Pensions & Investments, the international newspaper for money management, contacted Arixa Capital's Jan Brzeski and Greg Hebner for their insight on the institutionalization of single family investments - moving it from a collection of small operations to large, professionally managed portfolios. Read the full article
The following are an excerpts from the article.
I think there is room for institutional ownership of groups of homes that are rental homes, said Greg Hebner, managing director of Los Angeles-based real estate firm Arixa Capital Advisors LLC, which also invests in rental single-family homes. I think that there is room for a few million houses to be in institutional hands.‚
Still, it might be more difficult for larger managers to run portfolios longer term and turn outsized profits.
There is no problem that the homes are there. The problem is, operationally, can large money managers manage single-family homes effectively, said Jan Brzeski, managing director and chief investment officer at Arixa. When a firm is buying a portfolio of houses, there isn't the luxury of negotiating the lowest price on each property, he said.
Also, the bargains that once made the investment tempting have disappeared in many places around the country, he said.
Last year, buying houses in California was a no-brainer because you would be buying ... for 35% of replacement cost and getting a nice strong yield, he said.
At that time, single-family homes were a better bargain than apartment buildings, Mr. Brzeski said. That has disappeared, he added.
Today, good buys are available in more depressed pockets of the country such as Indiana, where banks still own property and there are still short sales by banks.