A real estate company that bought and sold 300 foreclosed single-family properties last year does not feel threatened by the expected launch of a federal bulk investor program for converting REO units into rentals.
“There is so much [investor] demand and so much inventory that needs to be picked up,” said Memphis Invest partner Chris Clothier, that he is not worried about competition. “This is about reviving the community,” he added.
Memphis Invest provides a turn-key service for investors by purchasing and renovating REO in its own name. The firm turns around and sells the properties to investors and then continues to manage them as rentals.
“Investors are looking for hard assets that provide safe, long-term opportunities in a time of economic uncertainty,” Clothier said. “Despite the recent real estate bust as part of the Great Recession, residential real estate remains a proven investment strategy.”
Investors generally receive 8.5% to 10% return on a cash basis. He noted returns are higher on a leveraged basis.
The family-owned firm currently manages 980 rental properties in Memphis and it is planning to start buying properties in Dallas.
“Our investors want to diversify” by buying properties in Dallas, Clothier said. “We’re still looking for huge growth in Memphis,” he added.
Meanwhile, the Treasury Department is expected to launch a pilot program in the first quarter to sell Fannie Mae, Freddie Mac and Federal Housing Administration REO to investors in bulk. Investors will be responsible for renting and managing the properties for three years.
The aim of the government program is to reduce downward pressure on home prices and stabilize the market.