By Dr. Samori Swygert
This week, an article was posted on YourBlackWorld.net, about an African American homeowner that lost his home due to unpaid property taxes.
Investors are buying tax liens and obtaining ownership of residential properties nationwide. This strategy is very disheartening to the unfortunate homeowners that may not be able to afford to pay their taxes for whatever reason. This is compounded when we factor in urban renewal, gentrification, and gerrymandering of political districts.
There are hedge-funds and private equity firms that are buying these properties by the bulk! Their goal is to purchase as many homes as possible, and turn them into single family rental homes. These companies are not looking to sell the homes. These firms are maintaining ownership and keeping them as rental assets.
What does this mean? This means there will be fewer residential properties available for you to purchase. Land and homes are tools that generate wealth because you can rent them as they are. Also, the monies you pay in mortgage go to actually owning property. Renters can pay monthly rent and when the lease is up, you own zero.
Houses, land, and estates can be transferred to generations to manage, expand, use as collateral for investments, and convert into home businesses.
You can grow trees and plants, but you can’t grow earth, and this is the dilemma of the haves and the have nots.
Who are the players?
The largest private equity firm, The Blackstone Group (owners of the Hilton Hotel chain), Colony Capital LLC, Cerebrus Capital Management, Oaktree Capital Group LLC, KKR &Co, GTIS partners, Och-Ziff Capital Management LLC, and Waypoint Real Estate Group LLC are the main players in this game of real life Monopoly. However, there are small investment groups and individual investors that are participating in this “LAND GRAB”. The head of The Black-stone Group, Stephen Schwarz-man, is a heavy donor to Republican Superpacs.
What are they doing?
During the housing crisis, so many single family homes went into default, foreclosures, and homeowners went into bankruptcy. Communities across America were decimated when the housing market crashed. Many homeowners had to perform short-sales to try and salvage any piece of investment and dignity of homeownership. Many just walked away from their homes. Now private equity firms such as Blackstone are buying all these foreclosed homes and tax delinquent residences by the bulk. The aims of these firms are to own the property, and strictly rent them to single families. The Blackstone Group has been purchasing through foreclosure auctions, short sales and cash in hand buyouts from smaller local real estate companies.
What are the facts and figures?
According to an article in Bloomberg News, Blackstone has spent more than $2.5 billion on 16,000 homes to manage as rentals from $13.3 billion it raised last year. Black-stone already owns $1 billion worth of homes in October 2012, and Blackstone chairman Step-hen Schwarzman said that the company is spending $100 million a week on houses. The conversion of private property to single family rental homes is projected to be appro-ximately a $3 Trillion market.7 Blackstone is currently the largest investor of single family homes for rent in the following nine markets: Chicago, Northern and Southern California, Detroit, Miami, Tampa, Phoenix, Atlanta, and Las Vegas. Blackstone is also leveraging their strategy by getting a $600 million dollar line of credit from the Deutsche Bank. To understand how strong Blackstone’s money is, they acquired Sam Zell’s Equity Office Properties Trust for $39 billion including assumed debt. A report by Keefe Bruyette & Woods says that $ 6 to 8 Billion dollars can buy 40,000 to 80,000 properties.
Detroit, Mich.,is the bulls-eye and ground zero for these investors and the individual investor. The following case studies were published in a Bloomberg News article. A 32 year old man, Peter Grosso purchased 29 Detroit homes for $90,000. Nate Heaps, a 32 year old investor, purchased 290 Detroit properties for $189,600. Sameer Beydoun, 33 years old, purchased 1,000 Detroit properties for approximately $5 Million with his investment group. Jasmine Mc Morris purchased 332 Detroit homes and paid an average $2,500 per property and sells them to larger real estate investors. There are even investors from England, Cambodia, China, and Australia that are buying into the market.
I would like to inform our audience that there is a formal blueprint for Detroit that these investors are acting off of. The name of the blueprint is Detroit Future City; this is a 50 year plan to bring Detroit back to recovery. The plan is to have green space and farms, assuming the Detroit population will drop to 615,000.
Take Home Message
All individuals that own property need to keep their property. We as African Americans need to practice group economics and purchase this land like Dr. Claud Anderson says. We need to talk with our parents and grandparents and make sure all taxes are paid. Parents don’t buy your son or daughter a car for graduation; purchase them some of these properties to own. Lastly, we need to B.M.F., and not drug deal, but, B.M.F. (Buy. More. Foreclosures). By owning these properties we can actually help struggling families regain wealth buy selling them at a fair market price, as opposed to just a system of rental Feudalism.
http://www.bloomberg.com/news/2013-01-09/blackstone-steps-up-home-buying-as-prices-jump-mortgages.html http://www.bloomberg.com/news/2013-01-16/bargain-homes-lure-buyers-worldwide-to-detroit-mortgages.html http://online.wsj.com/article/
http:/ www.businessweek.com/articles/2013-01-24/detroit-housings-for-sale-and-global-investors-want-inhttp://www.tampabay.com/news/business/realestate/blackstone-to-buy-1-billion-worth-of-tampa-bay-homes-for-rentals/1252624 http://www.nytimes.com/2007/06/01/business/01subprime. html?pagewanted=print&_r=0