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Is your landlord a hedge fund?

By Judy Martel ·
Monday, August 8, 2011
Posted: 3 pm ET

There's a new type of landlord in town. Instead of the typical mom or pop next-door who will come over to fix the leaking toilet at a moment's notice, your rent collector could be someone you never meet: a faceless investment company in a town far, far away.

There are a number of players snapping up foreclosed single-family homes as investments and renting them, including hedge funds, pension funds and private equity firms. The allure is the return on investment, which, according to the Wall Street Journal, is double-digit.

The WSJ spotlights one investment firm, McKinley Capital Partners, which purchased more than 300 foreclosed San Francisco-area homes over the past two years, and has recently joined with Och-Ziff Capital Management Group, a New York hedge fund. Together, they plan to buy at least 500 foreclosed homes in the next year.

With foreclosed properties accounting for about a third of homes on the market, it's an attractive bet for investors. But what does it mean to renters when the landlord is in it purely for the investment and has no personal interest in the property at all?

There's always the fear that the landlords won't keep up with property maintenance, creating slums. On the other hand, investors have an incentive to maintain these homes in top condition if they want to sell them at a profit when the market improves. Individuals aren't in a position to buy all the foreclosures on the market and President Obama has been considering ways to get them off the market by selling to investors who agree to rent them. The theory is that this could provide an overall lift to the housing recovery.

What do you think about investment companies buying foreclosed, single-family homes?

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