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Monday, February 25, 2013 - 14:30
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Monday, February 25, 2013 - 14:30
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Monday, February 25, 2013 - 14:30

Why Ken Fisher Just Spent $35 Million on the "Renter Nation"

Monday, February 25, 2013 - 2:30pm

StreetAuthority analyst Carla Pasternak is in good company...

In her recent issues of High-Yield Investing, she's been telling her subscribers about the "Renter Nation" -- and how to profit.

She's not the only one.

We've talked about how private equity giant Blackstone Group (NYSE: BX) is the biggest player in the new real-estate-owned) rental market. Blackstone has spent $2.5 billion in the past year purchasing 16,000 homes, a number that amounts to more than $100 million a week.

StreetAuthority analyst Nathan Slaughter has been telling his readers -- "Now may be the best opportunity in a generation to buy real estate."

Even Warren Buffett is getting in on the action. Buffett was quoted on CNBC saying that he'd buy "a couple hundred thousand" single-family homes if it were practical to do so. Instead, he's entered into a multi-billion dollar real estate brokerage venture with Brookfield Asset Management (NYSE: BAM).

Now, add Forbes columnist and billionaire investor Ken Fisher to the list.

But before I get into what Fisher is doing and how you can follow his moves to profit, let's recap...

"Renter Nation" is what we're calling a new trend in the U.S. real estate market -- one that can potentially make a nice windfall for investors who recognize it.

Simply put, now is a great time to be a landlord. Between low borrowing rates from the Federal Reserve's monetary easing policy and individuals who are either unwilling or unable to own a home thanks to the effects of the Great Recession, there's never been a better time (at least in a generation) to be a landlord.

Not only that, there is a growing demographic taking place across the United States. Agora founder Bill Bonner calls them "serfs" -- those who "don't necessarily live poorly; they live badly." These people are opting to become part of the "Renter Nation" to avoid the caveats associated with becoming a homeowner.

But here's the great thing: Regular investors can profit from the Renter Nation by investing in real estate investment trusts (REITs).

When you invest in REITs, you become a "virtual landlord" -- entitled to your share of the rental income and any capital appreciation should the properties be sold.

Here's what Carla said about the Renter Nation in a recent High-Yield Investing issue:

Landlords, in part because of the weak single-family market, have been thriving. Apartment vacancies are very low throughout the country. As of December 2012, the apartment occupancy rate stood at a strong 95.5%, the highest since 2007. Contrast that with a vacancy rate of more than 8% at the height of the Great Recession of 2008 and 2009.

There are several ways to become a "virtual landlord" and profit from the Renter Nation. But it's worth looking into what Fisher is doing, because I think he's found another brilliant way to play the "Renter Nation" -- one that just might work for you.

Here's the story...

Recent 13F filings have revealed that Fisher just invested almost $35 million in Education Realty Trust Inc. (NYSE: EDR).

Education Realty Trust is a REIT that develops, acquires, owns and manages student-housing communities located near university campuses.

Since bottoming out in the beginning of 2009, the stock is up more than 250%.

In 2012, third-quarter earnings more than doubled compared with the previous year, from $2.4 million to $5.9 million.

Downside risk is also reduced by the fact that Education Realty specializes in apartments located on university campuses. Unlike rental markets that are designed around businesses in cyclical industries, university communities have a built-in, reliable renter base. Large, well-established universities are unlikely to go bankrupt or move to another city.

For example, Education Realty just signed agreements with the University of Kentucky for a multi-year, 9,000-bed housing revitalization project and four new communities with 2,317 beds scheduled to open in 2014.

Risks to Consider: Due to recent acquisitions, the company has been cash-flow negative for the past two years. So there is always a risk that these new investments will not work out as planned.

A decline in enrollment due to rising tuition costs would also potentially put a dent in profits.

Action to Take --> The Renter Nation isn't going away anytime soon. While the pundits are talking about a real estate "recovery," that's only partly true. What's really fueling this sector is the rental boom. Investors looking to add exposure to this trend would be wise to take a closer look at Education Realty. I think this stock has a lot more room to run. Given the latest developments in the housing industry, it looks like opportunities to profit from the Renter Nation aren't going away anytime soon.

Further Reading:
  "You Can Thank My Daughter -- and Maybe Your Kids, too -- for the Big Yields in This Surging Sector"

  "How to get an 18% Yield from the Real Estate Recovery "

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Chad Tracy does not personally hold positions in any securities mentioned in this article.
StreetAuthority LLC does not hold positions in any securities mentioned in this article.