It was widely deemed a temporary play: Large-scale investors buying thousands of discounted foreclosed properties during the worst of the housing crash and turning them into single-family rentals. When home prices recovered, they would surely sell them for a hefty profit. The housing market is recovering, albeit more slowly than expected. Foreclosure volume is way down and home prices are way up, but these investors are not selling.
They are buying more, and now they are buying new.
"I actually think that we're coming into perhaps the most compelling three or four years that I've seen since I've been in the business," said Doug Brien, CEO of Starwood Waypoint Residential Trust.
Brien, standing in front of one of his company's rental homes in a brand-new housing development in Lawrenceville, Georgia, near Atlanta, says builders are the next frontier for institutional investors.
"For us operationally, being able to have a brand-new home that typically has a warranty, that works well for us. We can also customize floor plans that work for the business," added Brien.
Starwood Waypoint, which launched its business seven years ago, now owns more than 16,000 single-family rentals, the vast majority of which were foreclosures. So far it has purchased about 200 brand-new homes from builders, with an average price point of around $180,000. These homes represent about 5 percent of the REIT's portfolio.