What cities are the Hedge funds buying in ?

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What cities are the Hedge funds buying in ?

Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes

Are Hedge funds buying in your city... should investors be following them and buying along side the Hedge funds with the hope of getting swept up in the anticipation of capital growth based on supply demand?  Or are they wrecking it for locals and other investors by creating a frenzy and escalation in wholesale prices...

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Chris Martin
Investor · Willow Spring, NC · Member since 2009 · 5k+ posts · 3k+ votes
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Originally posted by @Dawn Brenengen:

American Homes 4. Rent has been in the. Raleigh, NC market for a few years. I'm not sure if they are still actively buying, but they own quite a few homes now. 

In Wake county (Raleigh area), AH4R has acquired 47 properties so far this year. We are half way through the quarter and that number is consistent with their buying pattern in the past year. 2014Q4 was 122, 2014Q3 was 84. 2014Q2 was 61. 2014Q1 was 83. As for cities they are in, Raleigh is not in the top 10. From their last quarterly SEC filing, the top ten are(*):

Dallas-Fort Worth, TX
Indianapolis, IN
Greater Chicago area, IL and IN
Atlanta, GA
Cincinnati, OH
Houston, TX
Charlotte, NC
Tampa, FL
Phoenix, AZ
Jacksonville, FL

(*)page 28: http://www.sec.gov/Archives/edgar/data/1562401/000104746914009227/a2222184z10-q.htm
Related:
http://www.biggerpockets.com/forums/311/topics/86191-the-modus-operandi-of-the-mass-buyer---a-case-study
http://www.biggerpockets.com/forums/88/topics/110262-thinking-of-an-investment-in-a-hedge-fund

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Bob E. 

      or they know oil cant stay down and this is a temporary blip and a buying opportunity and they load up even more !!! 

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  • Bob E.
    Queen Creek, AZ · Member since 2014 · 2k+ posts · 1k+ votes
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    @Jay Hinrichs  that is possible.  I keep seeing articles that oils will be down for a while, only time will tell.  A lot of the HF guys run in a herd so if they start losing money and a few hit the sell button it my case a correction in and of itself.

    I can't to get a bucket of popcorn and see how this movie turns out, it is sure to be interesting. 

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  • Cal C.
    Investor · Peachtree Corners, GA · Member since 2014 · 1k+ posts · 1k+ votes
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    Originally posted by @Jay Hinrichs:

    @Bob E. 

      or they know oil cant stay down and this is a temporary blip and a buying opportunity and they load up even more !!! 

     Last time oil fell like this it stayed down for over 15+ years-longer if you count inflation.

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Cal C. 

    well we ( at least us old guys) know what happened to Texas in the 80's oil glut !

    From what I understand there are a lot of chemical plants being built hopefully that diversifies the economy there..

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  • Chris ClothierBusiness Member
    Rental Property Investor · memphis, TN · Member since 2009 · 2k+ posts · 3k+ votes
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    Originally posted by @Leigh Ann Smith:

    @Rachel Leonard , we are investors in the Houston area.  Falling oil prices are starting to cause layoffs.  Do you think the hedge funds will back away because of something like that, even if the real estate market is still strong for the time being?  (I hope so.)

     I don't see the current oil price causing the HF to back away.  Houston is still a Gateway city with a tremendous surge in population and that is not all immigration.  Much of it is migration from other parts of the country including California because the market has done such a good job of employment diversification.

    We love Houston and my guess is that the funds will too for a while.  Smaller Texas cities will be hurt more by the downturn in pricing, but I don't believe Houston will be.  

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  • Dean Letfus
    Specialist · Memphis, TN · Member since 2012 · 1k+ posts · 1k+ votes
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    I have seen quite a few out of state funds selling down in Memphis. We get packets offered a bit, especially from West Coast based funds.

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Chris Clothier 

      I read some where that much of the new development in jobs in the Houston over towards LA. includes many chemical plants something like 5 billion dollars in new plants being constructed. So oil is just one component.

    And that kind of cap ex creates and sustains an area..  Intel in our market in Portland single handily kept us from having a total melt down.. they broke ground 5 years ago on three new fab plants and spent 10 BILLION over the last 5 years.. One of my business partners retired off of the dirt work there alone. so I tend to agree with you.. Texas is well diversified now  can it cause some harm yes but I don't see a huge back track.

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  • Leigh Ann Smith
    Manvel, TX · Member since 2014 · 309 posts · 127 votes
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    Thanks, @Chris Clothier .  It was helpful to me to learn that the HF's mostly go for newer homes.  So even if they don't leave town, that means they shouldn't be much competition for us!

    A few years ago, Johnson Space Center had some pretty massive layoffs, and most people thought that the NASA area of Houston would really suffer.  We weren't following real estate closely at that time, but it didn't seem to me that it even got bad at all.

    @Jay Hinrichs , regarding the chemical plants, there are billboards around town advertising a 2 year degree program to prepare you for a $100K/yr job working in chemical plants.

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  • Jerry Padilla
    Lender · Rochester, NY · Member since 2014 · 3k+ posts · 1k+ votes
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    @Jay Hinrichs 

     Your post took off! It was a great topic!

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  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
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    They've been buying in Jax for 2-3 years. In fact, many of the early entrants have already stopped buying. Meanwhile, some new ones are now just entering the market. So clearly people have different ideas of what are good numbers. 

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  • Steve K.
    Bellevue, WA · Member since 2014 · 69 posts · 20 votes
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    Hedge funds will be chasing the next best thing from summer 2015 forward if the Feds really start to increase the interest rates.  If the Feds stay the course and increase the rates in small increments like they've talk about for the past year, Hedge Funds will chase after fixed income.  Fixed income such as government debt has lower risk and higher liquidity, plus lower maintenance cost to boot.  Hedge Funds can also invest in real estate indirectly through REITs, which is a lot more liquid than true real estate.

    So really keep an eye out for the Federal Reserve.  Fed's actions will tell you whether the Hedge funds will exit the retail rental market.  

    The low interest rates caused Hedge Funds to chase after anything that will provide more yield which includes real estate and stocks.  When bonds are attractive again, HF will dump real estate in a heartbeat.

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Maxwell Lee 

      those are good points many smaller players entered the local markets. by smaller I mean those that raised 5 to 10 million to focus on a market.. I think there are a lot of those not necessarily Hedge funds per se.. but investment groups doing the same thing.

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  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
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    Originally posted by @Jay Hinrichs:

    @Maxwell Lee 

      those are good points many smaller players entered the local markets. by smaller I mean those that raised 5 to 10 million to focus on a market.. I think there are a lot of those not necessarily Hedge funds per se.. but investment groups doing the same thing.

    That makes sense. I do know specifically of an established NYC-hedge fund that entered the market in September of last year. They planned to make anywhere from $10-20 million in acquisition over the next year. That one was a legitimate hedge fund and they probably realized they were coming in a bit late (just my perspective) because they were really really rushing to get operations set up. 

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Maxwell Lee 

      I have been contacted by some BP members trying to do the same thing.. IE producing and sending out a PPM to raise capital to buy these homes.. I guess I am just desensitized to it, as in when I looked at the offerings my thought were to little to late.. but that was just me.

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  • Maxwell Lee
    Real Estate Investor · Miami, FL · Member since 2013 · 474 posts · 214 votes
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    yep! I mean I still invest here but we take care in searching for our deals, whereas two years ago a big fund could buy a tape of 100 properties and expect most to perform well. 

    I should add that the NYC hedge fund I mentioned earlier was an established one but had never done RE. Which is why they had to build that operation from the ground up. 

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  • David J.
    Investor · Houston, TX · Member since 2009 · 210 posts · 261 votes
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    HFs are all over Houston. They make offers on every one of my listings. Mostly buying 1980 or newer 3/2, 4/2s in suburban A, B and C areas. What I like is they are willing to list rentals at 110-120% of market rents and let them sit for 60-90 days to fill. Really helping push rents up on their dime. We have been unloading our inventory to them when the homes meet their criteria for quick cash.  They don't appear to backing off, but there isn't much inventory here for them to buy that meets their criteria. When we flip entry level homes they are still selling very quickly. 

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  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
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    They have also been active in the Palm beach and broward county areas (south florida). It is certainly attributing to our low inventory here making it super competitive with them being active here 

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  • Cameron Ellis
    Investor · Memphis, TN · Member since 2013 · 171 posts · 49 votes
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    Their are only a few hedge funds out in the market, but alot of "Managed Funds" looking to stock up on properties and sell them to Hedge Funds such as AH4R, Blackstone or Colony once their stabilized. However each fund has their own exit strategy, dealing with blackstone and their background I can assume their pool of properties will be sold once stabilized to some type of wealth fund.  

    @Jay Hinrichs my technique is buy properties that fit their criteria and resell them in as is condition, usually their just a little under retail.  Luckily I was able to bypass realtors and find the decisions makers and develop great relationships.

    With the 3 companies I do business with in memphis, i was able to enter additional markets and sell them properties in Houston, Dallas, and Nashville without me ever having to see the place. 

    --

    1 of the funds sends me properties that they may have purchased in a package to help them sell because it may have been in a area of town they dont buy in. Usually if i cant find anyone to pick it up they donate it to charity. 

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Cameron Ellis 

      now that's what I am talking about get ahead of the curve and profit.

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  • Aaron Ramm
    Investor · Marysville, WA · Member since 2014 · 146 posts · 62 votes
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    Seen a ton of activity here in Marysville, WA and surrounding areas from Invitation Homes AKA Blackstone.  They've been snatching up single family homes like crazy at high prices and renting them out.  I don't consider their tactics something I would follow, but it is interesting to see what they're doing!

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  • Scott Le
    Tampa, FL · Member since 2015 · 39 posts · 0 votes
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    I remember reading an article last Spring stating that 7 major hedge funds had purchased something like 6500 homes in the Tampa Bay area in the prior 24 months.

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  • Aaron T.Pro Member
    Developer · Aguada, PR · Member since 2014 · 928 posts · 279 votes
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    Originally posted by @Scott Le:

    I remember reading an article last Spring stating that 7 major hedge funds had purchased something like 6500 homes in the Tampa Bay area in the prior 24 months.

     Yes, Blackstone and subsidiaries like Invitiation homes scooped up a lot of SFRs. 

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    @Aaron Ramm 

      Well knowing what that part of Washington cost the HF did not get the BP memo on the 2% rule or 1% rule or any other metric that are goals for the BP buy and hold trained investor !!

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  • Jay HinrichsBusiness Member
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    Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
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    HF are also buying in other parts of the world... Blackstone recently bought a 2 billion dollar deal from GE capital in Tokyo mixed use resi and commercial.

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  • Mitchell Jaworski
    Rental Property Investor · Boynton Beach, FL · Member since 2014 · 273 posts · 197 votes
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    I agree @Lance Lvovsky  Between the foreign investors, investors like us and the REITS the number of solid deals in Palm Beach County have become somewhat limited.  Investors were spoiled down here a few years ago.  There are still plenty of properties for sale, but it's #'s that fit a family looking to buy a home, not investors looking for $ gain. 

    I've just started looking a little north in St, Lucie County, better #s but you have to worry about jobs up there and if people will be able to consistently pay rent.

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