Investors losing appetite for distressed homes?

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The CEO of Carrington Holding Co. LLC — who helped lead the hedge fund charge into the “REO-to-rental” business — says rising home prices and competition from hundreds of institutional and international investors make it harder to find deals that pencil out.

Carrington Holding CEO Bruce Rose says that instead of buying more single-family homes as rentals, the company has moved into nonperforming loans, buying about $4 billion worth last year.

“We just don’t see the returns there that are adequate to incentivize us to continue to invest,” Rose told Bloomberg of the REO-to-rental game. “There’s a lot of — bluntly — stupid money that jumped into the trade without any infrastructure, without any real capabilities, and a kind of build-it-as-you-go mentality that we think is somewhat irresponsible.”

Bloomberg notes that another $31 billion hedge fund, Och-Ziff Capital Management Group LLC, has also stopped buying rentals, but that the biggest player in the game — Blackstone Group LP — continues to add to its holdings of 26,000 homes.

Source: bloomberg.com.