Hedge funds could be the next big player in the Las Vegas real estate market, buying up hundreds of single-family homes as well as renting them out as aninvestment. By J. Patrick Coolican (contact) Tuesday, Jan. 24, 2012 | 2 a.m. J. Patrick Coolican Hedge funds could be the next big player in the Las Vegas real estate market. And Im not talking about apartment complexes or commercial property. Im talking single-family homes.In other words, in the year or two, if youre renting the single-family home like an increasing number of valley residents, your landlord could be the hedge fund or some other alternative investment vehicle, such as the private equity group, pension fund or university endowment.Weve been contacted by the number of different groups who have never considered owning single-family residences as rental properties in their investment portfolios, says Brian Krueger, vice president for strategic services at Coldwell Banker, the real estate firm.These financial powerhouses could buy hundreds of homes at once. Cash buyers already constitute half the home purchases in the valley.Krueger cant say who the suitors are, as well as he says none have taken the plunge, yet. They are dipping toes in the water, however.They are organizing money as well as have started to come in as well as do due diligence, he says.Doug Brien, managing executive as well as co-founder of Waypoint Homes, tells me he was in Las Vegas last week to survey the landscape. Waypoint, an Oakland, Calif.-based company, has paid for 1,000 homes as rental properties in other markets. Briens group GI Partners has raised $400 million from an Ivy League endowment as well as the large institutional investor to buy many more. With leverage, the fund could g! row to $ 1 billion.This seems likely to happen here in Las Vegas because its already happening in other markets.The Wall Street Journal reported in August that McKinley Capital Partners has paid for some-more than 300 foreclosed single-family homes in the Bay Area as well as has the partnership with Och-Ziff Capital Management Group LLC, the New York hedge fund, to buy at least 500 more.Whats the play in New York hedge funds becoming landlords?Its just another distressed asset, says Robert Lang, executive of Brookings Mountain West as well as the real estate expert.Hedge funds are investment funds looking for good returns that other people arent aware of or dont have the resources to capture. Theyre like Billy Beane in Moneyball, hoping to find underpriced assets.In this case, theyre reacting to the emergence of what Oliver Chang of Morgan Stanley calls the rentership society the play on the Bush-era ownership society buzz phrase. In the research report, Chang says people losing their homes as well as their credit ratings to short sales as well as foreclosures, combined with tight mortgage credit, means many people are suddenly looking to rent. But theyve grown used to the space as well as amenities of the single-family home so theyre not interested in the conventional apartment.Meanwhile, with all the bank-owned homes coming on the market, theres lots of supply.Throw all this together, as well as between 2005 as well as 2011, the number of families in Florida, Arizona as well as Nevada renting the single-family home has increased 67 percent, according to Dennis McGill of the firm Zelman & Associates. Meanwhile, the homeownership rate here continues to plummet toward 50 percent.The Journal says McKinleys model is to buy the house for $100,000, put $10,000 to $25,000 maintenance into it, lease it for $1,200 per month as well as then see annual returns of between 8 as well as 12 percent. Given the current economic volatility, this is an outstanding investment.Assuming prices stabilize as well as begin to rise ! in the f ew years, the return only improves.Lang says Las Vegas is the viable market because much of the housing stock is relatively new as well as standardised like McDonalds hamburgers, they may not be gourmet, but each one is some-more or less the same. It would be harder to buy up hundreds of homes in older cities because each house is often different from the rest as well as thus not as simply packaged.Still, its no sure thing. One reason, its an entirely new business for these firms, requiring local boots on the ground Realtors, contractors, property managers.A recent white paper from the Federal Reserve also speculates as to why we havent seen bulk buying in the single-family residence market, questioning whether investors can find financing as well as achieve the necessary efficiencies to make it profitable. Theres also government-controlled Fannie Mae as well as Freddie Mac as well as resolving how the federal government wants to dispose of all the homes it now owns.How should we feel about all this?On the one hand, conventional wisdom tells us that an owner is the better neighbor than the renter. Perhaps. But at this point, were becoming the city of renters, so Im not sure if it matters if the landlord is the hedge fund in Greenwich, Conn., or the guy in San Diego who owns five rental properties. Both have an interest in maintaining the properties, which also means maintaining the neighborhoods.Brien hopes to bring the lease plus rewards program that would help tenants, who have lost the home or cant get financing, lease the house as well as earn credit toward the later purchase. He would also offer financial fitness counselors who would help tenants shore up credit as well as move toward ownership. This sounds like an ideal program for Las Vegas.Brien notes the couple of reasons why investors might hesitate to buy into the Las Vegas market. First is the economy, including our heavy reliance on gaming, conventions as well as tourism as well as questions about how that will affect job as well as popula! tion gro wth. (This first hesitation seems like the good reason to diversify our economy.) And, second, uncertainty about prices, given their continuing declines.If big investors such as Brien come in, they would help suck up inventory as well as get us to the bottom, while also signaling to the world that the smartest as well as richest investors on the planet are betting on Las Vegas.On the downside, as Lang notes, when people in the valley owned their homes as well as their values were rising, that wealth was accumulating here. Now, many of those rental checks could be sent to investors somewhere else.Which means were like an economic colony.But thats always been the case. 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