Investing in Single-Family Rentals

As the SFR market sees its highest rate of rent growth in years, investors should be aware of trends, advantages, and risks. 


Part I: Overview 


Single-family rentals are typically standalone houses in suburban areas of second, third, and fourth tier cities. A single-family home sits on its own land and is designed to be used as a single dwelling unit, usually having one kitchen, unshared walls, and unshared utilities (1).


Across the United States today there are nearly 43 million renter households—25 million of which are in single-family rentals. The most common form of housing in the United States, SFRs make up roughly one third of the US rental stock and over 11 percent of the US housing stock as a whole (2). These significant numbers first spiked as a result of the increase in rental demand prompted by the 2008 housing crisis.


In recent years, standalone homes have experienced some of the strongest appreciation across asset classes, leading many investors to refocus on SFRs as a primary investment strategy.



While the SFR market is dominated by “mom and pop” owners—who account for approximately 88 percent of SFR unit ownership—there has been an uptick in institutional interest since the Great Recession (3). Today, Institutional players with over 2,000 homes each account for an estimated one percent of SFR unit ownership, but their participation is growing (4). Over the past 12 months alone, we’ve seen the likes of Blackstone, Goldman Sachs, JP Morgan, and Invesco make investments worth hundreds of millions directly into SFRs. 


This expansion of SFR portfolio ownership is in large part thanks to the evolution of tech-enabled property and asset management platforms, which have made it possible to operate from anywhere in the world (5).


Stay tuned for future blog posts, where we explore the trends, investment advantages, and risks surrounding single-family investments. By evaluating recent market shifts and factoring the most up-to-date data, we aim to create a detailed picture of one of America’s fastest growing asset classes. 

References:

(1) https://mf.freddiemac.com/docs/single-family-rental-markets.pdf

(2) https://kbw3.bluematrix.com/sellside/EmailDocViewer?encrypt=f892394f-6836-4f18-b215-91dcdf1f41f5&mime=pdf&co=KBW3&id=rtomasello@kbw.com&source=mail&distribution=librray

(3) https://www.nexpoint.com/wp-content/uploads/2020/11/IPA-Vinebrook-Executive-Summary-FA-Version.pdf
(4) https://www.rentalhomecouncil.org/wp-content/uploads/2017/12/Green-Street-Advisors-Single-Family-Rental-Primer.pdf
(5) https://docsend.com/view/t3azyn7evbeuuxkc

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Plotify Financial
9.28.21

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