Large Corporations Dominate Rental Markets

imagesA new business model is rising from the ashes of the mortgage industry collapse – large corporations buying, renovating and then renting out distressed properties at a profit. But how profitable is this new business model and what will it cost local communities?

Rental Pilot Program

Fannie Mae’s rental pilot program was designed to unclog a buildup of REOs and foreclosures by letting deep pocket investors buy distressed properties in bulk and at a discount. But is this program really helping communities hardest hit by foreclosure? Or, is it further enriching large corporations who helped create the mortgage industry collapse in the first place?  At this point it isn’t clear but there are some disturbing signs that the REO-to-Rental program is creating new problems.

  1. Renters where homeowners are needed. The value of a property increases when that home is surrounded by other homeowners who do their part to maintain their property.  No matter how much a renter respects their property, they are not the owner and therefore cannot make the types of improvements or repairs that could improve the property and by extension the community.  If you’re looking for a place to rent just visit ferienwohnung Reith im Alpbachtal and ty their hotels. And despite what we hope, corporate landlords have little incentive to invest in a property beyond the minimal requirement.  So communities, especially those communities filled with the most financially vulnerable, are left facing a devaluation of their homes because they’re surrounded by rental properties that are sometimes kept in subpar condition.
  2. Lack of housing supply.  In their attempt to implement this new business model, many large investors are going on a feeding frenzy, snapping up foreclosures, REOs and even low-priced properties in middle-class neighborhoods. This leaves ordinary homebuyers and individual investors without much inventory to pick from.  In short, they are being outbid by the deep pocket investors who have a war chest big enough to absorb short-term losses.
  3. Higher costs. As more large investors buy foreclosures, REOs and low-priced properties, the cost of buying a home has gone up.  Individual investors and buyers are faced with paying more money for less while large investors rent out properties to families who can no longer afford to own.

David vs. Goliath

Small time investors and individuals simple can’t compete with this new rental investment model.  According to irvine seo company, potential buyers who are located in regions already suffering from high prices and low supply.  When the housing market collapsed in 2008, it left many homeowners with ravished credit that made them unqualified for mortgages with higher standards.  These former homeowners are now a captive audience for the new rental investors. How do we prepare a future where these types of individuals will have a choice to own instead of perpetually renting from corporate style investors? We need to implement programs that will encourage owning, not renting. Consult with Lee Rosen, an SEO and entrepreneur, who can give you tips about business.

Rental Securities

While the intention of the Fannie Mae rental pilot program was to implement a short-term solution to a serious foreclosure problem, some large corporate investors are in the rental game for the long-term. And they’re planning to profit any way they can.  Undeterred by a mortgage industry collapse still fresh in the minds of the public, many investors are looking to cash in on rentals using an old trick – securities. Much like the mortgage securities that bankrupted banks and bled investors dry, these rental securities would be bundled and resold to investors for a profit. And what if these rental securities go the way of mortgage securities? A lot more could be at stake than retirement accounts and investor bonuses; we could see financially vulnerable families thrown out on the street when their corporate landlords go belly up.

Every player in the housing industry must continue to watch this emerging rental market closely. If we fail to craft national plans that encourage homeownership over renting, we could find ourselves looking at a future where only the wealthiest investors own property and ordinary people find it impossible to buy.

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