Flipping single family homes, or keeping them as rentals used to be the domain of the small time investor or “Mom & Pop”. With values down more than 50% in some areas private equity players are increasingly getting into the game as Bloomberg reports:

 Waypoint, a private-equity real-estate fund with $150 million in assets, is pioneering a new approach to making money from the housing crash. Since 2007, investors have been trolling the cratered suburbs stretching from California to Florida r cheap houses to flip. Waypoint, which owns 1,100 houses and is buying five more a day, is betting that converting foreclosures into rentals is a better way to make a profit. Other firms, such as Landsmith LP in San Francisco, are now cropping up and pursuing the same strategy in Arizona, California and Nevada.

Attractive Yields Lure Big Money

The home rental market boasts a total property value of $3 trillion, according to Morgan Stanley housing analyst Oliver Chang. Yet institutions have long shunned it as too scattered and impractical to be profitable. Last year, Columbia University’s $8 billion endowment invested $25 million with Waypoint. In January, GI Partners, a Menlo Park, California-based private-equity firm that manages money for the California Public Employees’ Retirement System and other pension plans, agreed to invest up to $400 million with Waypoint and acquire a minority stake in the firm. The same month, Oaktree Capital Management LP, the Los Angeles investment firm co-founded by billionaire Howard Marks, announced a $450 million deal with Santa Ana, California-based Carrington Capital Management LLC to acquire and convert foreclosed single-family homes into rental properties. Carrington already rents out more than 3,000 houses in California and other states.

Cost of Renting Could Propel Property Prices

The cost of renting in the U.S. reached an all-time high compared with that of buying a home at the end of last year, indicating it’s a good time for investors to purchase, Deutsche Bank AG (DBK) analysts said in a note today. Should property values rebound, Waypoint may earn at least 20 percent from appreciation in an eventual sale of the houses [...]

What are some of the “new options” the government is thinking about? One approach under consideration would be to find private investors to buy foreclosed properties that could be rented out and managed by private management companies (source). Another option, that’s admittedly not so new, but a lot easier to implement is SELLING AT A LOWER PRICE!

Here are some Fannie Mae-owned homes that have been on the market for a while, thus primed for seller motivation:

Homes Fannie Mae Needs to Sell in Portland

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Just when you thought housing was dead for good, residential construction mounted an impressive surge. Consider these indicators:

1) Nationwide housing starts in November hit a seasonally adjusted annual rate of 685,000 units, the highest level in 19 months, 24.3% ahead of the November 2010 figure (source: WSJ).

2) In less than eight weeks the stock prices of publicly traded home-builders such as Lennar and DR Horton have gained more than 60%.

3) The Architecture Billings Index, another indicator of future construction, also rose last month. The index stood at 52 in November, up from 49.4 in October. Readings above 50 indicate a rise in billings. The American Institute of Architects, which compiles the index, indicated that the gain is almost entirely due to billings related to residential construction.

Home Building Surge Fueled by Demand for Rentals

Much of November’s increase came from the construction of apartments, town houses and other multifamily developments, evidence that rising demand for rental housing has encouraged developers to begin building again. Starts of residential developments with two or more units saw a 25.3% increase, while starts of single-family homes, which make up about 65% of the housing market, rose 2.3%. A recent survey conducted on behalf of the National Multi Housing Council (NMHC) also appears to support the conclusion that much of the surge in home building is fueled demand for rentals;

67 percent of respondents noted considerable activity, either in the planning stage or actual new construction. In particular, 20 percent said developers are breaking grown on new projects at a rapid clip. Yet even with this increased activity, more than half (54 percent) think new development remains considerably below demand.

2012 Should be a Good Year for Landlords in Portland

Towards the end of 2011 the Portland area had the tightest rental market of any major city in the United States, according to the U.S. Census Bureau. Only 3 percent of apartments here are vacant at any given time—half as many as were available three years ago. Rents have risen 17 percent in the last five years in the Portland metro area, according to the Metro Multifamily Housing Association, a trade group of landlords and rental managers. That’s well above the national average of 12 percent during that same time. In 2011 alone, Portland rents jumped 8 percent – more than three times faster than the nationwide rate.

Will this trend extend into 2012 and beyond? Probably. As a result of the Urban Growth Boundary and a strong focus on condo development (as opposed to apartments), rental supply in Portland is still exceptionally low. According to Willamette Week (a local weekly) Portland is “Renter’s Hell“:

The days of apartment companies offering a month off or free parking are long gone. Apartment managers and landlords see people lined up outside rentals, many with applications and blank checks in hand. Desperate renters are finding places have been rented within minutes after being posted on Craigslist. Some renters have offered to pay above the advertised rent if it means they can land the place.

Sounds like all the right ingredients for a prosperous year of the Landlord!

Bank-Owned Condos For Sale in Portland

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Here’s a sampling:

Cash Only Homes For Sale in Portland

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Price Just Reduced by More Than $20,000

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Here’s a closer look at what’s currently available in the sub-100k category:

3-Bedrm Portland Homes for Less than 100k

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Knowing that a seller is motivated can signal to buyers that the seller will show some flexibility in dealing with your offer, as is the case with these homes for sale in Portland:

Motivated Sellers for Homes in Portland, OR

This list originally included nine listings. If you are seeing less than nine listings, some will likely have sold in the mean time.

Plenty of Buyers Underestimate the Importance of Proximity to Schools
Prospective home buyers don’t always think about schools when looking for a home especially when they don’t have children or they’ve grown up and moved out. In fact, according to the 2010 National Association of REALTORS® Profile of Home Buyers and Sellers, only 25% of home buyers listed school quality and 19% listed proximity to schools as deciding factors in their home purchase. Nonetheless, the impact of schools on property values is well documented, and previous research has established that people bid more for houses in high-performing school districts.

Good Schools can Insulate Homes from Declining Values
What role does proximity to good schools play in a declining market? When housing markets go south, “areas with exceptional schools tend to hold their value better than the market overall,” says Michael Sklarz, president of Collateral Analytics, a Honolulu-based firm that specializes in real estate data analysis. Sklarz’ nation-wide research revealed that home prices have dropped in areas with good schools, but the declines are typically nowhere near the levels in their surrounding metro areas:

In Irvine, Calif., a city that regularly gets national attention for its quality schools, average price per square foot has fallen 18% since its 2006 peak, but prices in the greater metro area surrounding Irvine fell 33%. The same goes for Edina, Minn., where prices per square foot are down about 14% since their peak, versus 27% for the greater Minneapolis area. And in the brainy town of Andover, Mass., prices are down just 4%, versus more than 16% for the Boston metro division.

Similarly , Ken Corsini at Georgia Tech undertook a research project to study the effects of the recession on housing values in Metro Atlanta. The purpose of the research was to identify changes in the demand for certain characteristics of residential properties as the market was falling. Looking at approximately 150 home sales from August 2006 and 150 home sales from August 2009, Corsini concluded that:

…properties near schools with a rating of 4 or 5 stars were almost completely insulated from declining values while those near schools with 1-3 stars experienced massive losses in value over that 3 year period.

Clearly there are various factors at play here…and plenty of room for debate ranging from “what makes a good school” to “how much are property values in fact influenced by good parents”. Regardless of where you stand on these matters, you’d be remiss to underestimate the importance of schools – especially in an age of budget cuts and bankrupt municipalities, where the gap between successful and under-performing schools is likely to widen.

Finding out More about Schools
So, what research should you be doing as you are looking for a home to buy? If you don’t have children and don’t plan to have any while in this home, you likely can get a comfort level after doing only some basic research. Take a look at GreatSchools and SchoolDigger: along with useful statistics, GreatSchools will rank the schools on a scale of 1-10 and also posts reader reviews; SchoolDigger ranks on a 5-star system and also shows rankings by test scores. Homes for sale in a school district with unusually low rankings compared to surrounding school districts shouldn’t necessarily be eliminated but should give you pause and perhaps reason for further research. And remember to check the availability of nearby Private Schools- a quality private or charter school can raise property values as well.