Institutions gets into flipping

[Lin He]

The institutions have been holding on to a large number of SFR rentals for a few years now. It seems they have figured out a way to make it work, for now. If they could (1) cut down transactions costs, e.g., commissions and carry costs; (2) keep the construction costs down, with large buying power and in-house construction teams, then it could work theoretically. However, there are challenges ahead. First, how will they find a large number of flips without agents? Two, more importantly, it works now in certain parts of the country because of their low capital cost basis and more importantly, the current low-interest environment, which allows them to own SFR as rentals with bare positive cash flow in lower-priced markets. Now the Fed is raising the interest rate, it could be a significant headwind ahead for both their flips and rentals. Interesting to watch.

https://www.bloomberg.com/news/articles/2018-09-18...