Investors excited for federal REO rental conversion

Private equity firms and other investors see an opportunity in the inventory of foreclosed homes currently held by the federal government, Bloomberg reports, and some are beginning to take advantage of it.

Based on information including a Federal Reserve study suggesting more rentals could strengthen the housing market, The Federal Housing Finance Agency (FHFA) plans to complete initial transactions of foreclosed homes in the first quarter of 2012.

An FHFA spokeswoman stated in a telephone interview that the agency will offer some of its inventory of 180,000 homes to private operators for rental conversion, Bloomberg reports. How many homes will be converted is unclear. According to the source, non-traditional investors are being attracted to the single-family rental market by high demand.

Capital Partners principal Gregor Watson told the source single-family rental homes can yield high cash flows. One expert noted that, under the current circumstances, investors are seeking to hold on to properties long-term and rent them.

Investors in the government REO program on the horizon may need significant rental property management services in order to fill this new niche and meet consumers' housing needs effectively. Services that improve efficiency, like online leasing, may make rental management more profitable.