Blackstone Cannonballs Into REI Again -...

Editor’s Note: Dennis Fassett is a former corporate finance executive turned real estate investing “Cash Flow Mercenary.” Dennis specializes in single-family and multi-family cash flow properties and thoroughly enjoys assisting his fellow investors with their own strategies, including how to buy your first apartment building.

As an ongoing contributor to Mogul’s “Market News Updates,” Mr. Fassett provides us with his own unique, lively, and thought-provoking commentary on the timely industry news and events of today that are impacting our industry. And be sure to check out his other super-helpful Market News Updates. For now, enjoy...

From Dennis Fassett, Cash Flow Mercenary...

It wasn’t so long ago that some in the REI community were cursing Blackstone and their Private Equity brethren for being voracious vultures for buying up every deal they could get their hands on in several markets and leaving nothing left to rehab and flip.

So much so that in just a couple of short years they’ve become the largest landlord of single-family homes in the U.S., having spent roughly $8 billion over the Past two years buying 43,000 homes.

And much to our collective consternation – they overpaid (at the time) for just about every single one of them.

It got so bad that those of us in markets they hadn’t yet discovered were keeping our heads down and being quiet so as to not draw attention to our market.

goodguys But now – Blackstone is back. With a vengeance.

But to paraphrase a line from the movie Megamind: Code - I guess they’re the good guys now.

Pinch Me – I’m Dreaming

I actually had to read the article about Blackstone’s return several time to make sure there was no fine print and that it wasn’t published on April 1st. And even though the piece checked out, I’m still having a hard time believing it.

The title of the piece was "Blackstone Establishes Single-Family Buy-to-Rent Lending Platform.”

And believe it or not, their purpose is to "provide residential buy-to-rent mortgages for property investors, focused exclusively on the financing needs of single-family home investors.”

Yeah, they really said they want to focus on the financing needs of single family home investors.

If you own rentals, when was the last time you heard someone say that? If you said “never” then you’re in the ballpark.

For my own single family house portfolio, I got my 10th conforming mortgage like 15 minutes before they reduced the limit to four.

I’ve been using private investors ever since, and I’ve also been talking to banks near and far to try and talk them into doing more mortgages for me. I mean, I have a day job, great credit, I have reserves, my houses are all rented, and my business on paper would be bankable in pretty much any industry segment.

Except rental real estate.

So this is huge. And it gets better.

One of the officers at the company stated:

"We see a great opportunity to fund small-and -medium-sized investors in the single-family space to help them expand their portfolios.”

And the president went on to say that:

"We saw a gap in the market where there was a lack of lending products for smaller investors looking to finance their single-family home portfolio. Few financing sources currently exist for this very significant pool of investors and B2R solves that problem.”

Yeah, it’s a Captain Obvious statement. But geez, it hits me right where I live so I can overlook it this time.

The Nuts and Bolts

I went on their site and checked out what they had to offer.

Here’s a description of what they do:

They offer 5- and 10-year mortgages on portfolios of residential rental properties with a minimum of 5 units.

They can either refinance your existing portfolio or finance the purchase of portfolios of rental investments that are currently leased.

They will lend on a wide range of residential rental property types including single-family homes, 2-4 family homes, townhomes, condominiums and multi-family apartment buildings

The downside is that they only lend in 46 states. But they will lend on residential rental properties throughout those states. I have a call into them to find out where they don’t lend and I’ll post it in the comments when I find out.

The kicker though is that these are asset based loans. That means they lend primarily based upon the value and cash flow of the underlying collateral, and they do not review the personal debt to income ratios of our applicants.

And get this - they require that the properties be held in an entity such as an LLC or a corporation.

Oh - and there’s no seasoning. They offer non-recourse loans. There is no ‘due on sale’ clause so the loans are in effect assumable. And they don’t limit cash out refis.

Wow. My head is still spinning.

These guys are the anti-bank when it comes to financing rentals. Except for the shorter loan terms, I couldn’t have designed a better program myself.
So if you’re buying single-family rentals, or you want to start, these guys are worth talking to.