Part I of this two-part series focuses on the new reality of the single-family rental market.

Alternate Path to American Dream Is Becoming a Single-Family Renter

Single-family built-to-rent homes now make up approximately 6% of all new homes in the US.  This percentage is projected to double in the next 10 years.

Paraag Sarva, chief executive of Rhino, a company that sells insurance renters can buy in lieu of a security deposit, said, “The majority of opportunities in this country have traditionally been rooted in the Old-World American dream, with a white picket fence, two and a half kids and a dog.  But that is fundamentally changing.”

The reality today is “…40% of Americans can’t afford a $400 emergency, let alone relocating to a new home…” and a down payment, added Sarva.

“The single-family home market has become an inevitable asset class for institutional money,” said Aaron Graf, chief executive of Lg Fairmont, a New York-based real estate brokerage.  “A normal buyer can’t compete with an all-cash offer from an institution, especially if (the all-cash offer) comes in high.  Young people are thus being priced out of the starter single-family home.”

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Built-to-Rent Movement Began in 2010

Investors began snapping up foreclosed single-family homes during the financial crisis of 2010.  Investors then turned to developers who were building large single-family properties and offered to buy 10-15% of those developments in order to lease their properties to individual households.  When developers said yes, “People saw that these rental homes could coexist just fine with owner-occupied homes,” said Gary Beasley, chief executive with Roofstock, an online marketplace for and investment in owner-occupied homes.”

By the pandemic onslaught, institutional landlords had shifted towards full-on subdivisions of rental properties.  In May 2020, Redfin indicated that investors had put down $77B on single-family rental homes within the last six months.  The cherry on the chocolate fudge sundae also happened in May 2020 when Rockport and an investment firm announced a joint venture of $1B in single-family homes to be renovated and leased throughout the country.

Thanks to The New York Times



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