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Single-Family Homes as Rentals

Jul 17, 2014

Lisa Prevost – The New York Times – July 17, 2014 – Bulk purchases of single-family homes by hedge funds and private-equity firms have been the focus of media attention over the last few years, but individual investors are also showing interest in the market, albeit with less vigor as home prices rise.

HomeVestors, a network of real estate investors known for its “We Buy Ugly Houses” signs, has experienced “unprecedented interest” over the last two years, said David Hicks, a company president. Franchisees, in 120 markets in 40 states, pay cash for homes usually in need of work, fix them up and resell them.

Typically, 30 to 40 percent of the properties acquired by franchisees are sold to investors, but that share has risen to 40 to 50 percent, Mr. Hicks said. And he noted that interest in opening a franchise is up. “We’ve added more new franchises in each of the last two years,” he said, “than at any other time in our history.” The company started in 1996.

HomeVestors franchises work with local investors. But a real estate investment company that started in May is trying to make single-family investment opportunities available to smaller investors on a national level. Called HomeUnion, the company helps investors identify, buy and finance properties in 15 markets.

The HomeUnion website features listings for single-family properties it deems to have the highest cash-flow potential. Once a buyer chooses prospective properties, the HomeUnion staff arranges the purchase and financing. Each home is also assigned to a property manager who handles landlord responsibilities.

“The advantage to the investors is we are providing this on a national scale,” said Chiranjib Pal, the chief financial officer.