The single-family rental (SFR) market has experienced dramatic growth over the last decade due to more consumers opting out of homeownership and higher rental costs due to an imbalance of supply and demand, but what does this mean for investors?
The National Rental Home Council (NRHC) President of the Board and President and CEO of Invitation Homes, John Bartling, recently sat down with DS News to discuss opportunities for investors in the SFR market and how they can capitalize on them to grow their businesses.
What are the biggest trends you are currently seeing in the SFR market?
Bartling: There has always been a vibrant single-family rental market. But over the past few years, we’ve seen an exciting level of growth and a real effort to professionalize what has traditionally been a fragmented marketplace – much the way multi-family was professionalized 30 years ago. The National Rental Housing Council (NRHC, the single family rental association) members have pioneered a new model for SFR that leverages best practices from well-established rental industries, such as multifamily and hospitality. Combined with enhanced property management, service and maintenance systems, we are starting to deliver an unparalleled resident experience.
What opportunities are there for investors in the SFR market?
Bartling: SFR offers tremendous opportunities for investors to realize an attractive risk adjusted return. As an industry, the U.S. housing economy is evolving, rental demand is surging, and professionally-managed single-family rental homes will continue to be a desirable option, with a quality of choice, for many Americans. At the same time, the industry is maturing and investors are becoming more sophisticated about the asset class. NRHC members are demonstrating a strong track record of performance that investors are starting to appreciate.
There is an opportunity to show investors that SFR industry margins and growth rate are equivalent or better than multifamily. In addition, there is on-going consolidation in the industry and institutional SFR companies only represent less than 200,000 units out of 15.5 million units.
What are the largest hurdles or challenges facing the SFR space?
Bartling: This is still a fragmented industry. Institutional SFR scaled quickly, and in a short period of time, our members have successfully transitioned from aggregators of homes to traditional institutional owners and operators of rental properties. We feel good about where we stand today and the resident experience we offer. But as the market continues to grow and serve more residents, it will be important for decision makers at the federal, state and local level to recognize the benefits of professionally managed rental housing and pursue public policies that preserve and strengthen this important affordable, high quality choice for those who choose it.
What do you expect in the coming years to happen in the SFR market?
Bartling: In the short-term, we think there will be continued consolidation in the industry. But over time, we expect several things to happen. First, more providers will enter the space and consolidation will continue. Second, the lines between multi- and single-family rental providers will dissolve, meaning companies will do both. Third, the SFR industry will be viewed as a profitable business that is attractive to investors as NHRC members lead in transparency and disclosure of key financial and operating metrics. And finally, technology will continue to unlock greater efficiencies, even better financial performance and an enhanced resident experience.
What areas/metros/cities are experiencing the most growth in terms of SFRs?
Bartling: NRHC members have properties in most regions of the country. The strongest SFR markets are located in communities that are experiencing significant job and population growth, and we are focused on continuing to expand access to professionally managed single-family rental homes throughout the United States in communities where economies are strong and where Americans want to live.