Overview of U.S. Single-Family Residential Investment Strategies

Abstract

This article focuses on describing the recent granular strategies pursued by investors to get closer to the active value creation activities in U.S. single-family residential investing. Since the onset of the credit crisis, alternative and distressed asset managers have employed a variety of strategies in the U.S. residential space to achieve attractive returns. The strategies have included non-agency RMBS, non-performing non-agency whole loans, REO-to-flip, and REO-to-rent. Lately, investors have also looked into the creation and/or recapitalization of originators, servicers, and purchasers of mortgage servicing rights. Fund managers and sponsors have used hedge-fund and private-equity style vehicles but are increasingly exploring public REIT (real estate investment trust) investment vehicles to also capture the enterprise value of the specialized infrastructure they have built. This article will provide general insights and an overview of the new opportunities being pursued and the requisite infrastructure and expertise for executing them. With millions of residential borrowers still in serious delinquency and an even-larger population with the prices of their homes still below their loan amounts, distressed residential properties and loans are expected to remain an area of interest for investors with managers developing new strategies to exploit them.

TOPICS: MBS and residential mortgage loans, real assets/alternative investments/private equity