Blackstone is originating loans of $500,000 to $50 million to small and midsize investors buying a minimum of five single-family rental properties. Each home must be worth at least $50,000, and Blackstone will do a lot of homework, using local appraisers to determine if the property’s cash flow covers the debt service.
“We underwrite our loans on a very conservative basis … like a commercial real estate loan,” Beacham said, adding that borrowers should have 25 percent to 30 percent skin in the game on each house. “We confirm the lease and the rent on the lease. We think that by underwriting this like a multifamily building, on pools of houses with more sophisticated borrowers, we have a pretty conservative loan product.”
Large institutional investors such as Blackstone, Colony Capital and American Homes 4 Rent have flooded into the market over the past three years, buying up thousands of distressed properties, remodeling and putting them up for rent. As housing prices gain significantly—as they have in 2013—some have claimed that the trade is falling out of favor.
Article source: http://www.cnbc.com/id/101276543