>"Throughout 2012 and 2013, representatives of private-equity firms flew to auctions all over the Sun Belt buying in bulk and squeezing out individual investors. By October 2012, as Stephen Schwarzman, the chief executive of Blackstone, said, the company was spending $100 million on homes a week.

Strategic would buy the property, obtain possession (often by offering occupants “cash for keys” — a few thousand dollars to move out as soon as possible), rehabilitate the property to Colony standards and then manage it for a year or two until Colony was ready to take over. The deals were so good, in fact, that the gush of inventory lasted only a couple of years; the market recovered, in part because of these investors. “Between Invitation Homes and Colony, that created a bottom for the market in Los Angeles that it hadn’t seen for the prior two years,” Baer said. Researchers at the Federal Reserve agree.

But even at the time, some saw things differently. “Neighborhoods that were formerly ownership neighborhoods that were one of the few ways that working-class families and communities of color could build wealth and gain stability are being slowly, or not so slowly, turned into renter communities, and not renter communities owned by mom-and-pop landlords but by some of the biggest private-equity firms in the world,” says Peter Kuhns, the former Los Angeles director of the activist group Alliance of Californians for Community Empowerment. Around Los Angeles, the companies scooped up properties in the majority-minority areas of South Los Angeles, the San Gabriel Valley, the San Fernando Valley and Riverside.

Landlords can be rapacious creatures, but this new breed of private-equity landlord has proved itself to be particularly so, many experts say. That’s partly because of the imperative for growth: Private-equity firms chase double-digit returns within 10 years. To get that, they need credit: The more borrowed, the higher the returns.

When credit was tight after the financial crisis, the acquiring firms, led by Blackstone,

figured out a way to generate more of it by creating a new financial instrument: a single-family-rental securitization, which was a mix of residential mortgage-backed securities, collateralized by home values, and commercial real estate-backed securities, collateralized by expected rental income.

In 2013, a year after Ellingwood’s home was acquired, Blackstone’s Invitation Homes securitized the first bundle of single-family rentals — 3,200 of them for 75 percent of their estimated value: $479 million.

Those who bought these bonds received

3 to 5 percent in monthly interest

[PDS: That's monthly -- yearly interest is 36 to 60 percent per year]

until their principal was returned (generally in five years).

[PDS: A little under three years if 36 percent -- and less than two years -- in the case of 60 percent...]

Blackstone put some of that $479 million toward repaying the short-term credit lines it took out to buy the houses. Because the value of the portfolio of homes had increased since their acquisition, Blackstone could extract much of the difference as cash and buy more homes. Blackstone issued a second bond package of nearly $1 billion six months later. Other REITs like Colony American Homes quickly began doing the same, rolling homes like Ellingwood’s into a $486 million securitization.

With the securitized homes, the rental income now needed to cover not only the mortgage but also the interest payments distributed to bondholders — creating an incentive to keep occupancy and rents as high as possible. In fact, Invitation Homes’ securitized bond model assumed a 94 percent paying-occupancy rate, putting pressure on the company to evict nonpaying tenants right away.

The growth imperative became even more urgent as the REITs began to go public. Since a rebound in the real estate market made acquiring new properties more expensive, companies looked for growth from their tenants: i.e., by raising rents, cutting down operating costs and maximizing efficiencies. In a 2016 fourth-quarter earnings call, Tuomi, the chief executive of Colony Starwood (formerly Colony American), declared that “not getting every charge that you are legitimately due under leases” — termination fees, damage fees and the like — is “revenue leakage.”"