Hedge Fund in California Swears to Put the Small Guys Out of Business

[Corey Dutton]

A prominent real estate investor in California related a story to me yesterday that nearly knocked me off my chair. This real estate investor specializes in real estate flips and rental properties in California, and has been in the business for 30 years. He currently has a portfolio of over 400 rental properties in California.

He was recently solicited by a hedge fund manager in California for a meeting. The first thing the hedge fund manager said to my friend was, “I really feel sorry for you small guys because we are going to put you all out of business.” My friend was obviously offended by this and replied, “I’ve been doing this 30 years, how long have you been doing this? Six months?”

This hedge fund manager offered to buy all 400 of my friend’s rental properties in California. He told him that his hedge fund was going to put all of the small real estate investors in California out of business. This hedge fund’s goal is to buy up all of the discounted real estate in the State of California and turn it into rental property. As many real estate investors can attest, these hedge funds are coming into the buying scene pretty hot, and are paying prices over retail for properties in California, Arizona, and other States in the West.

Needless to say, my friend flatly refused the hedge fund manager’s offer and walked out of his office. Does this pose a real threat to real estate investors in California? What is your take?