If you're an investor, take your pick of strategies when you invest in the REO-to Rental market - just know that it should fundamentally affect your approach to managing these assets.

And the good news is that banks really don't care.

At the ASF 2013 panel - "REO-to-Rental Financing" - one of the hottest topics in residential real estate - focused on this basic question, borne out the recent upturn in home prices. After researching home prices and investor activity in Phoenix, CoreLogic's Michael Saccento showed that much of the investor money entering target markets like as Phoenix entered after the initial uptick in home prices.

While some of this money could just be later to market, it may also indicate that a portion of investors are simply chasing returns without the intention of a long-term buy and hold strategy employed by firms like Waypoint Homes

Waypoint's Gary Beasley explained their internalization of every key process in their rental portfolio strategy, including property management. The primary rationale? They can train and oversee their employees to treat tenants using Waypoint's customer service methodologies. Beasley suggested that on the flip side, investors strictly seeking gains "should outsource the heck out of operations." 

In financing these investments, the bankers on the panel suggested that whether the investor treats the asset as a trade or a business, they feel they have the risk and collateral coverage either way.

It's taken nearly two years for this asset class to materialize in any real way. There are an estimate 13 million rental units across the United States, and the largest asset manager holds fewer than 10,000 properties. So, it's a highly disaggregated market that's existed for a very long time - it's only the institutional entry to this market that's really new.

Combine rental rates increases and falling cap rates with a limited preference shift among home dwellers, and I suspect that this is market that will swell to a moderate size for institutional investors then quickly fade with the exception of a few large market participants.

The falling cap rates and increasing home prices will push the trading-centric investors to sell their portfolios to home owners that will find rent-to-own ratios favor owning vs. renting over the next 3-5 years.

For the business-centric investors, I expect they will retain the top performing assets and markets in their portfolios, but the falling return rates will require them to shed some of their asset base to local "Mom & Pop" groups that can handle smaller returns.

Scott Sambucci works with CoreLogic Advisroy Services, the opinions expressed here are his own.