When I was a kid growing up in the 1950's and 1960's and you needed anything from a 2 X 4 piece of pine to BB's for your air rifle, you got on your bike and went to the locally owned neighborhood hardware store and bought what you needed from Mr. Whatshisname behind the counter because he owned the place.
In my high school days when you needed a new shirt or pair of slacks or penny loafers, you went to the locally owned men's shop in downtown St. Pete and bought what you needed from somebody who had made a career out of owning that downtown menswear shop ... and he knew your size as soon as you walked in.
Whenever we had a big date and wanted to impress our girlfriends, we always made reservations at some locally owned restaurant and got a table overlooking the Gulf of Mexico before we went to the locally owned theatre to see the latest movie.
Now, hardware stores have been taken over by chain home improvement centers. The downtown menswear store has become the chain department store. The family owned restaurant and theatre have been taken over by the chain restaurant and multiplexes.
The big boys have simply killed the little guy.
Survival of the fittest, I guess.
So, now I read in Friday's
Tampa Bay Times that one of the last bastions of individual entrepreneurship in this country -- real estate investing -- is about to be threatened by more big boys with ultra-deep pockets.
One of the world's largest equity firms, Blackstone Group, is planning to start buying distressed single-family homes in the Tampa Bay area and convert them into rental properties because the potential short and long term profit is so outstanding. More and more, we are apparently becoming a nation of renters rather than homeowners.
That would be okay if it weren't for the scale of their investment: Blackstone is going to spend $1-billion for distressed properties. Blackstone plans on buying up to 15,000 homes in this area over the next three years.
If you were planning on buying one to five properties over that same time period just to keep the wolf away from your door or supplement your retirement income, well, you better develop a new investment strategy.
Blackstone is about to change the game much the same way chain stores have changed the retail, restaurant and entertainment industry. When Blackstone starts buying, there may not be anything left for the individual investor to consider except beat-up homes in iffy neighborhoods that cost as much to repair as they do to buy.
Why?
Because Blackstone's money is bigger than your money. Right now, Blackstone supervises over $190-billion in assets. Let me demonstrate that figure for you:
$190,000,000,000. Whatever they want to buy, they can buy. They can outbid you. Simple as that.
Blackstone can outbid the individual investor for bank foreclosures. Blackstone can cut deals to buy up whole neighborhoods of foreclosed properties in places like New Tampa from banks before you even know the homes are available to be sold. Blackstone can wait forever to close on that short sale that you need to close fast so you can start getting rental income.
And Blackstone is not alone in this! Other big boy investment firms and hedge funds are going to do the same thing here. Eventually, they will probably bundle the rented properties into trusts or securities and sell them to other big boy investors or to governments like China, Russia or Brazil. Has kind of a familiar ring about it, don't you think! Except they used to call those "mortgage-backed securities".
Now, the problem with all this is that regular real estate investors are going to have a very hard time competing for property ownership against companies that can make Bain Capital look like poor-boys. It's going to become increasingly difficult for mom-n-pop investors to obtain the kinds of properties they want, especially the 3-bedroom/2-bath homes in good condition that are under 20 years old which is what Blackstone is targeting ... and they want
lots of them!
If you are a real estate broker with loads of foreclosure and short sale listings, you need to get on the phone and contact Blackstone right now. Sorry, I don't know the number. Most likely, if you make that call there's a sale in your immediate future. The
Times has reported that Blackstone has already closed on 200 such homes and have something like 700 more under contract as of today.
On the other hand, if you are an individual investor or home buyer looking for a deal, you need to get your property bought ... and I mean
now. No more waiting for the market to "bottom out". No more trying to negotiate the lowest price with the mortgage company on that short sale. No more low-ball offers on those foreclosures or HUD properties.
The individual investor in Tampa Bay is about to get squeeeeeeeeezed!
Why?
Because the big boys have come to play. And that's a game changer.
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