Single-Family Rentals’ New Attraction

As institutional investors finesse homeownership, they’re discovering that apartment efficiencies and amenities can apply. And they can attract even more interest in home rental.

Editorial Director Suzann D. Silverman

Suzann D. Silverman, Editiorial Director

Single-family rentals are rapidly attaining status as an established investment opportunity. With that has come greater standardization of operations—including multifamily-like efficiencies and amenities that are likely to attract even more residents.

To be sure, the vast majority of single-family rental ownership remains in the hands of individuals. According to a recent report from Yardi Matrix, just a very small percentage of the properties are owned by institutions, despite steady growth in investment.

But penetration is above 47 percent in the Midwest, and as IvyLee Rosario noted in our feature story, “Capital Still Flocks to Heated SFR Market,” demand is high in the Sun Belt. Plus, MetLife Investment Management recently predicted that by 2030, institutional holdings will have increased to more than 40 percent, with opportunity driven by short apartment supply, reduced homeownership and increased interest in renting larger housing spaces complete with private yards. A shift to building multi-home communities is increasing value for institutions, providing the preferred volume needed to meet investment targets and concentrating operations. Currently, 25,000 institutional build-to-rent homes are under construction in communities with 50 or more units, according to Yardi Matrix data, up from 2,500 as recently as eight years ago.

As a former single-family renter of an individually owned home and as a current homeowner, I can well appreciate the benefits emerging as the sector becomes more established. And I have no doubt such homes will attract more renter interest. After all, having your own yard, garage, patio and extra storage space are great benefits, but adding in a gym, a pool and organized cookouts ups the ante. It’s the best of both worlds!

And property owners are only scratching the surface of benefits that could be adapted from apartment communities when institutionally owned homes are closely located. In a recent interview with our reporter Anca Gagiuc, Al Otero, portfolio manager at Armada ETF Advisors and Home Appreciation U.S. REIT ETF, pointed to the adoption of smart technology, which “has streamlined every aspect of the business, from leasing to property management to maintenance,” thereby benefiting operating margins.

Improved maintenance and rent payment processes are a no-brainer for SFRs; why not package storage and retrieval? Or smart home access for house cleaners and pet sitters? And what about self-guided tours for prospective renters? Virtually anything being adopted for apartments can be applied to housing communities.

I enjoyed my rental home. I loved the extra rooms, the space between us and our neighbors (though they were nice), the ability to play my flute or piano at any hour (without turning the neighbors not so nice)–I even enjoyed the yardwork (and believe me, there were a lot of bushes to trim). But those added amenities would sure have been an advantage.

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