The Houston Chronicle has a great piece out, this week, which discusses how institutional investors have become the latest robber barons in the modern land rush last seen when Oklahoman’s picked up the moniker as Sooners. Utilizing technology similar to which Digital Matrix Group brought to bear in the foreclosure space. The jest of the article is that first time home buyers are,
[C]ompeting against a pool of investors that includes some of the largest hedge funds in the world, many of whom are armed with cutting-edge technology created by Entera, a Houston company, that’s designed to identify deals faster than [they] ever could.
The Chronicle goes on to say,
Competition for homes in this price range ratcheted up in the wake of the subprime mortgage crisis a decade ago. As the bottom of the housing market fell out, institutional investors saw another opportunity:cash flow from rental properties. Hedge funds began snapping up single-family homes and turning them into rentals in huge numbers, reducing the pool of housing available to entry-level buyers.
And we are seeing the flurry or rehab and restoration, throughout the United States, as I type. Currently, there are too many assets to service and not enough manpower. And while normally supply versus demand would increase pricing, the reality is that the hedge funds have already determined precisely what they are going to pay. If you get in direct with them, you stand a chance of making a modest profit, but if you are performing the services through any of the half dozen or so National Association of Mortgage Field Services (NAMFS) members, breaking even is a distinct challenge.
Unlike being a general contractor whom builds homes and you have contracted to build for a price, the rehab and restoration space assigns bids according to their value. It literally is dog-eat-dog. Moreover, though, if you are not licensed and have a previous track record, the chances of success are slim.
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