E09: The Growth of Single Family Rentals and Institutional Investment

In this week's episode of the Real Estate Investing Onpoint Podcast, Peter, Ron and Wade dive into the booming single family rental (SFR) and built-to-rent markets. They analyze recent data on institutional investment, discuss opportunities in different real estate locales, and share strategies for multifamily investing. Discover effective strategies for workforce housing, understand the trends shaping the industry, and learn how built-to-rent fits into the institutional model.

Here are some power takeaways from today’s conversation:

• Institutional presence in top vs bottom SFR markets
• Demand drivers fueling SFR growth
• Built-to-rent communities and the institutional model
• Strategies for workforce housing investments
• Nontraditional SFR investment platforms

 

Episode Highlights:

 

[15:00] Institutional Investors and Top Performing SFR Markets

A recent Moody's Analytics article, analyzing the top and bottom performing SFR markets, reported a lack of institutional investors in many of the top markets, including Rochester, NY and markets in the Mid-Atlantic like Baltimore and Philadelphia. Larger firms have faced challenges acquiring sufficient portfolios at scale in these urban markets, which often involve smaller, heavily renovated properties rather than newer construction. Developing at the required size to meet institutional return hurdles may also be more difficult in these areas compared to suburban markets in the Sunbelt.

 

[29:00] The Appeal of Built-to-Rent Communities

Wade provides insight into built-to-rent communities and why they appeal to both institutional investors and the group's investment thesis. He notes that developing new construction projects on vacant urban land fits their strategy of investing in areas where large institutional competitors are not active. Built-to-rent allows stacking units efficiently while avoiding issues like uncertain rehab costs. Wade also discusses how building from the ground up is more predictable than heavy renovations on older homes, though new construction experience is limited within the group.

[43:00] Emerging SFR Investment Platforms

alternative SFR investment platforms are emerging such as portfolio lease-backs and fractionalization. The group debates the challenges and opportunities of these models, including their ability to potentially attract new types of institutional capital to the sector. In portfolio lease-backs, a company leases and then subleases an entire SFR portfolio. This could appeal to investors seeking a true triple net investment. However, they also note the long-term risks over a master lease and how margins may need to be thin to make the deals work.

Resources Mentioned:

www.gsprei.com

Moody's Analytics - The Superstar of Today and Tomorrow, Growth and Opportunity in the Single Family Rental Market