Years after the housing bubble sapped home prices, investors are taking advantage of the new rental economy.
As a refresher, here’s how hedge fund Magnetar Capital LLC (reportedly) made money during the financial crisis: 1) Create collateralized debt obligations, which group mortgage bonds, and dice them into securities with varying degrees of risk that helped engender a housing bubble, and then 2) bet against some of those CDOs as part of an investment strategy that would pay handsomely if the system crashed.
Fast forward a few years later, and Magnetar has a new genius investment strategy for today’s housing market. Simply go into the communities hit hardest by the crash, buy up all that cheap juicy real estate, and rent it out to the common folk who, you know, can’t afford to own anymore.
Bloomberg’s Heather Perlberg (no relation) and John Gittelsohn have a deep dive into Magnetar’s scheme in Huber Heights, Ohio, where the hedge fund is now the largest landlord in the small Dayton suburb. From Bloomberg:
Private-equity firms and hedge funds have bought as many as 200,000 homes across the U.S., typically in areas hardest hit by the housing crash, to profit from soaring demand for rentals. What makes Magnetar’s investment unique so far is its focus, buying one in 11 homes in the Ohio suburb, magnifying its influence over the residents and the town’s finances.
The best part? Magnetar’s management company “applied for the largest cut to property tax assessments in the county’s history.”
If approved, the appeal would reduce tax collection by $US1.39 million, $US800,000 of which would come out of Huber Heights City Schools, the county auditor told Bloomberg.