REO-to-rental market quickly becoming asset class via REwired

The REO-to-rental market is expected to grow robustly over the next two years, firmly establishing itself as a potential institutional asset class. At least that’s what Keefe, Bruyette & Woods ($15.48 0.01%) is saying, and the market is showing.

Traditionally, the single-family rental market receives its funding from retail or smaller institutional investors. However, as the inventory of bank owned properties increases, so does the interest of investors towards a larger-scale investment in this space.

KBW estimates cash returns on investments in REOs are in the 5% to 7% range, with total returns hitting 15% to 20%. The asset class seems like a perfect fit with secondary market players at first glance because REO-to-rentals offer more tangible cash flow than other distressed properties.

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