Investment Capital Chases Single-Family Investment Opportunities to Phoenix

Investment capital is turning its attention to single-family rental communities in Phoenix. NorthMarq has called Phoenix the gold star for single-family rental investment. The brokerage firm has sold seven of these assets in the market since 2018, and currently has two additional listings, including the Villages at Queen Creek from TruVista Development. Investors are responding to strong tenant demand for well-managed single-family properties.

“From a tenant perspective, the demand has been fantastic,” Trevor Koskovich, president of NorthMarq Investment Sales, tells GlobeSt.com. “We are seeing people moving and gravitating to this product in the most insatiable way. This is happening for all of the reasons that COVID has created. We have low-density, private backyard, your own space, pet friendly environment and all of the benefits of a single-family home without all of the maintenance. From a tenant perspective, it have become one of the most desirable assets in Phoenix.”

Investors are not only attracted to the tenant demand but also to the operational efficiency and stability of these communities, which often produce better rents and tenant profiles than a comparable garden-style apartment community, according to Koskovich. “The product demand has been so robust because investors see the operational benefits,” he says. “Owners are achieving rents that are better than comparable garden-style properties in the immediate neighborhood, and there is more efficient operating than a traditional single-family home. Investors are able to operate these properties extremely efficiently. They are seeing great returns on these.”

The single-family housing market until recently has been highly fragmented with mostly mom-and-pop ownership. Tenants, however, have seemed to prefer these communities—which are built for renters—to the one-off homes in traditional neighborhoods owned by individuals. The reason: amenities. “We are offering a high-quality amenity package,” says Koskovich. “There are fitness centers, pools and pocket park areas. Tenants are benefitting from high-quality management that comes with having people onsite. A fragmented market might not have the same responsiveness.”

While Phoenix is a hotspot for single-family rental communities, they are popping up indiscriminately throughout the area. “We have seen these properties strategically located throughout the Valley,” says Koskovich. “Southeast Valley, the Deer Valley area and the West Valley, including Peoria and Surprise have been popular. They are in low-density markets. You aren’t building these in areas like Central Phoenix or North Scottsdale where the land costs are so high that it is improbable to structure the deal.”

The demand for single-family rental communities is also surging throughout the sunbelt region. “This is not unique to Phoenix. It is happening in multiple Sunbelt cities today,” says Koskovich. “We are seeing this proliferate in Texas, Florida, the Carolinas, Denver and Salt Lake City. All of these markets have active building assignments. This is happening all across America, and Phoenix just happened to be the birthplace of this trend. It is happening and it is happening everywhere in a big way.”