Large Landlord Selling Homes to Tenants

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Did Blackstone Just Call A Market Top?

The famous single family home investor, Blackstone Group, has started to sell some of their homes to their tenants, according to this article in Bloomberg.

“Invitation Homes [part of Blackstone] started selling houses to renters in Phoenix and Sacramento, California, this year, with plans to expand the program… in all 14 of its markets across the U.S. in the next few months.”

That sounds like it could be a great program for many of their tenants. I like it!

Worried

But I’m a little worried.

Does that mean Blackstone is less optimistic about single family home appreciation going forward?

  • Do they know something about the real estate market that I don’t know?
  • Do they see appreciation or rents levelling off?

My first impression is they see appreciation leveling off, otherwise, why would they sell? They would just continue to ride the appreciation wave… until it petered out, anyway.

This kind of reminds of apartment magnate Sam Zell announcing last fall he was going to sell many of his apartments. At the time, some thought his bailing out was a sign the multifamily market was peaking. And, as it turns out, that was probably right.

Suspicious

“Blackstone has amassed about 50,000 rental houses in the past four years. While Invitation Homes is still buying selectively, spending about $5 million a week, it expects to cull about 5 percent of its properties annually…”

They make it sound like they’re buying and selling at more or less equal paces. I don’t buy it. It’s expensive to buy and sell houses. You wouldn’t sell one home to buy a different one unless they were significantly different.

So how does Blackstone pitch the selling?

“The company’s decision to sell a home is based on a variety of factors, including the concentration of properties it wants to have in individual markets, prices and whether it wants to reallocate funds in other parts of the country…”

My total guess is they’re simply beginning to cash out after a great run.

What does Blackstone see that I don’t see?
Or am I just being paranoid? 🙂
Leave your comments below.

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8 COMMENTS

  1. Greg, I thought that buy and hold investors would have started to sell in 2014 when appreciation slowed down but then realized that even if prices are only rising 6% a year that’s still a pretty good return when they’re also making money on the rent.

    It was a golden investment for them with both home value appreciation and rising rents but they were going to have to start to unwind their position at some point.

  2. As FTB s we were terrified as no one wants to catch that falling knife without knowing where the bottom is. My strategy this time round will be the same, wait until prices reach what I consider value but buy cash.

    • Sounds like a great plan!

      But on the other hand, if you’re buying and selling at the same time next time, it doesn’t matter much when you do it.

  3. They’re selling the homes in the areas that are less desirable and purchasing homes in the market they find will add more value to their portfolio.

    • Makes sense. They’re probably selling their least profitable houses and/or the ones where the outlook is the least good for appreciation and rent increases.

Comments are closed.