Commercial real estate investors are continually searching for new ways to boost their portfolios. One of the hottest new asset classes for this group is single-family rentals (SFRs). Managing these properties was once so challenging that commercial investors avoided them. But no longer. Here is how this asset class is exploding in popularity among investors and why it is now receiving so much attention.
Single-Family Rentals Now Popular With Commercial Investors
We are currently in one of the strongest single-family housing markets since 2008. And, this time, there isn’t a looming crash on the horizon. In just the past four years, 90 million new homes have been built in the United States, and we still have a housing shortage.
Home prices and rents are soaring nationwide, and institutional investors are increasingly looking to participate in this booming market. And there is still plenty of room. According to JLL data, institutional owners, which are investors who own more than 100 homes, make up less than three percent of the market. And single-family homes build specifically for rentals are still a small portion of this country’s inventory.
Drivers for Growth in the SFR Market
Investing in single-family homes isn’t new. Popular television shows like Flip or Flop or and Fixer Upper have shown how small-time investors can purchase a home and make a quick profit. But doing this is on a larger scale as a commercial investor has never been very widespread. Until now. Here’s are some of the reasons why this has changed:
Managing residential properties has always been challenging. There are headaches involved with finding and retaining tenants as well as rent collection and maintenance issues.
But technology has made this process much easier, allowing commercial investors to handle these matters at scale. Now there are entire communities of SFRs in some markets using tools like digital lockboxes and mobile apps for online maintenance requests, rent collection, applications, and document signing.
The COVID-19 pandemic has underscored the demand for more space. Some families and individuals have a desire to take social distancing to a new level with a move away from densely-populated areas into more suburban and rural spaces.
Change in Demographics
Demographics have created a shift and boosted demand for single-family rentals as well. Older Millennials might be looking to get away from the city at the same time that retirees are selling their homes with the hope of downsizing to a smaller rental unit in the suburbs for retirement.
Want to Add Single-Family Homes to Your Commercial Portfolio?
While commercial investors might be increasingly interested in single-family homes, there is still an issue of short supply in many parts of the country. But there are homes available in the local market, and we can help.
Caldwell Commercial Real Estate is the premier provider of commercial real estate services in Charleston, South Carolina. Contact us today to learn more about how our trusted real estate professionals can help you achieve your investment goals.