Snapping Up Foreclosures on a Whole New Scale

Hot on the heels of Fannie Mae's plan to turn foreclosures into rental homes, Oakland-based Waypoint Real Estate Group is preparing to buy homes on an unprecedented scale. The firm has bought about 1,200 homes since 2008, and plans to acquire 10,000 to 15,000 by the end of next year.

"Nobody has ever tried this on such a large scale," writes Rich, "and critics worry these new investors could face big challenges managing large portfolios of dispersed rental houses. Typically, landlords tend to be individuals or small firms that own just a handful of homes."

Waypoint owes its breakneck pace to an aggressively automated process for appraising homes: the firm sends inspectors out to over 20 properties a day, crunching information about the condition of the house into an iPad to get the inspector out the door with an estimated cost of renovation in roughly 20 minutes. Waypoint co-founder Colin Wiel likens the system to a production line: "We think this is a huge opportuity and we are going to treat it like a factory."

In spite of concerns over the risks of managing so many properties, communities may benefit from the large-scale acquisitions. "If you have a lot of foreclosures in one community you will improve everybody's home values if you take them off the market," said Diane Swonk, the chief economist at Mesirow Financial. "If those homes are renovated and even rented, it is a lot better than having them stand empty."