GlobeSt.com: It would seem as though another factor is that investors can disperse their single-family acquisitions across a given market and cherry-pick the properties that best fit their investment thesis. They wouldn't need to acquire every property within a given block.

Cisterna: That's absolutely correct, and that's why I think there's a little bit of a disconnect in the capital markets when it comes to this asset class. If you look at some of the risks associated with buying traditional commercial estate, you have to find another investor that wants that property. Whereas if you're buying a single-family property, you could have a typical investor exit or you could sell it on the retail market to an owner-occupant.

GlobeSt.com: The single-family rental sector is not new, yet it has been “on the map,” so to speak, in recent years as institutional-level investors took advantage of the downturn and foreclosure-sale pricing to buy in bulk. Home prices are up and the foreclosure rate is down, yet SFR is still appealing. What are some key factors despite the higher prices compared to a few years ago?

Cisterna: When the larger institutional investors did the vast majority of their investing, home prices were very depressed from the peak level, we were seeing a great deal of distressed inventory in the market and they were really doing more opportunistic investing at that time. As the market began to mature, we've moved into more of a value-add model, where you're pulling out a little more equity or getting a greater return by doing a deeper dive into renovation and pulling that property up to market standards.

Secondly, although prices have increased, there are still a number of markets where prices have not increased as dramatically. If you were to look at California right now, there aren't a lot of opportunities for long-term rental because prices have appreciated so dramatically, and in addition they've increased faster than rental-rate appreciation. That's an example of a market that doesn't make a lot of sense today, even if you were to follow the value-add investing model.

However, there are a number of markets throughout the country that have done one of two things. Number one, prices haven't increased that much, or number two, the prices have increased but consistently with the rental rate increases, so you're still able to obtain yields today that are similar to what you could achieve three or four years ago.

GlobeSt.com: By comparison with institutions, whose investments have been diverse geographically, smaller investors have tended to focus on their own backyards and markets they may know well from first-hand experience. What are the advantages of investing outside of the home region?

Cisterna: The most basic answer is: looking for better returns. Opportunity doesn't necessarily have borders, so if I were someone who lived in a higher-priced market that has achieved a tremendous amount of appreciation—a San Francisco or New York, a Miami or Los Angeles—I'm not going to see a ton of opportunities that make sense as a long-term rental. So I would start to look to other markets that have similarly strong economic growth patterns, but are priced more reasonably. That's the real driver behind why a number of these larger institutions looked to other markets. They were looking for an entry point where the cash flow on the properties made sense but there was also potential for appreciation.

That same thought process holds true for smaller investors as well. Luckily for them, advances in technology for property management have made it such that you can have just as much transparency on a property that's 2,000 miles away as you can with one that's 200 feet away.

GlobeSt.com: Looking specifically at the Investability platform, what are some of the ways in which investors can turn its abilities to their advantage to facilitate their decision-making?

Cisterna: We really focus on three things: giving the investor access to information, access to property and access to services. Those are the three things that separate good investors from bad ones. By being able to provide them a tremendous amount of data in terms of what a property should rent for and what the operating costs are, it allows the average investor to go to a single site to get this information and understand if a property has the potential to be a good or bad investment. Rather than going to a source such as Craigslist to find out what the rent might be, speculating on what the operating costs might be or what the taxes might be, we bring that all into a single platform on Investability.

The next step for them is to find the type of property that's right for them. By using our proprietary technology, we're able to show them that information over a million properties across the country, which are available both on the market through MLSs and through exclusive listings. This allows them to become more comfortable with those markets and what the returns might be.

Seventy percent of investors invest within a 10-mile radius. It doesn't have anything to do with good investing; it has to do with their level of comfort. By being able to introduce these investors to service providers throughout the country, this gives them a level of comfort and transparency in terms of what's going on with the property and understand that it is okay to invest outside of your own backyard, especially if there are better opportunities.

DENVER—In the single-family rental market, a common perception is that there are the grand-scale institutional players such as Colony Starwood and Invitation Homes with portfolios in the thousands, and then there are strictly local investors who account for the majority of activity in this sector. Dennis Cisterna, chief revenue officer for Investability Real Estate, has a different view. The Denver-based online marketplace is intended to provide small investors access to the data that can help them make decisions on SFR buying opportunities outside their immediate operating areas. GlobeSt.com spoke with Cisterna about why SFR investment on a wider-ranging, although not necessarily larger, scale can make sense.

GlobeSt.com: For investors venturing outside of their immediate geographic regions, what are the advantages of investing in single-family compared to rental apartments?

Dennis Cisterna: It really boils down to a couple of key points. Number one probably the flexibility and optionality you have in the kind of choices you can make. If you went into a given market and looked at the number of apartment buildings that were available compared to the number of single-family homes, you'd have a lot more flexibility in the single-family category.

In addition, the vast majority of investors are limited by the amount of capital they have. And because even small apartment complexes can be much more expensive than an individual single-family home, that automatically eliminates a number of investors from even considering multifamily, especially if it's their first, second or third investment.

GlobeSt.com: It would seem as though another factor is that investors can disperse their single-family acquisitions across a given market and cherry-pick the properties that best fit their investment thesis. They wouldn't need to acquire every property within a given block.

Cisterna: That's absolutely correct, and that's why I think there's a little bit of a disconnect in the capital markets when it comes to this asset class. If you look at some of the risks associated with buying traditional commercial estate, you have to find another investor that wants that property. Whereas if you're buying a single-family property, you could have a typical investor exit or you could sell it on the retail market to an owner-occupant.

GlobeSt.com: The single-family rental sector is not new, yet it has been “on the map,” so to speak, in recent years as institutional-level investors took advantage of the downturn and foreclosure-sale pricing to buy in bulk. Home prices are up and the foreclosure rate is down, yet SFR is still appealing. What are some key factors despite the higher prices compared to a few years ago?

Cisterna: When the larger institutional investors did the vast majority of their investing, home prices were very depressed from the peak level, we were seeing a great deal of distressed inventory in the market and they were really doing more opportunistic investing at that time. As the market began to mature, we've moved into more of a value-add model, where you're pulling out a little more equity or getting a greater return by doing a deeper dive into renovation and pulling that property up to market standards.

Secondly, although prices have increased, there are still a number of markets where prices have not increased as dramatically. If you were to look at California right now, there aren't a lot of opportunities for long-term rental because prices have appreciated so dramatically, and in addition they've increased faster than rental-rate appreciation. That's an example of a market that doesn't make a lot of sense today, even if you were to follow the value-add investing model.

However, there are a number of markets throughout the country that have done one of two things. Number one, prices haven't increased that much, or number two, the prices have increased but consistently with the rental rate increases, so you're still able to obtain yields today that are similar to what you could achieve three or four years ago.

GlobeSt.com: By comparison with institutions, whose investments have been diverse geographically, smaller investors have tended to focus on their own backyards and markets they may know well from first-hand experience. What are the advantages of investing outside of the home region?

Cisterna: The most basic answer is: looking for better returns. Opportunity doesn't necessarily have borders, so if I were someone who lived in a higher-priced market that has achieved a tremendous amount of appreciation—a San Francisco or New York, a Miami or Los Angeles—I'm not going to see a ton of opportunities that make sense as a long-term rental. So I would start to look to other markets that have similarly strong economic growth patterns, but are priced more reasonably. That's the real driver behind why a number of these larger institutions looked to other markets. They were looking for an entry point where the cash flow on the properties made sense but there was also potential for appreciation.

That same thought process holds true for smaller investors as well. Luckily for them, advances in technology for property management have made it such that you can have just as much transparency on a property that's 2,000 miles away as you can with one that's 200 feet away.

GlobeSt.com: Looking specifically at the Investability platform, what are some of the ways in which investors can turn its abilities to their advantage to facilitate their decision-making?

Cisterna: We really focus on three things: giving the investor access to information, access to property and access to services. Those are the three things that separate good investors from bad ones. By being able to provide them a tremendous amount of data in terms of what a property should rent for and what the operating costs are, it allows the average investor to go to a single site to get this information and understand if a property has the potential to be a good or bad investment. Rather than going to a source such as Craigslist to find out what the rent might be, speculating on what the operating costs might be or what the taxes might be, we bring that all into a single platform on Investability.

The next step for them is to find the type of property that's right for them. By using our proprietary technology, we're able to show them that information over a million properties across the country, which are available both on the market through MLSs and through exclusive listings. This allows them to become more comfortable with those markets and what the returns might be.

Seventy percent of investors invest within a 10-mile radius. It doesn't have anything to do with good investing; it has to do with their level of comfort. By being able to introduce these investors to service providers throughout the country, this gives them a level of comfort and transparency in terms of what's going on with the property and understand that it is okay to invest outside of your own backyard, especially if there are better opportunities.