Warren Buffett may have missed out on an amazing opportunity

Back in 2012, during the depths of the housing crisis, billionaire Warren Buffett – known for his keen eye for a business opportunity – told CNBC’s Becky Quick on Squawk Box that “if I had a way of buying a couple hundred thousand single family homes and had a way of managing . . . I would load up on them.”

Private equity firm Blackstone Group, known for its real estate prowess (its purchase of Hilton International is one of the most successful private equity deals ever), and a few other investors went out and did what Buffett shied away from.

Buffett may be kicking himself.

During the last four years Blackstone has become one of the biggest, single-family home landlords in the U.S. with around 50,000 rental properties, a business historically operated by small-time real estate investors.

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Blackstone spent $10 billion, and has now signaled that it is preparing to take the vast portfolio public under Dallas-based Invitation Homes, possibly as early as January, according to a recent report in the Wall Street Journal.

Citing its pending IPO, a Blackstone spokesman declined to comment.

It’s a gamble for Blackstone and its real estate maven, Jonathan Gray, who engineered the Hilton deal and is widely viewed as a likely successor to Blackstone co-founder and chairman Stephen A. Schwarzman.

The size of the investment and the mixed success of others who have tried to scale the single-family home market means the Invitation Homes IPO will likely be closely watched to see if Gray has cracked the code on managing 50,000 homes spread throughout the country.

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“There was a lot of trepidation from across the board in the housing world to form a company that would do single-family rental,” said Sarah Edelman, director of housing policy at the Center for American Progress, a left-leaning think tank. “It’s hard enough to be a landlord in a building where you have all 50 units at the same address. There was concern it was too hard to make the operation work and be profitable and to take care of properties that are geographically dispersed.”

The housing slide was tempting for investors in 2012, when interest rates were low and there were hundreds of thousands of vacant, single-family homes and available at fire-sale prices.

Forbes magazine at the time provided insight into why Buffett, real estate mogul Sam Zell and others were reluctant to venture into the business.

It is “a real challenge to manage and service the homes as rental units, unlike say multifamily units in which oversight of a centralized property is far easier,” Forbes said.

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U.S. homes were worth a total of $28.4 trillion as of Dec. 31, 2015, according to online real estate firm Zillow. It’s likely well above that as housing prices continue to recover. And the number of rental tenants have increased in recent years, Edelman said.

Blackstone isn’t the first to try to profit from this business. Investors have plunked down $32 billion or more on similar bets, according to The Journal. American Homes 4 Rent, founded by Public Storage magnate B. Wayne Hughes, owns more than 47,000 rental homes in 22 states.

Companies like Invitation will have to straddle a line between charging rents that return a reasonable profit without turning those tenants into motivated home buyers. There is also the dichotomy of owning rental properties as a long-term business or selling homes for big profits as the home prices increase, and liquidating the company.

“When companies are asked to deliver short-term returns for shareholders, they may be under pressure to raise rents or cut costs on property management in order to do so,” Edelman said. “Maintaining quality and affordability will be key to the long-term success of the single family rental industry.”

Colony Starwood, a real estate trust that owns thousands of properties, sees a long-term business.

“We’re not in this to simply fix and flip,” Fred Tuomi, Colony Starwood’s chief executive told The Journal. “We’re in this for the long-term, steady and growing income stream.”

Under the private equity model, Blackstone and other firms tend to liquidate their investments over a period of years and return that to their limited partners. Whether that happens here is open to question. Blackstone isn’t saying.

“It’s really a nuanced story, a complex story,” Edelman said. “In terms of where we go from here, we are sort of entering a new stage for this industry. Institutionally-owned, single-family homes.”