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The Biggest Trends in Single-Family Rental Investing

Our key learnings from IMN's Single-Family Rental Forum this year.

There’s no denying that the single family rental marketplace has boomed in the last few years. Today, nearly 35% of all households are rentals. This is in part due to the housing shortage, but it’s likely this is also being driven by demographics and market trends. We recently attended the 7th Annual IMN Single-Family Rental Forum in Fort Lauderdale, Florida, which covered all things SFR from the perspective of REITs, funds, lenders, flippers, investors, and many more. Safe to say all attendees left with more knowledge on bettering their products and making headway in the competitive rental marketplace.

One key takeaway: capital is being pumped into this industry because of the current housing shortage. Investors see an opportunity to capitalize on these sort of assets as a steady source of income. On the other side, many lenders see this as a defensive play. The yield curve being inverted is a key sign for some that we may be heading towards a housing recession. They are attempting to secure a safer, long-term source of income over the next year or two in order to protect themselves from the inevitable volatility. The single-family rental space is maturing, which means the operating systems of many institutions are improving, so the appetite for this product is increasing by the day.

Another trend we found interesting is that renting has become so popular over the last few years directly correlates with both demographics and market trends. Renting provides an incredible opportunity for people with a high quality of living at a much more affordable price. A big portion of this population is millennials, the target demographic of many who own and operate this particular asset class. Some credit their renting preference to not having the means to build equity, while others discuss how they do not want to lose that equity like their parents did ten years ago.

For lenders, technology and data are becoming more and more important for their businesses, particularly in the single-family rental space. Using these two together allows lenders to make smart, responsible decisions in booming markets in order to make profitable returns. However, the use of these two in tandem will create more barriers to entry for new players in the space and allow for more competition in the space. On the borrowing side, the key to receiving higher yields is scale. The rental market would not exist if it were not for the operators, those who buy and manage these properties. As they look to build their portfolio, they must develop more efficient tactics for their returns to continue to increase.

One final prediction: we will continue to see more and more of the younger generation will begin renting this asset class, and that is why there is so much buzz in this market. Millennials will likely become the end buyers of the rental homes they are currently renting, and they know the most desirable neighborhoods better than anybody, meaning these investments can be sources of cash flow now and sold for profit in the future. Whether securing or lending long term funds or bridge financing, the single-family rental space will continue to grow in the coming years.


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