Where The Hedge Funds Are Buying

[Tim C.]

I've been working in insto finance for a few years spent a few hours having a dig around for any public information instituation buying of SFR as I'm personally invested in the Atlanta market just recently.

Came across multiple reports this one I found was interesting: http://investors.silverbayrealtytrustcorp.com/Cache/1500047694.PDF?Y=&O=PDF&D=&FID=1500047694&T=&IID=4335231

Silver Bay Realty is a the first fund who have public listed (there's been an IPO listing for American Residential Homes just recently so they are looking to cash out as well). They are really trying to list SFR as a new asset class that is publicly tradable.

Some interesting points in the report.

- Phoenix and Vegas seem to be the markets where they are struggling to rent comparatively.
- The budget 15% for renovations
- I remember reading somewhere they estimate 40% in expenses (vs the 50% rule inthis forum)
- Their average age of properties 14 years.

I know a lot of people on this forum says that property as run up really fast really quickly. It has. But looking at the data from a few hours analysis it looks like there is still a lot of capital to be deployed. I know from experience it takes time to raise capital, execute etc. and there are a lot of players right now I don't think they will slow down buying they will just lower their criterian instead of 10% net they will go down to 5% net etc. They will continue buying even if it doesn't make financial sense as long as they can IPO it off and there is a demand for their fund.

One thing to note that hedge funds / insto capital still account for a small % of the entire market so academically their buying shouldn't effect the prices beyond a sentiment point of view. I would be interested in how this compares with people on the ground and bidding on REOs.