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Bailey: Looking to buy a home? Good luck bidding against these guys.

Steve Bailey mug.jpg (copy) (copy)

Steve Bailey

Pity the first-time homebuyer trying to get a foot on the ladder in the Charleston area’s red-hot housing market. Mortgage rates are spiking. Good luck, too, competing with the deep pockets of Dan Rudin or Scott Kelly.

Take 57 Reid St. on the East Side, for instance. It’s a duplex, not unlike the one my family bought half a lifetime ago in Cambridge, Mass. It was in sorry shape, but we moved upstairs and let the tenants downstairs mostly pay our mortgage. Over the years, we fixed it up, bit by bit, allowing us to build our assets through homeownership. We still own that house today.

The house on Reid Street was vacant and in even worse shape than the one we bought. But no first-time homebuyer need apply because Rudin, an investor, got there first and bid $480,000, $30,000 over the asking price. Repairs are underway. College students to follow.

Who is Dan Rudin? It’s hard to say; certainly he’s not saying.

“I am a pretty private guy,” he told me in a brief telephone interview. “That’s why I do everything through partnerships.”

He is also a pretty busy guy who likes downtown Charleston real estate. In addition to snapping up 57 Reid in April, Rudin has bought downtown houses on St. Philip, Thomas, Warren, Bogard and Sumter streets in the past three years and rented them out, property records show.

Most were bought through funds tailored to the tax-advantaged opportunity zones championed by Tim Scott, our U.S. senator. My favorite touch: Rudin registers his companies at an AirBnB on Kiawah that rents for $1,100 a night — about the monthly rent for a one-bedroom apartment in North Charleston these days.

Rudin is hardly alone. He is part of a big move by investors, particularly in Sun Belt states, buying up houses and turning them into rentals. The trend by investors is exacerbating the shortage of houses for sale, pushing up prices and increasingly putting homeownership out of reach for many first-time buyers.

Once the domain of mom-and-pop landlords, single-family homes have become hot commodities among some of the world’s investment giants such as Blackstone Inc. and Starwood Property Trust. They represent a small but growing share of homebuyers: Real estate investors bought a record 18.4% of the homes sold in the United States in the fourth quarter of last year, according to market research company Redfin. That was up from 12.6% a year earlier. In Charlotte and Atlanta, more than 30% of homes were bought by investors in the fourth quarter, Redfin says.

Brookfield Asset Management, a huge, secretive Toronto investment business, owns more than 10,000 homes in 26 cities across the Southeast and the Midwest through its Charleston-based subsidiary, Conrex Property Management.

Brookfield famously bailed out Donald Trump’s son-in-law Jared Kushner from a bad business deal by leasing 666 Fifth Ave. in Midtown New York and paying the entire 99 years of rent upfront. Now, its Conrex affiliate, operating out of the fourth floor of the Charleston Tech Center on Morrison Drive, has been buying and renting across South Carolina.

Real estate records show Conrex owns more than 100 homes in the Charleston area, more than 40% of them in North Charleston. In January, Conrex bought 15 properties, 11 of them on the East Side, in a single transaction valued at almost $20 million, according to real estate records.

Conrex’s website shows the company is constantly buying single-family homes and converting them into rentals. It purchased a four-bedroom house on Eider Down Drive in Summerville in June for $275,000 and was offering it for rent for $2,075 in July. A three-bedroom house on Tanglewood Drive in North Charleston, bought in June for $263,000, was available for $1,750 a month. Four of its new East Side properties were also for rent.

Time will tell if Conrex is a good landlord. Let’s hope tenants with a blocked toilet or a broken refrigerator have more luck getting through to a customer representative at 1-833-4CONREX than I did reaching Scott Kelly, Conrex’s president, through his email.

Whether it’s investors buying homes through opportunity zone funds or global investment companies rolling up 15 properties at a time, this is not good news for communities such as Charleston that are facing an acute shortage of affordable housing. We do need more rental housing, but the strongest neighborhoods are built on homeownership, and deep-pocketed investors are making that ever harder for real people.

Buying a home has been the surest way for generations of average Americans to build wealth. If you are a first-time homebuyer and feel like the deck is stacked against you, you're not wrong.

Steve Bailey can be reached at Follow on Twitter @sjbailey1060.

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