New Attraction for Single-Family Rentals – Multi-Family Real Estate News

Suzann D. Silverman, Editorial Director

Single-family rentals are quickly reaching the status of an established investment opportunity. This has been accompanied by greater standardization of operations, including multi-family type efficiencies and conveniences that are likely to attract even more residents.

Certainly, the vast majority of single-family rental property remains in private hands. According to a recent Yardi Matrix report, only a very small percentage of properties are owned by institutions, despite a steady growth in investment.

But penetration is over 47% in the Midwest, and as IvyLee Rosario noted in our feature article, “Capital Still Flocks to Heated SFR Market,” demand is high in the Sun Belt. Additionally, MetLife Investment Management recently predicted that by 2030, institutional holdings will have increased by more than 40%, with opportunities driven by apartment shortages, reduced homeownership and interest increased for renting larger housing spaces with private yards. The shift to building multi-unit communities increases value for institutions, providing the preferred volume needed to meet investment goals and concentrating operations. According to Yardi Matrix data, 25,000 institutional homes for rent are currently being built in communities of 50 or more units, up from 2,500 just eight years ago.

As a former single-family tenant of a detached house and as a current owner, I can well appreciate the benefits that are emerging as the sector becomes more established. And I have no doubt that such houses will attract more interest from tenants. After all, having your own yard, garage, patio, and extra storage space are great perks, but the addition of a gym, pool, and organized barbecues raises the bar. It’s the best of both worlds!

And landlords are only scratching the surface of the benefits that could be adapted from apartment communities when institution-owned homes are nearby. In a recent interview with our reporter Anca Gagiuc, Al Otero, portfolio manager at Armada ETF Advisors and Home Appreciation US REIT ETF, highlighted the adoption of smart technology, which “has streamlined all aspects of the business, from from leasing to property management to maintenance”, which benefits operating margins.

Improving maintenance and rent payment processes is a matter of course for SFRs; why not storage and retrieval of packages? Or smart home access for housekeepers and pet sitters? And what about self-guided tours for potential tenants? Virtually anything 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 (even though they were nice), the ability to play the flute or the piano at all hours (without making the neighbors not so nice) – I even enjoyed the garden work (and believe me, there were plenty of bushes to trim). But those extra amenities would definitely have been a plus.

Keith P. Plain