Green Street



CNBC: Investors Finally Embrace Big Single-Family Rental Companies a Decade After the Financial Crisis

According to CNBC:

A decade ago, when the U.S. housing market collapsed and millions of homes went into foreclosure, a new class of real estate investors was born. Large-scale, institutional firms began buying up tens of thousands of properties. They rehabbed them and put them up for rent.

Some said it was a short-term play; they'd sell the homes once property values recovered. And some did, but a decade later the firms that made the biggest bets are not only still in play, but expanding, and continuing to reap the rewards of a new rental boom.


"The single-family rental market is very healthy right now. The demand versus supply balance and the operating outlook for revenue growth over these coming years is more favorable versus most property types," said John Pawlowski, an analyst at Green Street Advisors. "The operating backdrop for them is quite sound, and they're better at what they do today versus the early days of this sector, they're better operators, they have more refined systems."


"In a business that's only been around five years, nobody knows how these homes are going to age," said Pawlowski. "People understand how much wear and tear they put on their own homes, and how much money they put into it on a recurring basis, but we don't have the track record of the institutional single-family rental sector to opine with confidence on a long term capital expenditure burden of this asset category versus others."


As the vintage of the homes increases, the capital burden will increase as well. But one thing improving with age is the confidence in the sector. The stocks underperformed initially but hit their stride in 2016. It was a shock to a lot of those following the sector, who thought that as home prices increased these REITs would sell off their homes and close up shop.

"Operating performance, both occupancy, rental rate, and operating margins, all began clicking and proved to investors that these companies could operate this asset class more like an apartment company, and now it does look like a viable business, so yes we were surprised as well, and it seems to still have legs these next couple years," said Pawlowski.

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