Landsmith Pays $48M for 455 Homes, Half of Them Located in Houston, TX

Note: We normally don’t cover the single family home market, but this goes to support the article dated June 4, 2013 and this new trend could have a potential impact onto the housing market as a whole and onto the rental market.
See also this article published a few days later.

 
May 28, 2013

HOUSTON-Landsmith LP has acquired 455 single-family rental homes in three markets, playing $48 million for the assets. More than half the homes – 250 of them – were acquired in Houston for $32.2 million.

According to a press release from San Francisco-based Landsmith, the Houston homes were completed in 2012 and leased up with the intent to package them as a portfolio investment.  That portfolio investment, by the way, was 98% leased at closing.

Landsmith CEO James Breitenstein tells GlobeSt.com that the Houston transaction was especially interesting because the builder of the homes actually built them to be used as rental properties. “He figured there would be a newly constructed market for single-family homes to rent, so he built them and put them in a portfolio to sell,” he says.

The average rent for such homes in Houston is around $1,300 a month – depending on the submarket, these rentals are less than some of Houston’s luxury apartments. “These are ideal for people with good, solid jobs who aren’t yet ready to buy,” Breitenstein says. “They don’t want to put a down-payment on a home and aren’t sure they want to live there. So this is a pretty good value, getting a four-bedroom home for what you might pay for a luxury apartment.”

In addition to buying in Houston, Landsmith is involved with deals in Raleigh, NC (87 homes, about half of which are still in escrow) and in Nashville, TN (on which it closed on 118 homes in mid-May).

Breitenstein says he anticipates closing about 500 more homes in the next 60 days. The homes purchased were done on behalf of institutional investors – what Breitenstein dubs as “the top 10 private equity funds and REITs in the country. Landsmith is examining several markets for more investments, and if there’s any common denominator with the ideal spot, it’s that the MSA should have a population of at least 500,000.

“We don’t want to place 100% rentals in any subdivision,” Breitenstein comments. “We look for solid, growing areas with good schools and low crime.”

Breitenstein says he learns about the single-family rentals through a variety of methods; foreclosures, property managers, the Internet and builders – Breitenstein says builders with inventory sometimes like the idea they can sell an entire collection of homes in a fairly quick transaction, rather than selling the single-family homes one at a time, over a period of months.

And it’s not only the builders who are intrigued by the idea of single-family sales to well-heeled institutional buyers. Landsmith’s transaction occurred a little more than two months after MACK Cos. sold 93 single-family homes to Arizona-based American Residential Properties. According to an article written on GlobeSt.com, that particular transaction followed a similar $28 million, 196-home transaction that took place between MACK and ARP in December, 2012. On its website, MACK bills itself as “the nation’s premier provider of single-family, turnkey investment properties.

Nor does the single family seller need to be a huge, national one. “I spoke to a woman this morning,” Breitenstein says. “She’d closed on more than 200 houses since 2008, but thinks now is the time to get out of the market.”

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This entry was posted in 2013, Houston, Market trends, Single-Family Homes, Supply. Bookmark the permalink.

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