Your Next Landlord Might Be a Buyout Fund

The dealmakers running America’s private equity firms see opportunity in one of the most distressed precincts of the U.S. economy: residential housing. The New York-based real estate buyout fund GTIS Partners will spend $1 billion by 2016 acquiring single-family homes to manage as rentals, founder Tom Shapiro said on Jan. 24. That followed announcements earlier in January that GI Partners, a Menlo Park (Calif.) private equity fund, expects to invest $1 billion and Los Angeles-based Oaktree Capital Management will spend $450 million on similar housing deals. “We are starting to see this as a billion-dollar opportunity,” says Shapiro.

Why the enthusiasm? For starters, the U.S. government is eager to clear out the foreclosed properties now on its books. The Federal Reserve, in a study released in January, urged the government to explore ways to reduce the glut of bank-owned homes, including by selling them to investors to rent out. On Feb. 1, Fannie Mae, the government-controlled mortgage agency, extended the first invitation to investors to apply for joint ventures to buy bulk foreclosed homes and manage them as rentals. The Obama Administration hopes to market some of the 210,000 homes repossessed by Fannie Mae, Freddie Mac, and the Federal Housing Administration, which insures mortgages, during the first quarter of 2012.