Wall Street May Soon Be Your Landlord

Fannie Mae mulls bulk sales that would turn homes into rentals

By Mark Russell,  Newser Staff

Posted Mar 19, 2012 7:02 AM CDT

(Newser) – Wall Street firms may soon have a new gig: landlord. A number of them are looking into getting directly involved in real estate, buying up foreclosed properties from Fannie Mae in bulk, reports the Wall Street Journal. They couldn't then flip the houses—per the deal, they would rent out the properties and not resell them for several years, in an attempt to unclog the housing market. And that arrangement likely sounds fine to many investors: Goldman Sachs economists pegged the annual yield on rental units at a 6.3% average nationwide, though that figure topped 8% in some areas; mortgage bonds, meanwhile, are yielding about 3%.

The planned bulk sale is not huge: eight pools that contain a total of 2,500 houses, worth about $320 million. "We're investing a lot of capital, a lot of time, with the expectation that this is a very small beginning to a very big movement," said the head of one securities company considering buying. But will the bids be too low, or will investors make healthy offers in the hopes of convincing Fannie Mae that bulk buys are the way to go? On the investor side, one warns that it's tough to get a "responsible return on capital" due to the costs associating with renovating and managing the properties. Bids are due next month.

A financing available by Fannie Mae sign is posted on a foreclosed property offered for sale Tuesday, May 31, 2011, in the Los Angeles.
A financing available by Fannie Mae sign is posted on a foreclosed property offered for sale Tuesday, May 31, 2011, in the Los Angeles.   (AP Photo/Damian Dovarganes)
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