Multi-billion-dollar real estate investment firms own nearly 1 percent of single-family homes in the greater Nashville area and have converted 3,060 houses into rental properties, according to a new study.
The trend has most deeply taken hold in outlying suburban areas, including Spring Hill, Nolansville, Antioch, Murfreesboro and Smyrna – with Wilson and Rutherford counties attracting the most interest.
“This is a rent-based security model. Money from the rents fund the acquisition of new properties,” Tennessee State University associate professor Ken Chilton said at a presentation Friday at the Avon Williams Campus. “They pay cash, and often buy houses sight-unseen. So, by paying cash, they can go offer $230,000 for a $250,000 listing. They’re able to undercut the market in that regard.”
Chilton is part of a growing group of academics and government officials tracking the impact that real-estate investment trusts (REITs) have in communities, as homeowners increasingly express concerns about living next door to renters.
REITs became popular after the housing-market crash, when firms purchased distressed properties en masse and repurposed them as rentals.
But, since entering the Nashville market in 2015, their business model has shifted, Chilton said. The firms are buying spacious homes near good schools in suburban communities that attract well-educated families with incomes of roughly $75,000.
They’ve shifted from buying homes at the lowest-end of the market to snatching up houses for $300,000 and more, Chilton said.
“This is not poor-people housing, this is middle-income workforce housing,” he said. “What’s driving the demand? We don’t have the definitive answer to that yet. Some people argue that young families are burdened with student loans and a tighter credit market, but they still want that suburban lifestyle.”
Chilton is working with Robert Silverman, a professor at University at Buffalo in New York, to better understand the market forces driving the trend, and the risks it could pose to communities.
In many cases, the REITs don’t have a local presence where they purchase homes and tenants have complained about unfair charges and poor communication.
The large companies operating in the Nashville area include Invitation Homes, Streetlane Homes, American Homes 4 Rent, Colony Starwood Homes, Progress Residential, and Tricon Capital.
The increasing popularity of rental housing is mirrored in the growth of short-term rental companies such as Airbnb.
“Some people are waking up to find out that 10 homes on their street have been bought out by rental companies in the last five years,” Chilton said. “This is no longer our parents’ or grandparents’ housing market, where a Realtor puts a sign in the yard. Now we’re fighting against the Airbnb people who are competing against the local flippers and the Wall Street flippers.”
Original post: https://www.tennessean.com/story/money/2018/04/13/rental-homes-owned-investment-firms-draw-scrutiny-researchers/514806002/