The whole world is experiencing a real estate boom. With massive government debt and an ongoing zero interest rate policy, investors are looking for investment opportunities. There is so much money involved that even previously neglected opportunities are being exploited. It is not new that large investors are investing in real estate. In Germany, too, a good part of the public sector portfolio has ended up in the hands of large investors.
Only so far have these investors not bothered with single houses. In the USA, one can see a rethinking since the corona pandemic. Wall Street invests in single houses. On the one hand in the classic way: instead of only investing in the construction of large apartment complexes, investments are being made increasingly in the construction of settlements with houses. This is also a problem for private individuals. If entire new development areas are sold to an investor, interested parties who are only looking for a house for themselves and their family do not get a chance. These houses are only offered for rent.
Purchase of existing houses
The new construction sector is not enough for investors like the BlackRock Group. To invest their money, they buy empty the market for used houses, at least in the growth regions of the USA. And money doesn’t seem to matter. The investors forego the usual securities and regularly outbid the estimated values of the objects. The estimated value is a peculiarity of the US market; financing by the banks is tied to this value. For example, the estimate is $ 400,000 and the bank is funding up to 80 percent. Then $ 80,000 in equity is required. If the house is sold at a higher price of around $ 460,000, the bank’s funding amount remains the same, namely € 320,000. The co-payment increases by the entire 60,000 dollars of the additional price to 140,000 dollars. With the outbid strategy, the “locusts” throw out all private interested parties who are dependent on financing.
Lucrative investment
The frustration in the USA is correspondingly high. The main criticism is BlackRock. However, the model was invented by Blackstone, this company bought houses on a large scale after the financial crisis of 2008, whose financing had failed. At that time the real estate market in the USA collapsed completely at times. Those who had enough funds and did not need mortgage financing could stock up on houses at ridiculous prices. Business isn’t going that well today, but renting out single houses in suburbs is still lucrative. The company “Invitation Homes” currently has around 80,000 houses in its portfolio.
Attractive business models
The industry is far more resourceful than private customers. You act as a bulk buyer to real estate developers and conclude deals for more than 2000 houses in one fell swoop. They are ideal customers for developers and companies in the construction industry because they guarantee reliable planning. To this end, rent-to-own models have been developed in which the transition from tenants to owners is fluid. It is also possible to sell your own house and rent it back.
Threatening development
Compared to the USA as a whole, the development is not threatening. But that’s only because investors are concentrating on the boom regions and leaving most of the country by the wayside. In these areas with an already tense housing market, they are very present in relation to the houses on offer. Your commitment leads to a massive increase in prices. The buying power is so great that it feeds your own business model. The companies continue to drive up prices, so they subsequently gild their investments that have already been made. Houses that you bought a year or two ago are significantly more expensive today.
If this trend continues, a good deal of middle-class home ownership will move away and end up with Wall Street firms. The importance of real estate for asset accumulation will decrease accordingly. In the long term, it is to be feared that this development will also spill over to Europe and that these investors will push more into the small and small business with individual properties. This makes the housing market even more tense. It can be assumed that listed companies want to achieve a higher return on their systems than traditional landlords. On the other hand, all property owners should benefit from the strong demand, and their houses will gain in value. As a result, the division between those who have haves and those who have nothing will widen.
David William is a talented author who has made a name for himself in the world of writing. He is a professional author who writes on a wide range of topics, from general interest to opinion news. David is currently working as a writer at 24 hours worlds where he brings his unique perspective and in-depth research to his articles, making them both informative and engaging.
