Investing in the Single-Family Home Rental Market

For the first time in Florida history, real estate investment firms are investing in the single-family home rental market, replacing so-called “condo vulture” investors.Singe-Family Home Investment

Private equity funds, hedge funds, and REITs have purchased at least 4,000 single-family homes for the purpose of renting them out. These companies pay cash for a cluster of foreclosed or bank-owned homes, rent them out for a couple years, and then sell them for a profit. This business model works because home prices are low, rent prices are high, and the market is expected to bounce back in a couple years.

These homes are a much better investment than condos because in addition to the eventual payoff when the property is sold, single-family home investors can also make a profit while renting out the homes.

Previously, it was almost impossible to buy homes in clusters because they went on the market randomly and were usually spread out over a wide geographic location. This is no longer the case because the Federal Housing Finance Agency is now selling foreclosed homes in bundles.

Investors also have the option of hiring a local property management company to keep up with maintenance, rent collection and more, making the process even easier.

If you have the venture capital, it is a great time to start a Florida real estate investment company. For foreign investors, this could also be a path to a visa if the investment is sufficient and will create jobs.

Venture Capital to Start a Business

Venture capital is the high-risk investment needed to start a business, and venture capitalists, such as angel investors, are investors who are willing to take these risks in order to receive high returns.

The Wall Street Journal points out a flaw in relying on “angel investors” by noting that only 2% of startup companies who applied to the largest angel-capital group attracted enough attention to even be considered.

In reality 90% of entrepreneurs raised their venture capital on their own through personal savings, business partners, family, friends, bank loans, or other means.

Venture CapitalIf you are unable to raise your venture capital through these means, then you need to get investors. The best way to do this is with a solid business plan. Take the television show Shark Tank, for example. The “sharks” ask the person seeking the investment tough questions such as:

-          How much did you sell this past year?
-          What is your profit margin?
-          Where do you see the business going?

If the business owners cannot answer these questions, they will not get an investment. The same is true in the business world. If you can’t answer these questions, then it will be very difficult to find somebody who is willing to invest in your company or idea.

The most professional way to answer such questions is through corporate documents such as a business plan or company bylaws, which should be drafted by a Business Law Attorney. This gives investors confidence in the professionalism and ability of the business to succeed, which will help them achieve their goal of receiving a return on their investment.

Source: The Wall Street Journal