IBJNews

Investor home purchases raise rental concerns

Back to TopCommentsE-mailPrintBookmark and Share

Thousands of houses in Indianapolis and surrounding counties have been bought by investors in the past year, driving up prices and fueling residents' worries about what the future holds for their neighborhoods.

The mass purchases by big investors have fueled a 19-percent increase in sales of existing homes in the past 12 months. About half the increase is due to the investor activity.

Jim Litten, president of the residential division at F.C. Tucker, estimated that more than 10 percent, or 2,700, of the 27,000 homes that sold in the area in the past year were bought by institutional and other investors.

"They're buying a ton of homes," Litten told The Indianapolis Star.

The buyers aren't home flippers, who flooded the market during the mortgage meltdown in 2006-08. Most intend to rent out the homes they've purchased, many of which were sold at sheriffs' sales.

The more than $400 million the investors have spent in the past year has driven down the housing vacancy rate and shored up prices, which dropped 15 percent between 2003 and 2011 but have risen nearly 2 percent since then.

But it's also made some neighborhoods more of a rental market in Indianapolis, which has seen its homeownership rate drop from a high of 79 percent in 2006 to 67 percent.

Christopher Stark, who bought a Noblesville house with his wife in 2004, said he is worried about how American Homes 4 Rent's plan to convert houses on his curved street to rentals will affect resale values.

Neighbor Dan Ropte said he shares Stark's concern but said the California-based company offered him $5,000 more for his three-bedroom house than an agent wanted to list it for. The $125,000 deal was too good to pass up, he said.

"They pay cash, and you don't have to do an appraisal," he said. "And they didn't want anything fixed."

Some mortgage brokers expressed concern that the purchases could distort the market.

When the investor groups decide to put their money into "something else bright and shiny, we're going to see a false equity raise, and then the bottom's going to fall out," said Lucy Brenton, a mortgage broker and board member of the Central Indiana Real Estate Investors Association.

Indiana's low housing prices make it an attractive market for investment groups, said Lance Rhoades, a broker-owner for the Re/Max Centerstone realty office in Hendricks County.

American Homes 4 Rent, for example, has paid an average of $149,000 for its Indianapolis houses, the lowest per-home price among the eight largest markets in which it has bought houses.

Rhoades called the institutional money a "mixed blessing."

"It's kind of got a nasty connotation: Out-of-towners coming in and buying up properties. I've had 'em come to me and say, 'I'm looking for 100 homes.' "

On the other hand, Rhoades notes: "It's not all bad because it's pushing prices up a bit."

ADVERTISEMENT

  • Indy Office Is A Disaster
    The Indy office is horrific to deal with. They never answer calls or emails. You can get nothing done and they violate the laws without regard. Never rent from these people. They are a nightmare to deal with and the staff is completely incompetent.
  • Sounds familiar...
    ...mold, electrical problems, sheisty investors, but what about non-compliance with health inspections, too? I truly hope the local FBI is at least looking into any groups/people passing improperly maintained homes onto renters. I, too, can personally attest to a far-too similar predicament in 2012.
  • AH Is A Scam. Why? Well I'm in one let's count the ways.
    After searching for homes for nearly a year we found a couple of homes that was listed by American Homes for rent we then inquired on a broker to assist us the broker ended up showing us over 15 homes in which we like a lot of them but we ended up being a minority and there were other problems including the factor of the bare bone of the house well we take the house out thought we knew about it but boy were we in for a surprise not more than a week later we have water busting everywhere we have things leaking we have mold we have entire rooms without electricity our dishwasher which was about a 400 500 dollar dishwasher heating element went out and instead of replacing the $50 part they trashed the nice dishwasher that had recently been put in and replace it by a apartment dishwasher that you can go and get for $110 anywhere which barely sprays any water that wastes is water consumption and doesn't even wash your dishes and I'm talking about after you scrub the food off of them first and just want the dishwasher to clean them off and it can even do that that's been a month and they refuse to do anything worry are about 3 To re fuse to pay rent and by the way this is the fourth month without electricity and several rooms and I mind you it's a minus 30 here on top of that the house next to ours is empty and has been for a while its on for closer these houses are 3000 square feet homes so they're not small but they are CPT Morgan homes so that says it all American homes for rent went in and bought this home at a whopping hundred and forty nine thousand and put us at a price tag of 1400 dollars a month we really did not like the price but we like the location and needed to live somewhere quick out of the house we lived in was sold however we have been harassed daily because again we are Caucasian and a minority we are the only Caucasian on the street I've had my car damage I've had threats and to top it all off American homes is up charging our rent 1400 dollars and double charging our bills to the home as they're charging us for everything sewer water trash now I understand water and electric things of normal nature when it comes to maintaining a home but this is ridiculous when it comes to rental you should not have to be build an additional $800 a month in bills put in your home that is not even worth $150,000 at a crazy monthly payment out of our pockets of 2200 dollars minimum we call these jokers daily telling them everything that's going on we are cold there's no proper water I am sick and been to the hospital because of the mold this is just an outrageous crime being in the mortgage business I should have paid more attention to the transition and demanded an appraisal because if I would have known that they do not do an appraisal on this house and they just bought it and guess a price when these people originate from California when the prices are inflated over there this house should not be charged more than a thousand dollars a month and American homes for rent should pay for the Hell we've been put through.
    • REITS
      I have come across some of these out of town owners funded by a REIT. These homes will only be rentals and not rehabbed to be resold. The upgrades are barebones at best,interior paint and carpet. I don't think there will be much of a return for the investor, and would not want to invest in such a program, and see no benefit to the neighborhoods. These companies are very difficult to deal with.
    • Home Buyers
      More power to these absentee landlords. As long as they keep the properties up, it's all good. But will they? Highly doubtful.
    • Trashy Rental Home?
      I take offense to the notion that all renters and rental homes are "trashy". I had to move in a moments notice and did not want to make a hasty purchasing decision. I am renting a nice home that had sat on the market for 7 months without a nibble. The owner was more than happy to rent me the house so he didn't have to cover the mortgage and other expenses. I might even end up buying this home - it's a win win. I suppose most of you would rather see these vacant homes stay vacant and end up being a haven for crime and possible future demolition? Not every rental is trash and not every tenant is trashy.
    • Susan
      Susan- you are in luck. most of them don't want old homes like you have so you won't have to worry about of these investors being interested and you can keep your family heirloom
    • Vinyl Implosion
      Aren't they already owned by out of town lenders or are about to be? This is the free hand of the marketplace. Many peeps in these homes should have been renters in the 1st place.
    • Bigger Picture
      "...When the investor groups decide to put their money into "something else bright and shiny, we're going to see a false equity raise, and then the bottom's going to fall out," said Lucy Brenton, a mortgage broker and board member of the Central Indiana Real Estate Investors Association..." She should know that it requires a buyer to liquidate those holdings! Of more concern is leveraging the neighbors out.
    • Give my sister what the house is worth or back off....
      They want you to give them the property, lol. They can be paying a fair price, that just won't do, lol.
    • No going to happen
      As god is my witness this will not happen to my childhood home. My father just died 8 weeks ago and the 101 year old home will not be bought by someone out of town or foreigner to turn it into a trashy rental. Over my dead body. I grew up there, played there and my parents lived there for 65 years. The will not "pave paradise and put up a parking lot". Give my sister what the house is worth or back off.

      Post a comment to this story

      COMMENTS POLICY
      We reserve the right to remove any post that we feel is obscene, profane, vulgar, racist, sexually explicit, abusive, or hateful.
       
      You are legally responsible for what you post and your anonymity is not guaranteed.
       
      Posts that insult, defame, threaten, harass or abuse other readers or people mentioned in IBJ editorial content are also subject to removal. Please respect the privacy of individuals and refrain from posting personal information.
       
      No solicitations, spamming or advertisements are allowed. Readers may post links to other informational websites that are relevant to the topic at hand, but please do not link to objectionable material.
       
      We may remove messages that are unrelated to the topic, encourage illegal activity, use all capital letters or are unreadable.
       

      Messages that are flagged by readers as objectionable will be reviewed and may or may not be removed. Please do not flag a post simply because you disagree with it.

      Sponsored by
      ADVERTISEMENT

      facebook - twitter on Facebook & Twitter

      Follow on TwitterFollow IBJ on Facebook:
      Follow on TwitterFollow IBJ's Tweets on these topics:
       
      Subscribe to IBJ
      ADVERTISEMENT