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JPMorgan Chase & Co. is giving its wealthiest clients the chance to invest in the single-family rental market after other investments linked to the U.S. housing recovery jumped in value.
The firm’s unit that caters to individuals and families with more than $5 million, put client money in a partnership that bought more than 5,000 single-family homes to rent in Florida, Arizona, Nevada and California, said David Lyon, a managing director and investment specialist at J.P. Morgan Private Bank. Investors can expect returns of as much as 8 percent annually from rental income as well as part of the profits when the homes are sold, he said.
The bank’s wealthy clients are joining a growing number of private-equity firms and individuals buying rental homes in the regions hardest hit by the U.S. housing crash. Blackstone Group LP has spent $2.7 billion, and said last month it accelerated purchases as home prices rise faster than anticipated. Even after home values in November gained by the most in six years, investors are wagering on rental properties as an alternative to housing-related stocks and mortgage debt that’s already soared.
“The traditional places people might look – homebuilder stocks and appliance makers – probably aren’t the best places for new investments,” said John Buckingham, chief investment officer at Al Frank Asset Management in Aliso Viejo, Calif., which oversees about $4.5 billion. “They’ve had fantastic runs.”
PulteGroup Inc., the largest homebuilder by market value, was the biggest gainer on the Standard & Poor’s 500 Index last year, rising 188 percent, helping an index of 11 builders more than double since the end of 2011 and raising concern among analysts, including Michael Widner of Stifel Nicolaus & Co., that growth is already priced in.
Whirlpool Corp., a home-appliance maker, was the third-best performing stock in the S&P 500 Index last year, rising 114 percent, and subprime-mortgage bonds gained more than 40 percent.