Rising home prices spawn new crop of landlords

Mom-and-pop investors are replacing funds that swooped in during recession

With home prices rising and the rate of homeownership plummeting, there’s a new crop of landlords in town.

Small investors — mom-and-pop landlords, if you will — are increasingly scooping up property and treating them as rental investments, Bloomberg reported.

Last year, 37 percent of homes were sold to people who didn’t live in them, according to tax data analyzed by Attom Data Solutions and ClearCapital.com Inc. While the properties could be second homes for some, signs point to mom-and-pop investors increasingly buying properties and becoming landlords.

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In the wake of the financial crisis, private equity firms swooped in and bought cheap homes. Institutions accounted for 7.8 percent of home sales in 2012, notes Bloomberg. But that number fell to 2.9 percent last year, thanks to rising home prices.

Small investors, however, still see an upside to owning rental property particularly in cheaper markets where profit margins can be greater.

What that means for the overall market is still unclear. “On one hand, landlords are filling a need that exists because of the low homeownership rates,” said Daren Blomquist, senior vice president at Attom. But, “They may also be crowding out folks that want to be homeowners but can’t compete with investors.” [Bloomberg]E.B. Solomont