that he could get now, as there are other properties for sale for a lot less already.

That gives an awful lot of room for cash flow, even assuming a fair number of challenges along the way.

He's moving to a distant suburb, so he doesn't want to deal with a rental anymore, but at that crazy low price he can't justify selling it. He'll get stuck driving in to deal with it, but giving up that kind of cash flow doesn't make sense.

Somebody handy/non-lazy should really be buying these things up.

Financial markets aren't 100% efficient, but they are close enough that there aren't going to be any low-risk, low-effort investments that are likely to produce a hefty yield today. If any such investments existed, there would be enough money flowing into them that raised their prices to the point where it wasn't such a good deal any more -- especially in an environment where investors are desperate for *any* yield at all.

 

[wildcat]

I don't know if you will find a REIT investment that fits your criteria. A lot of REITs seem to be large scale operations where you won't find mgt buying a duplex/4-plex here and there (hence why small investors play the game).

Only option I could think of is one of the non-REIT real estate companies that hold or buy land and intend to develop it. You wouldn't get the dividend cash flow paid out like a REIT but you could potentially play the recovery in home prices. It definitely seems more speculative as you are depending on mgt to develop the land into residential real estate for sale.

The popular one is St Joe (Florida market) - JOE

Less popular one is Tejon Ranch (CA - outside LA) - TRC

Both of the ones above have been owned by value investors over time as asset plays, i.e. the value of the land (if monetized) is worth more than the market value of the stock.

One carved out of General Growth Properties bankruptcy is Howard Hughes - HHC; a lot of the vultures who bought the assets of General Growth still have pretty decent stakes in HHC. Also mgt owns significant stakes + warrants to incentivize value creation. Since it was created out of the GG bk, there's little institutional coverage of the stock or the story.

Of the 3 above, HHC seems to be most interesting IMO.

 

[Onward]

Are these still around?

Case Shiller Housing Market ETFs Start Trading on NYSE | Altos Research: How's the Market?