March 20, 2018
Though much continues to be written about multifamily properties as solid investments, single family rentals (SFR) are fast becoming an interesting sector, as well. Thanks to consolidation, SFR REITs, such as American Homes 4 Rent and Blackstone’s Invitation Homes Inc. (which merged with Starwood Waypoint Homes in 2017) have been able to come up with credible earnings, while keeping maintenance costs in check.
Single-family rentals as an investment asset class took off following the Great Recession, when large, private investors purchased distressed housing and non-performing loans, then spun those portfolios into REITs. Meanwhile, the product itself tapped into the desire of families that wanted the spaciousness of a home, without the concerns of home ownership.
These days, according to Seeking Alpha, single-family rentals are nearly half the total of the nation’s renting supply, at 16 million. However, the SFR REITs own just 130,000 units, while institutional investors own 200,000 units. The industry is still very much fragmented, with the average SFR owner owning/managing one or two properties. Still, increasing interest rates, combined with the new tax reform laws and a continued growing labor market “appear to be creating a perfect condition for strong SFR demand growth,” Seeking Alpha noted.
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