As interest rates fall and the U.S. rental market continues to expand, single family rental (SFR) investors are expected to significantly increase acquisition of single family rental homes in the coming year.
Single Family Rental Homes | Investors Benefit from Lower Cost of Capital
In a January 2020 article The National Real Estate Investor (NREI) reported that several large REITs are stepping up plans to add significantly more SFRs to their rental portfolios before year's end. The largest publicly-traded SFR owners have more money to spend on acquisitions due to a rise in stock prices that lowers the cost of capital.
Invitation Homes Doubled Their Mid-Year SFR Acquisitions in Q3 2019
"We have seen more opportunity for accretive acquisitons," Dallas Tanner, president and CEO of SFR REIT Invitation Homes told NREI. Compared to its single family rental homes acquisition pace in the first half of 2019, Invitation Homes doubled the number of properties it acquired in the third quarter of 2019—most of them located in the Western U.S., including Dallas.
Tricon paid $210 million for a portfolio of 708 rental homes
Tricon Capital Group, headquartered in Toronto, is also planning to expand its U.S. SFR acquisitions in 2020. In the fourth quarter of 2019 Tricon paid $210 million for a portfolio of 708 rental homes located in Nashville, Tenn. “We are excited to add such a high-caliber portfolio to our single-family rental business and gain immediate scale in Nashville, one of the fastest-growing cities in North America ,” said Gary Berman, CEO and president of Tricon.
Demand for Single Family Rental Homes Will Grow in 2020
Gary Beasley, CEO of Roofstock, an online platform for buying and selling SFR properties, said, "The next 12 months are likely to be busy for investors in single-family rentals. Robust rental demand is contributing to strong occupancy rates, helping boost financial performance for owners."
Currently, the top markets for SFR investors include cities in the Southeast and the Southwest. In Phoenix and Las Vegas, two of the strongest SFR markets in the country, average annual rent growth has increased from 5.4 percent to 7.0 percent. “There is something significant happening in the Southwest," says Doug Brien, CEO and co-founder of Mynd Property Management. "The SFR market appears heated, fueled by strong demand from renters."