GoRion’s Kerry Curry discusses the significance of the Invitation Homes IPO on the Single-Family Rental market with Roofstock CEO Gary Beasley.
- Invitation Homes (IH), a unit of the private equity firm the Blackstone Group, owns about 48,000 rental homes and is the largest single-family rental operator in a highly fragmented sector still largely dominated by small independent players.
- Fannie Mae’s backing of Invitation Homes’ recently completed IPO bodes well for the future of the single-family rental market as the government-sponsored enterprise’s decision to securitize a $1 billion loan adds an important layer of credibility.
- “It’s a watershed moment for the industry; the scale was one of the largest REIT IPOs ever,” says Gary Beasley, CEO and founder of Roofstock, an online marketplace for investors to buy single-family rentals.
- More than half — 57 percent — of the rental stock in the U.S. consists of single-family housing of one to four units, according to the 2015 American Housing Survey.
- Beasley anticipates future growth in the SFR sector coming from both large institutional players and from small individual investors.
As our CEO makes clear in this discussion, Fannie Mae’s decision to back this IPO of the largest operator in the Single-Family Rental industry is a significant validation of the long-term prospects for the asset class and its continued future growth as a way to invest in real estate. Read the full article for more details.
The BiggerPockets Blog takes a look at how to assess which direction the market is trending and how to be prepared. Our key takeaways:
- “Change Your Strategy” – Whether you’re a seasoned “flipper” or a multi-family property investor, exploring new opportunities in the market such as the growing demand for Single-Family Rental houses can significantly increase your options for finding great returns on your investment, both in terms of capital and time invested.
- “Change Your Market” – If you’ve traditionally purchased investment properties in your local market, it might be time to try exploring new markets that offer greater diversification options as a hedge against fluctuations in a single real estate market.
- “Be Patient” – Be confident in your underlying fundamentals and underwriting metrics so that you can ride out cyclical changes in the market.
With more and more investors looking for short-term rental properties, the need for resources to help those investors calculate their decisions is growing as well.
- A study from the Consumer Reports Research Center found that 71% of millennials aspire to own a home, but only 26% already do.
- Until recently it would have been difficult for anyone who wasn’t a real estate expert to find the necessary data to make those decisions. A group of innovative startups, however, are aiming to solve that problem.
Invitation Homes IPO will test investors’ interest in the idea that the rental-home business can be institutionalized as apartments were before. Having invested $10 billion to purchase roughly 50,000 homes, Invitation Homes LP, the Dallas-based company Blackstone Group LP formed to maintain and rent those homes, has filed confidentially for an initial public offering that could come as soon as January.
- These new institutional landlords say the move toward rentals further supports their business model. They point to tight lending standards and a generation of renters who are outgrowing apartments but are too burdened by student debt to buy homes.
- Historically, mom-and-pop investors and regional players have owned nearly all the single-family homes for rent. Blackstone and other investors that emerged from the foreclosure crisis face unique challenges in joining them, beyond the chore of maintaining thousands of far-flung homes.
- If Blackstone and its rivals in the rental-home business succeed, they will have created a huge new field in which Wall Street can invest. At about $35 trillion, U.S. homes are one of the world’s largest asset classes—collectively worth more than the $20 trillion U.S. stock market. Since the housing meltdown, big investors have spent at least $32 billion buying and fixing up homes, and they own between 1% and 2% of all U.S. rental homes, analysts estimate.
One Forbes contributor explains how he used investments in rental properties as a way to generate income and save enough to pay his kid’s college tuition. Investing in Single-Family Rentals using Roofstock is a great way to secure your financial future.
RealtyTrac analyzes the trend of real estate investors in major cities on the East and West coasts investing heavily in Single-Family Rentals in the Southeast, most commonly in Florida, Georgia, and North Carolina.
- “A lot of demand is people in the Bay Area and New York City looking to buy in the Southeast,” said Gary Beasley, CEO and co-founder of Roofstock.
- According to an analysis by ATTOM Data Solutions, Florida has the most investment single family homes owned by out-of-state owners of any state, followed by North Carolina, Tennessee, Arizona, Georgia and Texas.
- States where Californians own the most investment properties are Arizona, Nevada, Texas, Florida and Oregon, while New Yorkers own the most investment properties in Florida, Pennsylvania, New Jersey, North Carolina and Georgia.
An analysis of the U.S. Census Bureau’s 2015 American Community Survey by RentCafe revealed that about 1.2 million wealthy households joined the widening ranks of renters in the U.S. in the last 10 years (from 551K to 1.75M).
- From 2005 to 2015, the number of renter households who earn more than $150,000/year increased by 217% as opposed to an 82% increase in the number of homeowner households within the same income bracket.
- Annual increases in the number of renter-occupied households with incomes over $150K have exceeded those of owner-occupied households consistently over the last 5 years.
- In large urban areas, the percentage high-income households renting vs buying is on the rise.
“Investors are seeing that this market looks more like multifamily,” he says. “It’s more stable than investing in homebuilders, and it’s a real estate asset class that’s still below peak value” says Roofstock CEO Gary Beasley.
- Beasley believes investors of all sizes see a growing market with steady returns, a safer bet than the stock market. He’s optimistic about the future: millennials starting families still want to be inside a house, even ones they don’t own, and the turn towards more professionally owned properties make it easier to attract tenants.
- “I’m bullish on the need for the product. People are moving around more, and the ability to test out a neighborhood before committing is a huge advantage.”