by Dr. Housing Bubble, WealthWire:
The whispers about private equity exiting the rental market are now out in the open. A few reports are highlighting that some private equity investors are testing the waters for an exit via IPOs. Some have asked why it is necessary for these investors to hold onto properties for a few years before exiting. One of the main reasons is for valuation purposes given that it takes a few years to gather enough workable data on say a block of 1,000 homes and their overall vacancy rates, rental rates, and expense ratios. This would be important if this pool of homes were to be converted into an income stream for investors. Yet many are now looking to exit given how hot the stock market is. You want to sell into momentum. A few other key points include rents falling in places like Las Vegas where investor demand has been incredibly high. Is the hot money planning an exit?
Many of the projections that I have seen assumed that rental prices would continue to move up between 3 and 5 percent on an annual basis in many locations. Yet this assumption is being put to the test in many markets as employment growth is still weak and wage growth is nearly nonexistent:
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