Rents greatly exceed the mortgage payment in many areas of California. For cash buyers, rents can earn a 3-10% return on investment after expenses and the income can be written off against the property resulting in capital gains income instead of ordinary income.
How is any of this a mystery?? It's what some of us have been saying on this board since 2008. The real mystery is why it took so long for the big money to flood in.
Probably more like the institutions identified a break even point. On the balance sheet, banks don't want their loan portfolios to reflect depreciated value, they would be on board. It would behoove to buy housing inventories en masse, rent them out, cause market prices to swell, and then try to sell as many as possible to ignorant rubes on an individual basis at the inflated values. Not much different from the Fed buying and selling bonds, or companies buying and selling their own stock.
That would be the incentive to become landlord for institutions that otherwise wouldn't do so, especially if the gov has given them some kind of assurance that they will get another bail if it doesn't work. As conspiracies go, pretty sweet waltzing between Wall Street and Washington.
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Large investment firms/banks are buying up tons of housing as a "rental investment".
It's not just SD but all over the country. Anyone's who has attempted to buy middle to low end real estate in the past 24 months has more than likely felt the fierce competition. And it's no longer who has the highest offer but banks want to close quickly and cash is king (I've been beat out on more than one property over the past year despite having the highest offer). Given the surge we've seen in 2012, I've actually backed off and standing on the sidelines since it's just not as attractive anymore to me as it was 12-24 months ago.
It's pretty sad for the middle to lower class since they don't have a chance in hell. This is a problem that the higher class doesn't face since the rent to buy ratios are too low in high end areas to attract investors (unless those investors are banking on equity return and not rental return, which is rare)
When real estate is bringing bigger ROI than the stock market, CDs, commodity investment, etc, you will see the big bucks head in that direction.
Want to buy a sub $400K house in CA that isn't a complete dump with 20% down and perfect credit? Sorry, you probably can't, at least not today.
Also, I notice you are from Chula Vista. I bought a Cobra Mustang there a couple years back from a military family who was in the midst of foreclosure. The guy indicated to me that every third house in that neighborhood was foreclosed. Place looked like a ghost town.