How to invest in single family homes

scott

Do your own due diligence. Did not include builders, just owners. A bit skeptical of housing strength in some regards (you have large institutional investors hoovering up houses, creating a crowded rental market - see link below), but SBY/RESI are a little interesting especially if the concept starts paying off and they start providing dividends.

Pure Play:
SBY - Silver Bay Reality. Pure play on single family homes.

RESI - Altisource Residential. Pure play, buying distressed loans and turning homes into rentals.

http://www.cnbc.com/id/100366417 ("Meet America's New Landlords: REITS")
- Neither RESI or SBY pay dividends currently, but the plan would appear to be eventually provide dividends. If interested, the thought would be to get in now, if the dividends start the companies then get more interest and off to the races.

Diversified companies with some exposure
BX - Blackstone. Buying up single family homes at a rapid pace. Owns 20,000 single-family rentals (http://www.bloomberg.com/news/2013-03-18/rent-gains-trail-as-blackstone-crowds-u-s-with-homes.html)

STWD - Starwood. Has bought some single family homes recently, although I haven't found a definite number of what they currently have.

CLNY - Colony Financial. Not their key business, but have been devoting an increasing amount to buying single family properties. More information under investor information on their website, then their latest presentation.

OAK - Oaktree. Have been buying (http://www.bloomberg.com/news/2012-01-18/oaktree-joins-carrington-on-450-million-house-rental-program.html), but no confirmation on current # of holdings.
Oaktree Yield to Approach 10% by 2015:
http://blogs.barrons.com/focusonfunds/2013/03/20/oaktree-yield-to-approach-9-this-year-10-by-2015-predicts-morgan-stanley/?mod=yahoobarrons

rono

Howdy Scott,

Good stuff. Was at a conference today and they were talking about land use residential patterns in the coming decade or so and it's all revolving around the boomers exiting the 'big house' and moving into retirement. This results in a glut of the large lot big house and a scarcity of apts and small lot inexpensive residential. We're seeing the same thing local just nw of Lansing. The demand is for starter homes and apts.

Oh, and BTW, is there was also some talk about malls and retail development and the wizard is Taubman TCO at about twice the sales per sqft as the nat avg. It was form based zoning and development for successful retail and very informative. He contrasted fancy malls with rat sales vs. a taugman mall that was elegant but neutral so that the ONLY thing interesting was the store windows [read: if you're looking at the digs, you ain't buying].

good stuff,

peace,

rono

johnN

related - hcn healthcare reits.
gov - govt renting buildings/facilities
nly - mortgages related, pays div

BWG

Good idea to get this thread going. While I am interested and looking more carefully here, there are a few factors that have given me pause:

1) Suddenly there is a lot of media discussion on playing the single family home market. Does this mean this opportunity has "jumped the shark"? How much of the appreciation in these homes is already built into the book value of these companies?

2) Maybe, the single family home market still has a lot of gas left and these companies will make money. How much of this will be shared with shareholders (as opposed to distributed to asset management companies) -- for example, take a look at the relationship between RESI and AAMC (both tied to ASPS and OCN). For an unrelated example of potential self-dealing, look at GSVC and SVVC: both trade at massive discounts to NAV, both have a large percentage of assets in cash and both refuse to do buybacks, probably because the asset managers get compensated because of AUM rather than stock market performance.

3) Are these companies underestimating the day to day costs of managing a portfolio of single family rental homes? Carlyle Group (CG) has stated that it thinks so and has invested in apartment buildings instead.

4) There may be one or two companies (e.g., American Homes 4 Rent) similar to RESI and SBY going public soon. Will the increase in supply of ways to invest in this market remove any scarcity premium that is reflected in the current prices of SBY and RESI (SBY trades at a premium to book value)?

For those looking at SBY, be aware that TWO (from which SBY was spun off as an IPO in Dec 12) holds a large number of SBY shares and will be distributing them to TWO shareholders next month.

GLTA,

BWG

Investor

Well, the baby boomers may be retiring and downsizing but their children and their grandchildren are still buying houses. In fact, as long as the population growth is positive there will be increasing demand. Maybe not as much as it used to be but it still will be.

Detroit and a few cities have seen population decrease but it is less associated with baby boomers but rather the economic situation of the location. When a particular type of manufacturing dominates and then that business relocates and goes away, there is often a decrease in employed population (which moves away as well) so there is excess capacity. In fact, I think people are left behind are more likely to be boomer generation less willing to relocate for work.