Wednesday, February 1, 2012

"Private equity flocks to foreclosed homes"

And the Kardashians.
From Marginal Evolution:

Private equity is flocking to get its share of 200,000 foreclosed homes that the government wants to sell as rentals.

Rentals produce cash flows and Oliver Chang, Morgan Stanley analyst, says that such properties yield 8.1% on average calculated from 1990.

Federal Reserve report also calculates a similar rate of return.

“Preliminary estimates suggest that about two-fifths of Fannie Mae’s REO inventory would have a cap rate above 8 percent — sufficiently high to indicate renting the property might deliver a better loss recovery than selling the property,” says Fed paper....MORE