[quote=SK in CV][quote=CA renter]
Stay strong, Kev. As you probably already know, these “all cash” buyers are often leveraged. Just because they aren’t using purchase mortgages, don’t be fooled into thinking they are actually using 100% unleveraged funds. Not only that, but they will have redemption requests at some point. If they are leveraged on top of that, look out.
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Any evidence of this? I’ve only seen a few private equity prospectuses, and those that I’ve seen do have provisions allowing leverage, but there’s no indication it’s in their plans, and their structure makes borrowing highly problematic. And they have no redemption provisions. Sales of the properties lay entirely at the discretion of management. I don’t doubt it’s possible, I’m just curious why you think they’re leveraged and what the structure of that leverage is.[/quote]
[quote=CA renter]Some good stuff on how the large investment funds are planning to take their profits while leaving the idiots to suffer the impending losses:
[You can be sure that the pension funds will inevitably be caught up in this one, too…and the public sector employees will be blamed for Wall Street’s mess, once again.]
The scale of the problem [think redemption and disposition time!]:
Understand that these investments will generally act like bonds relative to interest rates. As rates rise, the value of these securities will likely go down since rents (the ROI) are fairly fixed. I also seriously doubt that these funds have properly figured in the real costs of maintaining and managing these rentals over the years, so their assumed rates of return are probably unrealistically optimistic as this would increase the value of the securities that these fund managers and initial investors are trying to cash out of (totally IMHO).
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Private equity firm Blackstone Group borrowed $2 billion from banks to invest in single-family homes it intends to rent out. Someone thinks the housing rally will continue! The Wall Street Journal reports that “Blackstone’s agreement with Deutsche Bank, Bank of America, Credit Suisse, and other lenders more than tripled the size of its previous loan, to $2.08 billion from $600 million, a person familiar with the deal said. Deutsche, which had arranged Blackstone’s initial accord, will remain the lead bank on the bigger loan. Private-equity firms such as Colony Capital LLC and real-estate investment firm Waypoint Real Estate Group LLC have snapped up thousands of previously foreclosed homes in recent months to rent out as part of a strategy to take advantage of the recovery of the housing market.” It appears that leverage is alive and well. “Blackstone has said it is buying single-family homes at the rate of $100 million a week, a faster pace than any other buyer. The firm now owns around 20,000 homes, say people familiar with the matter. The firm expects to spend more than $4 billion on homes, and could seek additional loans related to fund these purchases, these people said.”
