Single-family rentals as the next opportunity

April 3, 2021
Exploring the evolution of the single family rental investors, asset class fundamentals, and industry outlook

The great recession still hangs present in many investors’ minds, however where there is turmoil, there is also ample opportunity. During the Great Recession, house prices fell 31% nationwide and homeownership rates declined, however one thing that still remains consistent is that people need a place to live, making the residential real estate market a high value opportunity for investors.

Approximately 36% of households in America are renters. Additionally, the current lending environment has changed and rather than multi-family renters becoming home buyers, they tend to become single-family renters first, in large part due to the high barriers to homeownership with many renters not having enough capital for a down payment on a home in today’s market. Out of the 16.9 million single-family homes present today, only 14% are renters, showing that we are indeed missing out on SFR opportunities via an institutional approach. Approximately only 2% of single-family rentals are owned by institutions, whereas 55% of multifamily rental units are owned by institutions.

By taking an institutional approach towards the single-family rental market, it is allowing for increased efficiencies and the ability to scale quickly and steadily as one approaches a new marketplace. Institutions carry stronger balance sheets, allowing access to more capital and lending sources. Additionally, an institution has the monetary resources to invest in the proper technology and attain the top property management to make their properties as efficient as possible.

A notable difference in the marketplace today than that of the last downturn is the COVID-19 impact which has encouraged multifamily renters to leave the cities and acquire more space for their “work from home” arrangements. With an office being allowed “anywhere”, workers can choose to work wherever they like. Many employers have suggested this arrangement to stay in place indefinitely, realizing they no longer need to pay for the thousands of square feet of office space. Instead, those workers are turning to the suburbs to find a home to rent with ample space to become productive with their new working arrangements.

To learn more Whitestone and our offerings, please contact Alicia Miller, VP Capital Market at amiller@whitestoneco.com.