The glut of foreclosed homes for sale has been a stubborn problem, causing neighborhood eyesores and depressing prices for the entire housing market. Just as it began to look as if the housing recovery would continue to spin its wheels under the weight of these cast-offs, groups of investors began to see the profit in buying up large swaths of these abodes at discounted prices, then renovating and renting them.
Investor groups are all over the map
This past May, homebuilder Beazer Homes
Lately, investment firms are springing up that are dedicated to buying jilted single-family properties on the cheap, then repairing and renting them for an unspecified period of time. These companies are start-ups with a twist: Their founders were former executives at big investment banks, so they ought to know just how valuable this market can be.
One such firm is being set up by a former Morgan Stanley
These newcomers are joining the ranks of private equity and hedge funds that have been sniffing around the foreclosure sector for some months now. In addition to KKR, Blackstone and other equity groups such as Starwood Capital Group have seen the promise that this investment strategy can bring to the table.
It might make some people cringe to think that some of the architects of the housing meltdown might now be profiting from the detritus of the fraudclosure mess. The fact is, however, that today these firms are serving a purpose. Many of the worst of the abandoned properties are too far gone to be of interest to small investors, and their continued presence on the market is hobbling the recovery. As long as housing remains in the dumps, the economy will continue to sputter -- so anything that helps is a plus, in my book.
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Fool contributor Amanda Alix owns no shares in the companies mentioned above. Motley Fool newsletter services have recommended buying shares of Goldman Sachs Group. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.