Bloomberg News
Private Equity Has Too Much Money to Spend on Homes *By John Gittelsohn on June 13, 2012
From the article:
“You’ve got Warren Buffett saying he’d buy 200,000 homes if he could find the operational ability to do so,” Warren said. “The reverse of the conversation is, where the hell do you think you’re getting 200,000 properties?”
Gathering investment money in an artificially low interest rate environment doesn’t seem to be a major challenge. The challenge may be getting a decent rate of return after management fees, the costs of acquisition, rehabilitation, and management of the properties (I believe this is the operational ability to which Mr. Buffett is referring.
It seems to me that traditional real estate management firms may have a better undertanding of the challenges of maintaining and managing a large number of widely dispersed single family residential rental properties.I had to chuckle when I read, "Nobody’s ever done this on a scale before,” Michael Burns, chief executive officer of the Alaska Permanent Fund, which had $41.5 billion under management at the end of the first quarter, said in a telephone interview from Juneau, Alaska.“These people’s background is in public storage, which is about as close as we could find.”