When both economic swells and shocks work to a real estate sector's advantage, then it's high-growth time. That's the single-family rental (SFR) housing market, and as Suresh Srinivasan, CMO of Roofstock, a San Francisco Bay Area-based online investment marketplace and technology platform, told GlobeSt.com investors are definitely taking notice.
"The single-family rental market is really having a moment right now," Srinivasan said. "People who prioritized being close to work are now focusing instead on more space and increased safety. Combine that shift with the massive housing supply shortage and we're seeing record occupancies and housing units filling up at record speed. All of that benefits single-family rental investors, of course."
Part of the current interest stems from the pandemic. Shelter-in-place mandates shifted some of the millennial desire away from multifamily resulting in a potential diversification problem in the residential space for investors. Srinivasan said, "Many residential investors realized they were all locked up in apartments with no exposure to single-family homes, and if this is where consumer preference is shifting, they needed to get an allocation there." Srinivasan notes that SFR residents tend to be stickier as well, staying longer than in multifamily units.
The country's biggest builders are joining in as well, creating build-to-rent communities in suburbs and secondary and tertiary markets. SFR product used to be the oldest housing stock, with units turning into rentals as they age, but that always made upkeep more challenging. Investors come to the SFR market these days demanding new product without the maintenance concern, and builders are happy to oblige them.
"They can essentially pre-sell portions of their SFR communities," Srinivasan said. "We've seen there's a strong investor demand for buying new inventory because you don't have to think about repair and maintenance for a while."
The challenge for SFR investors has been that investment technology has been slow to catch up to the multifamily side. For example, an investment firm wanting to buy a portfolio of 500 SFR residences can encounter difficulties given that individual investors still account for 98 percent of the housing stock. All of this is changing with the emergence of real estate tech, like Roofstock, that provides a more liquid trading platform for SFR and makes it easy for any investor to build and scale a portfolio of SFR investments.
Srinivasan sees a bright future for the sector. "The characteristics of SFR, a very resilient asset class, make it quite appealing if you can apply tech to boost efficiencies," said Srinivasan, whose company saw 569% growth in the first quarter's investment volume over last year. "There has been a big leap in technology that not only makes it easier to invest in the asset class, but innovation around resident experience, property maintenance, and portfolio optimization."
Browse properties at Roofstock.
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Brian Lee
Brian Lee is an Albany-based litigation reporter for the New York Law Journal. He has worked at daily newspapers in Massachusetts, New York and New Jersey. He can be reached at [email protected]. Twitter: @bleereporter
