Homebuilder Beazer Homes
Beazer has recently teamed up with Kohlberg Kravis Roberts
Large homebuilders are prime candidates for this sort of investment, since they have lots of cash on hand and can do the renovation work themselves. Lennar
Homebuilders aren't the only players in this lucrative game. Other big investors have also been scarfing up distressed properties for a deep discount and then renovating and putting them on the rental market. New York hedge fund Och-Ziff Capital Management Group
Participation in this investment scheme may have just have gotten a bit easier. Fannie Mae's recent decision to package and sell foreclosed properties in bulk to well-financed investors is attracting some of these big names, such as Rialto. Though interested, Lennar's CEO noted that caution was the order of the day, since determining costs would be problematic with such large pools of properties. Fannie offered 2,500 renter-occupied homes in the April round, with strict requirements for participation and rigid parameters, such as the provision that the entire bundle must be purchased and then rented for a specific number of years.
The results of the government's property auction won't be known for some time, but chances are good that at least some of the foregoing companies threw their hats in the auction ring. Big investors, particularly homebuilders, see the profit not only from renting these formerly distressed homes but also from eventually selling them when the market improves. I can certainly see these investments making money over the next several years.
Will these types of investments help the housing market to recover more quickly? I believe they will. Though some critics think it's unfair for Fannie to sell these properties to big money, small investors simply wouldn't be able to market these homes quickly enough to make it worthwhile. Cleaning up the foreclosure mess is central to healing the housing market, and here's an example, for once, where throwing money at a problem really does help.