Single-Family Rental REIT’s Craze?

“So Far, Institutional Ownership of Single-Family Rentals Appears to Have Legs, Analysts Say.”

By Randyl Drummer. CoStar. March 6, 2013.

“Despite the volume of [single-family] acquisitions in recent months in some markets, the percentage of homes for rent in the U.S. is not expected to materially change,” said Suzanne Mistretta, senior director in Fitch’s U.S. RMBS Group; and Dan Chambers, managing director in the U.S. CMBS group.

“What is significant, however, is the trend towards institutional ownership of [single-family] homes, and this does not seem to be a fleeting trend. That said, distressed buying opportunities are likely to fall off from current levels.”
[…]
“In general, home sales and effective apartment rent growth will be able to co-exist,” said Luis Mejia, director of multifamily research for CoStar. “More single-family rentals will complement, rather than compete with, the multifamily market, because the transition between renter and homebuyer is getting longer due to credit and economic issues,” Mejia said.

via Will Wall Street Buy Into Single-Family Rental Craze? – CoStar Group.

The question appears to be one of sustainability of the large-scale model being employed by Blackstone and the other cash-rich entities that have been plowing billions into the single-family-to-rental model. How much of a bubble can be created in this market segment if the most sophisticated equity real-estate firms comprise such a large percentage of current buyers? Aren’t they the least likely to continue buying to the point of overbuying, where profit margins will overly tighten and they should start channeling their investment funds elsewhere?

Regardless, what does this all mean for the smaller investor? The bargains have been being snapped up by those with very deep pockets full of cash and the money to hire professional buyers. Smaller investors likely are best served by not having unrealistic expectations but rather investing with the long-term in mind, keeping themselves from becoming overly leveraged and especially not leveraging based upon the faulty notion of one way real-estate-price appreciation, up, as so many now failed investors did in the run up to the 2007-8 collapse.

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