Say Hello to Your New Landlord, Mr. Bezos: Berkshire Being Sued
REAL ESTATE NEWS — In a torrent of events that feels like a crossover episode between Silicon Valley and Wall Street, Jeff Bezos, the iconic former CEO of Amazon, has ventured into a new domain – real estate. Bezos is backing a startup named ‘Arrived’, which is buying up family homes across the nation to rent them out. This move heralds a significant shift in the housing market, as it introduces a novel way for individuals to invest in real estate, but it also raises concerns about the impact on home ownership and rental markets. | FREE LIST OF OFF-MARKET PROPERTIES
Founded in 2021, Arrived is not your typical real estate company. It operates by purchasing single-family homes and transforming them into rental properties. What’s unique is that anyone can invest in these properties with as little as $100. Initially, Arrived allowed customers to buy shares of individual homes and reap dividends from rental profits. This approach essentially created a decentralized network of landlords. However, with their new “Single Family Residential Fund,” investors can now put their money into a fund that invests in a range of single-family homes, mimicking a Real Estate Investment Trust (REIT).
The rationale behind Arrived’s strategy is simple yet profound. With the increasing unaffordability of homes, more people are resorting to renting. Arrived’s vice president of investments, Cameron Wu, emphasized the focus on properties that offer good cash flow. CEO Ryan Frazier highlighted the chronic undersupply in the single-family home residential market as a driving factor for their business model. The company, which began its journey in Fayetteville, Arkansas, is now expanding into areas like Greeley, Colorado, pursuing properties that present an affordable yet profitable investment.
Arrived’s approach, however, is not without its detractors. Critics point out that while the company is adding to the rental supply, it is simultaneously reducing the number of single-family homes available for purchase. This is a significant concern, given the already strained housing market. The trend of private equity-funded single-family home purchases, which surged post-pandemic, has only compounded the problem. With investors accounting for a substantial portion of home sales in recent years, the landscape of homeownership is undergoing a radical transformation.
The growth of companies like Arrived, while still small compared to giants like Invitation Homes and Tricon Residential, is indicative of a broader trend. Venture capital money is increasingly making its mark on the nation’s housing market. As mortgages become less accessible, these investor-backed companies are stepping in to fill the role of landlords, offering a piece of the action to the average consumer for a minimal investment.
In a somewhat related yet distinct development, Berkshire Hathaway, another titan in the business world, finds itself embroiled in legal troubles. A group of home sellers in the Pittsburgh area has sued local affiliates of Warren Buffett’s Berkshire Hathaway HomeServices, along with Anywhere Real Estate subsidiaries like Sotheby’s and Coldwell Banker. The lawsuit alleges that these companies conspired to artificially inflate home-sale commissions, a claim that raises serious antitrust concerns. This recent case follows a significant jury verdict in Kansas City, where a class of home sellers was awarded nearly $1.8 billion in damages for similar allegations.
This legal battle brings to light the contentious issue of buyer-broker commissions in the residential real estate industry. The current practice, where sellers pay commissions to the buyer’s agent, has been criticized for potentially leading to overcharges and market distortions. The National Association of Realtors, while not named in the Pittsburgh case, has defended this practice, arguing that it ensures efficient and equitable marketplaces.
In summary, the landscape of real estate is witnessing significant shifts, with big names like Jeff Bezos and Warren Buffett at the center of these changes. While innovative business models like Arrived’s offer new opportunities for investment, they also pose challenges to traditional notions of home ownership and rental markets. Simultaneously, the legal challenges faced by Berkshire Hathaway highlight the ongoing debate over fair practices in real estate transactions. As these developments unfold, they will undoubtedly shape the future of housing in America.
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Copyright © This free information provided courtesy Entar.com with information provided by Corey Chambers, Broker DRE 01889449. We are not associated with the seller, homeowner’s association or developer. For more information, contact 888-240-2500 or visit WeSellCal.com Licensed in California. All information provided is deemed reliable but is not guaranteed and should be independently verified. Text and photos created or modified by artificial intelligence. Properties subject to prior sale or rental. This is not a solicitation if buyer or seller is already under contract with another broker.
