¶ … Entrepreneurs' unusual tactic: Buying up homes by hundreds" is an interesting look at an investment scheme that not too many companies have attempted. From a financial management standpoint, it seems to make at least some sense, because it uses lower priced homes as leverage for the future, hoping the homes will eventually appreciate, and renting them out will earn returns until they are sold. Property management is a difficult field, as the article notes, and there are inherent problems with rental properties, from damage done by renters to the turnaround of tenants and finding new ones quickly and effectively. If the company can afford to hold on to the houses long enough, they will certainly appreciate and make the company money, even in this time of falling home prices and delinquent loans. That is a big worry here. If the company carries their own paper on loans for the sale of these houses, they could be in real financial trouble, because they could end up with many defaults on their hands, and that would spell disaster for their company.

I think this type of financial management plan must depend on very long-term investment solutions and options, and that it is not something to enter lightly or without the proper capital and time. With the downturn in housing, many of these homes will be difficult if not impossible to sell right now, because the average middle-America family who are the market for these homes cannot afford them without the sub-prime lenders who have already done so much damage to the housing market. That means these homes will have to continue to be rentals, and that eats up more administrative and repair costs. Thus, from a financial management standpoint, this seems like a good program, but only if the company is capitalized enough to weather the lending storm that is hitting right now, and is poised to make their investments last over time, rather than pay off rapidly.