“Single-family rental housing has existed for decades as a significant part of the U.S. housing stock. Investing in single-family rental properties has been a way for Americans to build and maintain wealth, prepare for retirement, and hold income-producing assets in perpetuity.” Brian Grow, Managing Director, Morningstar, Inc.
Supply and Demand
Analysts are predicting further economic growth in housing appreciation, which in turn intensifies the housing supply dilemma.
Current trends show that buyers are concerned about affordability, inventory, and competition. “While buyers continued to cite affordability as their top concern, inventory woes are gaining attention. Twenty percent of buyers worried there weren’t enough homes to choose from, up four percentage points from last quarter. And 16 percent of respondents said there was too much competition from other buyers, a five percentage point jump from last quarter,” a survey from Redfin, “One in Four Homebuyers Cites High Rent as Reason for Buying”
Small to mid-sized investors are building homes to rent as a response to the housing demands. “A combination of a lack of housing inventory, especially discounted and distressed, and a surge in demand for rental housing has caused more investors to turn to the build to rent strategy—that is, building a single-family home with the specific intent of renting it rather than sell it to an owner occupant.” DS News
Investors are looking for scalable solutions to control costs and to maximize profit. Renters in single-family neighborhoods can expect quality amenities, professional property management, and flexible, affordable leases.
Single-borrower, single-loan, and multi-borrower securitizations
As demand grows in the single-family rental space, access to institutional capital has evolved, enabling investors of all sizes to respond to the market conditions. “The institutional investors own a small percentage, approximately 2 percent, of the single-family rental housing stock, according to Urban Institute…The growth of the single-family rental market ultimately depends on the demand of the smaller investor for financing,” Morningstar, Inc., RMBS Commentary: Single-Family Rental Update, December 2015