There has been an increase in the number of homes purchased by large institutional investors on Wall Street in recent years, primarily as investment opportunities to capitalize on rising annual return rates from rental properties. The pandemic, in which more people are searching for rental homes rather than home purchases or renting an apartment, the rate at which Wall Street is buying up homes has increased.
Why is Wall Street purchasing homes across America?
One of the primary goals of large investors on Wall Street is to diversify and invest across different sectors. The real estate market has been a popular go-to source for diversification of their financial investments. Specifically, many institutions and wealthy independent Wall Street investors have been purchasing homes across the United States in record numbers. They intend to make a profit on these investment properties primarily by renting the home to tenants, which is generally done through a local realty group that manages the regular needs of the tenant. Other investors may have the intention of selling the property for more than the purchase price.
What does the increase in Wall Street home purchases mean for renters?
It may first seem as if the increase in Wall Street home purchases would negatively affect renters. However, there are differing opinions about how renters are affected. Many real estate experts believe that areas, where many of the rental homes available are owned by institutional investors, could have a negative impact, stating concerns about the ability for tenants to get timely repairs completed, access to landlords, and potentially higher rental prices due to more of the neighborhood homes being owned by a single investor.
Other real estate professionals believe that the impact of Wall Street investors purchasing homes to use as rental properties is overstated, and the price for rental properties could remain relatively stable. What we know so far is that there has been a significant spike in the price of rental properties in recent years. The extent to which institutional investors purchasing homes across America has impacted the national rise in rental prices is controversial and not clear.
How does Wall Street buying homes affect first-time homebuyers?
Many real estate experts also believe a rise in Wall Street home purchases could affect first-time homebuyers by flooding the market with competing offers, which can drive up prices and make it seemingly impossible for first-time homebuyers to win over a competing offer.
For example, if a home has two offers with one of the offers being an all-cash offer from an institutional investor that has a good history of home purchases and the other is a first-time homebuyer seeking to make a minimal down payment with a fair credit score, most sellers are likely to side with the more certain purchaser, which is the institutional investor. However, as mentioned, many believe that the impact of Wall Street home purchases is overstated and not likely to impact the availability or the price of homes for first-time homebuyers in a meaningful way.
EXIT Realty Bob Lamb & Associates is Murfreesboro’s most innovative real estate team.
EXIT Realty Bob Lamb & Associates
2630 Memorial Blvd, Murfreesboro, TN 37129