It was widely deemed a temporary play or even a passing trend: Large-scale investors buying thousands of discounted foreclosed properties during the worst of the housing crash and turning them into single-family rentals. When home prices recovered, they would surely sell them for a hefty profit. The housing market is recovering, albeit more slowly than expected. Foreclosure volume is way down and home prices are way up, but these investors are not selling. They are buying more, and now they are buying new.
Real estate investment experts feel the institutional capital is still looking at this very carefully, because there’s a belief, and many support that belief, that it is a long-term hold and there’s yield and there’s appreciation to be had. But the real challenge for capital now, for the institutional capital sources, is that the massive low-lying fruit is gone.
That fruit, cheap foreclosures, offered investors a relatively low-risk play, because they could buy homes at well below the cost of replacement, and not only would they see rental revenue but also property price appreciation. As this new interest develops, however, builders are starting to offer institutional buyers bulk discounts. Not only does it help builders grow revenue, but it gets them closer to normal levels of production, which has been a real struggle thus far.
One of the big criticisms of the single-family rental world is that they’re all kind of one-offs in unique locations with unique amenities. The scalability of the management is what gets it complicated. This makes it much more like an apartment community in that it’s all together and can be managed by a single entity.
In many of the nation’s actively selling, master-planned communities, which don’t build homes just for rent, there are a significant number of renters anyway. Research shows that these renters live in detached homes primarily because that is the preferred lifestyle. Most of them did not even consider renting an apartment either because of necessity, flexibility or choice.
The nation’s homeownership rate, which continues to fall, is now at the lowest in a half a century. While home sales are improving, both homeowners and renters are feeling less confident about the housing market now than they were even at the beginning of this year, according to Zillow. Fewer overall say now is a good time to buy.
To learn more about the market for new construction single family rentals in Southwest Florida, give the 9 Core Realty team a call today!