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Will big asset managers crowd small investors out of single family rentals?

One result from the recent housing crisis has been growing interest in the nation's rental market. There has been a major shift away from home ownership towards renting, and the big guys have been paying attention, moving into the market to gobble up as many rental properties as possible.

It is easy to understand why people are opting to rent instead of own, and there are multiple reasons why we are seeing the shift.

One is the amount of foreclosures that took place in recent years. People who were forced out of their homes due to foreclosures are going to find it tough to get another mortgage for a few years. In most cases, their only option is to rent. Even if they could get another mortgage, chances are that they are psychologically just not ready to take on another mortgage.

Falling home prices are another reason people who would otherwise be entering the market may decide to hold off and opt to rent. Everyone knows at least one person who is underwater on his or her mortgage. Home prices have been in recovery, but have still not corrected to their pre-recession level. Hearing people talk about how much their homes have depreciated can be a good enough incentive for people to decide not to purchase a new home.

A final reason is tighter lending standards by banks. The foreclosure crisis hurt lenders, and as a result it is much more difficult to get credit that it was before the crisis. The Federal Reserve has tried to loosen the mortgage market with near-zero interest rates, but loans are much harder to get than they were a few years ago.

This has resulted in single-family home prices falling further than rental rates, which has attracted a number of large asset management firms.

Blackstone Group (BX) has emerged as one of the biggest players in this new market. Since last year, the company has poured $3.5 billion into buying 20,000 rental properties, and it is eager to buy more. The company recently announced that it had expanded a credit line from $600 million to $2.1 billion as it rushes to buy as many properties as it can while prices remain low.

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.