Around 12 -18 months ago is when the first major hedge fund came to town and started buying property up like it was going out of style. We expected this to happen as the Memphis real estate investing market is considered by many the top market to invest in real estate. Not only was Memphis one of their markets but also other markets like Dallas, Houston and Atlanta just to name a few.
Fast forward now to the present and there have been several funds who have come to Memphis and purchased thousands of homes. Now this can be considered a positive thing and to an extent it is but for some of us it could be looked at as a negative. They have artificially inflated the price of property. Companies who make a business of buying, fixing up and selling to investors have been forced to pay more for the properties due to the funds paying more as they are not at this point in time focused on reselling the home.
Another factor some have thought would be a problem is that with as many homes coming into the market available for rent you might think homes would be more difficult to rent out. We have not really seen this to be true as there are so many people looking to rent it has not been too much of a factor.
Just when you thought the funds were starting to settle down and stop buying I hear of another one coming to Memphis and several other markets as well. Could these funds who really dont know much about being landlords possibly create the next wave of foreclosure/distressed activity? Some of these funds goal from the start was to buy a large number of homes, get them rented out to a certain occupancy and cash flow goal and then sell the whole package off to another entity. Now what happens when things go south for the new entity? I think because they are not in this as true investors but only one aspect of investing, this will eventually force them to sell off their properties and thus creating another buying frenzy for Memphis investors. Cash flow as well as % returns constantly fluctuate which can make a non real estate investing professional nervous. Only time will tell.