October 31, 2013 · Exit133

Out of State Real Investors: Good for Tacoma or Bad?

Out of state investors are buying up big chunks of real estate in the Tacoma area.

These large investment companies are making deals like the one that leads a story from The News Tribune earlier this week; New York-based FREO paid $2.9 million for 31 homes out near Spanaway. Almost all of those properties are rentals.

Other investment companies, with names like "American Homes 4 Rent," have been making similar buys. According to another TNT article, one in 10 homes sold in Pierce County in the last year wasn't bought by a real person; instead, they were purchased by these investment goups, and the true number of homes bought by investors, rather than real families, is probably much higher.

Any Econ 101 student will tell you that more homes selling means fewer on the market, which should push home prices higher - good for property owners, right? But what happens to the Pierce County real estate market when one or more of these investment groups decides they want out?

What if you add into the equation the complicating fact that these homes will be operated as rentals by their now distant owners? The term "absentee landlord" seems pretty apt here. That's not necessarily synonymous with "slumlord," but it's not a huge leap, either.

Do we have reason for concern? Or should we just be glad that someone is interested in buying property around here?

Filed under: Neighborhoods, On the Market, Economic Development

8 comments

Sarah October 31, 2013

Those are valid points and good questions, but I have to admit, I'm more immediately concerned about the fact that someone has five bedrooms "forent." Maybe if we learned to spell we could attract more families instead of investment groups.
- ThriceJamie October 31, 2013
  
  I totally know the guy that puts out "forent" signs.
Steve October 31, 2013

Apparently you guys need to do some more home work before jumping conclusions. What about the way the companies put over 500 contractors to work, the hiring of local agents to represent them in there ventures, they are also using local agents to manage all the property management , they're putting a huge amount of money back into the state that your brains apparently can't comprehend, and last for now but not least they are buying millions of dollars of materials from local companies to rehabilitate homes all over our local markets. If you truely think they are not smart enough to know not to over emcumber their own market when they decide to sell, you writers really should not be allowed to write to the public with your empty publishing's. Look... They are even keeping the writer of the papers employed. I guess what I am saying is that before you start slamming the hand who feeds our country right now. You might want to take an economics class and try to imagine how much more intelligent you would have sounded if you would of turned this story around. Making someone into a negative is a lot easier than turning them into a hero. THE WRITER HERE TOOK THE EASY WAY OUT AND HIS HOMEWORK SHOWS IT. MAYBE NEXT TIME DO WHAT YOUR MOM, DAD, TAECHERS HAVE ALWAYS TOLD YOU. THINK BEFORE YOU TALK.
- Peter Peter November 1, 2013
  
  Wow. People who write in all caps should always be taken seriously. 1) I see a link to a story and questions about it. Exit 133 does that. I don't see conclusions. 2) This seems to hit a little too close to home for you. Would you like to disclose your connection to the subject at hand?
- phil November 1, 2013
  
  They create short term demand & push up home prices, but I don't suspect it's a good thing long term to have a company like Blackstone forcing individual home flippers out of the business. Rental investors are small businesses making their living through sweat equity & also employing local tradespeople, buying materials & using real estate agents/title companies. In the end, a company like Blackstone has a legal obligation to put the interests of their shareholders first & not those of the citizens of Pierce County. In the final analysis, homeownership is still the most tried & true path to building wealth, increasing social mobility & community development. Our public policies should encourage this.
Home Owner November 1, 2013

Steve - What you say is true indeed. However, you may want to dig a bit deeper into this issue to fully understand the strategy behind these investors. There are 4 Hedge-Fund firms in the nation, who are each backed (funded) by original members of the WallStreet (Goldman Sacks etc.) crowd (who personally rcv'd mass bonuses and did not pay-out-of-pocket for the mess they created and are now using that money for this funding), who first inflated the market then rolled up the toxic mortgages and sent them out into the investment world. Who paid for this profit at all cost strategy? Individual tax payers, you & I. What impact did THAT have on the economy? These firms are now taking the current profit opportunity to buy mass real estate, nationally, fix up homes that need it (on the cheap BTW), hold them (rent) until the market values increase over the next 2-5 years and then sell them for double the money. This is the ONLY reason they are buying up property. If the market does not look like it will bare significant returns, their plan is to dump these homes back into the market. This will have two significant economic impacts: 1 It will over inflate (again) the market and drive mid-lower income people out of the home buyer market or 2 will sink the home market (again). If you believe these firms have the U.S. economy as their NorthStar, I am afraid you are naive. Local investors (who are out-bid by these large national firms) would be the ones with local economy on their minds as it is in their best financial interest to do so - that is healthy economics. Do you believe these national firms give a hoot about the S. End of Tacoma, Wa?? Not! They follow the money - that's the idea behind "Hedge Funding". If you have ever seen the movie It's a Wonderful Life - think Pottersville. I have nothing against capitalism but when economic drivers such as real-estate are purchased on this large scale, it puts the $$ into a very few hands and takes it away from the many (local economies).
Erik B. November 2, 2013

I am concerned about a large company buying so many houses. With that said, these houses were some of the worst. If they had not had an infusion of money, they could have been vacant for years sending many neighborhoods and cities into a tailspin. Detroit had so many vacant houses, it had to start knocking them own.
Renter November 4, 2013

Home Owner, how is that you are able to concede some things to Steve while also making your own point, all the while refraining from typing in all caps and not speaking to us like we are children? Truly remarkable... Out of state hedge funds might help parts of the local economy in the short term but I don't believe it will help create a sustainable long term economy.