On one side there are vast sums of money to be made in housing. On the other the time scale is still too long for most investment types, particularly larger scale, so something like buying cheap houses, renting them for a few years, then selling them to realize huge capital gains is a really smart strategy.
I just don't think it will go as well as the bankers think. If an individual wants to buy and manage 2 or three renal properties themselves, that can work (easier in some cities than others). If a block of investors wants to buy and manage an apartment complex and/or a neighborhood worth of houses (well concentrated) then that can work. But if a huge investment group wants to buy and manage dozens to hundreds of homes in disparate locations across the country? That's a disaster waiting to happen.
The problem is location and distribution of profits. One person can manage a small number of houses, provided all profits are going back to that one person. An investment company, however, needs to be profitable while paying someone a salary to manage those houses. This is normally done in rental markets with volume. An apartment complex allows a small number of people to manage maybe hundreds of units. Even accounting for empties this isn't too hard to manage a profit with.
That same handful of people can't manage houses located hundreds of miles apart in different cites/states. Also, you can't really cut back on management in such a way that 100 properties have the same total management costs. So now the cost of management goes up by 10-fold, and it is that much harder to be profitable. It isn't impossible, and come sale time, could still result in lots of money, but to manage the properties in the meantime probably means an operating loss for the investment company.
"Franchising" out the rental properties may be a solution to prevent/minimize losses without sacrificing management of properties (individuals bid on managing properties and get to take all the income from said properties over a 5 year period...think you can manage an average profit $700/month over 5 years, maybe you'll pay $12k upfront to do so). This doesn't really do much for upfront investors, however, and so it seems very likely that poor to non-existent management will happen in many cases (I'm pretty sure that tenants being treated horribly is Atrios's fear here).