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It’s About Time: JP Morgan Enters the Housing Slumlord Trade

February 4, 2013
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Source: Michael Krieger

It was just a matter of time before the most powerful crony capitalist bank in America decided to join the housing trade. Making money running the food stamp program just wasn’t enough for Your Crony Highness Jaime Dimon and company, it’s time to join his financial oligarch brothers in the bidding war to corner the housing market and become your overlord. That way they can control how you eat (food stamps) and where you sleep. It’s become very clear what the large financial interests in these United States are attempting. Funnel all the low interest crony American money, with a dash of Chinese laundered money, into the “housing recovery.” From Bloomberg:

JPMorgan Chase & Co. (JPM) is giving its wealthiest clients the chance to invest in the single-family rental market after other investments linked to the U.S. housing recovery jumped in value.

The firm’s unit that caters to individuals and families with more than $5 million, put client money in a partnership that bought more than 5,000 single family homes to rent in Florida, Arizona, Nevada and California, said David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank. Investors can expect returns of as much as 8 percent annually from rental income as well as part of the profits when the homes are sold, he said.

The bank’s wealthy clients are joining a growing number of private-equity firms and individuals buying rental homes in the regions hardest hit by the U.S. housing crash. Blackstone Group LP (BX) has spent $2.7 billion, and said last month it accelerated purchases as home prices rise faster than anticipated. Even after home values in November gained by the most in six years, investors are wagering on rental properties as an alternative to housing-related stocks and mortgage debt that’s already soared.

The strategy is similar to institutional buyers including Blackstone, the world’s largest buyout firm, Thomas Barrack’s Colony Capital LLC, and Oaktree Capital Group LLC. (OAK) They’re aiming to profit from low prices on distressed properties, often those in foreclosure and sold at auction — and the demand for rentals from people who don’t want to own a home or can’t qualify for a mortgage.

Now here’s where the article gets really interesting.

“It’s hard to find a private-equity firm on the planet that doesn’t have a strategy in this space,” Gary Beasley, chief executive officer at Waypoint Homes, said last week at the American Securitization Forum’s annual conference in Las Vegas. The Oakland, California-based company has bought homes in California, Arizona, Illinois and Georgia.

Sure seems like the right time to buy housing. You know, after every single pool of aggressive private capital in the nation and abroad is already bidding.

Now take a look at how poor the returns are. This is what happens when…

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