Some wealthy people are busy turning the 20th century dream of owning their own home into the dirty 21st century reality of permanently renting out their home. These wealthy individuals and the companies they run have been buying up homes for sale in recent years and converting their newly purchased homes into rental properties.
In big cities from Atlanta to Phoenix, deep-pocketed investors account for a quarter to a third of local home purchases. Is there an impact that this ample financial power has dabbled in middle-class housing sales? It turns out that corporate landlords are more likely to do so. vox The analysis says the move is to evict tenants, raise rents and avoid necessary repairs and maintenance.
Defenders of the wealthiest among us argue that critics of this abundant interest in middle-class housing are making a mountain out of a molehill of investment. For example, they note that private equity firms and other “institutional investors” drove less than 3% of overall home sales in 2021 and 2022.
But housing experts like Cincinnati's Laura Brunner say this low national rate can obscure what's actually happening in many local neighborhoods. do. Private equity funds can routinely buy up “50 percent of the homes on one street.”
Meanwhile, other deep-pocketed movers and shakers are taking other routes to exploit America's lack of affordable housing supply. How inadequate is that? Last March, Realtor.com reported that in the 10 years ending in 2022, there would be a “6.5 million single-family home shortage” in Japan. How are investors reacting to that shortage? Rapid increase in “Residence Transition Loans”.
These loans go to America's growing army of housing “flippers.” They are a variety of local speculators who buy up older homes from families who cannot afford the necessary upgrades and repairs. The loans will be made at “relatively high interest rates” of up to 10 percent per year. Barons.
The financial industry, like OneSharp Capital, a subsidiary of private equity giant Blackstone, packages these high-interest bonds into investment funds, giving billionaires an average of 30% less than investing in U.S. Treasury funds. It offers more than a percentage return.
For all of these roles, OneSharp Capital's Sharp companies charge an annual management fee of 0.5% and a 20% “success rate” if the investment fund outperforms the U.S. Treasury index by more than 1.3% over a three-month period. receive a reward.
These hefty fees represent only a small portion of the revenue that ends up flowing into Blackstone's private equity pool each year. But every little bit helps. In August of this year, it was revealed that Blackstone CEO Stephen Schwartzman “received an adjusted compensation package totaling $253.1 million in 2022.”
