Bulk Portfolio Sale Marks Changing Times in Housing Market


54unit MapYears have passed since the credit crisis and housing market crash with banks foreclosing on millions of homes nationwide.  In the subsequent years, many of these homes have been purchased by investors.  From major institutions to individual investors, hundreds of billions of dollars of single family residences have ended up as rental properties in the control of investors.  Groups like Blackstone had purchased upwards of 50,000 single family homes since the downturn and are now beginning to look to liquidate blocks of these homes and realize their profits.

Though numerous institutions have built 10,000-plus unit portfolios, many individual investors have likewise stockpiled countless homes in every major market.  Zack Mishkin, Vice President at ORION Investment Real Estate, remarks, “A single home purchased by an individual led to another and another, until countless individuals in our market have amassed substantial portfolios.”

With the benefit of hindsight, the strategy was quite simple:  buy into a depressed market at a discounted price, make necessary repairs, lease to a tenant to create cash flow and buy time while the market to recovers and appreciation to take hold.  “Many of these investors have realized substantial gains, but the day-to-day management and maintenance issues are beginning to take their toll.  These opportunistic investors are ready to convert their potential profit to realized gains,” notes Mishkin.

As an example, Scottsdale-based ORION Investment Real Estate facilitated the sale of a 54 unit single-family residential for $7,050,000 ($130,556/unit).  The properties were located primarily in the Phoenix Metropolitan Area and Tucson and were 98% occupied at close of escrow.

With low interest rates, a recovering economy, consumer confidence and people’s personal balance sheets cleaned up, many are bullish on the housing market going forward, ushering in a new breed of investor that is looking for the stability of cash flow and continued appreciation.  “This portfolio of homes was a great find as the bulk of the properties were in fair condition or better and priced at approximately a 10% discount.  The in-place unleveraged return was over 6% based on overall rents that were below market,” commented Zack Mishkin.

Most investors of these types of transactions are benefitting from purchasing at a discounted bulk price and reasonable cash flow and will methodically sell these properties individually for a profit into a recovering market at market prices.

Mishkin reported that these types of transactions are occurring with more frequency as of late.  “This large single family portfolio sale marks the second of its kind that our firm has completed recently.  It is perfect timing and often times a ‘win-win’ situation with Sellers realizing huge profits yet able to provide a Buyer with upside and opportunity.”