Wall Street Is Muscling in on the Real Estate Market

One of the best-performing asset classes this year is residential real estate. According to most real estate indices like the Federal Housing Finance Agency (FHFA) or Case-Shiller, home price appreciation has risen by anywhere between 18.5% and 19.5%. While this is below the 24% year-to-date rise in the S&P 500, it still has been a great year for house prices.

While individual landlords have been buying properties for rent, we have also seen a lot of professional money get into the buy-to-rent space. Investment giant BlackRock (NYSE: BLK) bought Home Partners of America for $6 billion. Other major investment firms have raised money to purchase rentals.

For institutional money managers, this strategy is quite attractive because they earn rental yields on the properties, deduct depreciation (which can reduce taxes), and benefit from home price appreciation. I recently wrote a piece on single-family rental real estate investment trust (REIT) American Homes 4 Rent (NYSE: AMH), where I discussed how much home price appreciation has added to the company's intrinsic value.

Source Fool.com