Single-family real estate has been described as the tail that wags the dog in the rental market. According to the Emerging Trends in Real Estate 2022 report by PwC and Urban Land Institute, trends between now and 2030 will be “forged in a simmering cauldron of demand for shelter, constrained by an inadequate supply of new development and construction.”
Vacancy rates are falling, and while there’s tremendous demand for single-family rental (SFR) properties in the rental market from both tenants and investors, one of the biggest SFR challenges investors face is scalability. Growing a rental property portfolio one home at a time can be incredibly time-consuming..
Buying an SFR portfolio is a strategy many real estate investors use to purchase multiple rental properties in a single transaction, negotiate the best deals, and put their investment capital to work more efficiently.
In this article, we’ll discuss 9 places to buy SFR portfolios and explain how to finance an SFR portfolio.
- SFR portfolios are groups of rental properties purchased in a single transaction.
- Rental homes in an SFR portfolio may be located in different cities or states, be a combination of other property classes, or blend complementary investment strategies, such as cash flow and appreciation.
- SFR portfolios for sale can be found on commercial real estate websites or sites specializing in SFR properties, like Roofstock.
- SFR portfolio lenders provide a single mortgage for multiple rental properties, often with more flexible loan terms and conditions than those found with a traditional lender.
What is an SFR portfolio?
An SFR portfolio is a collection of SFR properties held and managed to realize a specific financial goal. The concept of an SFR portfolio is similar to holding a portfolio of dividend-paying stocks, but without the inherent volatility of the stock market.
For example, an investor might purchase a SFR portfolio for the recurring cash flow or use the combined equity growth of properties held in the portfolio as an internal funding source to buy additional SFRs.
Rental homes held in a portfolio may be in different real estate markets across the country, in various property classes (such as Class A, B, or C), or used to balance SFR investment strategies, such as owning a mixture of properties that generate consistent rental income and those in markets with high appreciation.
As the supply of SFR real estate continues to decline, large institutional investors, family offices, and individual private investors alike are buying SFR portfolios.
Where to buy an SFR portfolio
Traditional residential listing websites, such as the local multiple listing service (MLS), Realtor.com, Trulia, and Zillow, may be good resources for finding individual rental properties, including multifamily properties. However, because these platforms are tailored for the general public, they’re typically not a good place to look for groups of rental homes for sale.
SFR listing websites, such as Roofstock and commercial real estate websites, are better resources for finding SFR portfolios for sale because they target the investment community.
Here are 9 sources to consider for buying an SFR portfolio.
Roofstock SFR portfolios allow investors to diversify rental property investments in a single transaction. Purchasing a portfolio of rental properties in bulk from a seller may increase the chances of getting a more attractive deal, obtaining better lending options, and making 1031 exchanges more convenient.
Each SFR portfolio for sale on the Roofstock Marketplace includes key financial performance details, such as projected cash flow and appreciation, photos, and due diligence documents like property inspections, title reports, tenant lease information, and rent rolls.
After browsing SFR portfolios for sale in different cities and states on the Roofstock Marketplace, investors can make an offer for an entire portfolio or pick and choose properties and complete the whole purchase transaction online. The Roofstock team coordinates the process and, upon request, can provide referrals for local property managers to handle day-to-day operations.
2. Connected Investors
Connected Investors is a peer-to-peer platform where real estate investors can connect with one another, list property for sale, and find motivated sellers and private lenders. After signing up for a free account, investors can search for SFR portfolios or participate in forums to interact with private sellers with portfolios of homes for sale.
Crexi is a commercial real estate listing website with property listings all over the U.S., including SFR portfolios and build-to-rent (BTR) homes. It’s free to sign up, easy to use, and includes SFR portfolios listed for sale by some of the country’s top real estate brokerages, including SVN and NAI.
DealStream is a global online marketplace with over 20,000 items listed for sale, including established businesses, public shell companies, oil and gas properties, franchise opportunities, and SFR portfolios. DealStream is a listing platform only, and investors deal directly with sellers to conduct due diligence and put a deal together.
LoopNet is an online marketplace for commercial property listed for sale and lease in the U.S., and is owned by commercial property data company CoStar Group. In addition to commercial real estate, LoopNet has residential income homes listed for sale, including SFR portfolios. Investors can search for SFRs for sale using an interactive map or filter by city, county, or neighborhood names.
Motleys is a buying and selling marketplace for industrial assets, auto auctions, and commercial and residential real estate. Motleys' residential real estate listings include auction property, trustee sales, and land zoned for residential development. The company also partners with SFRhub for investors wishing to sell their SFR portfolios.
QuantumListing is a commercial real estate website where investors, buyers, sellers, and agents can browse listings for free. Search filters are limited to location, square footage, and price. After selecting the multifamily asset class, buyers can scan listings for SFR portfolios for sale.
SVN/SFRhub Advisors is an independently owned and operated franchise of SVN International Corporation that focuses on SFR and BTR investment portfolios of 5 or more homes. The company provides acquisition and disposition services, and SFRhub is designed for sophisticated and first-time SFR and BTR portfolio investors.
Showcase is a listing website owned by CoStar that has commercial properties, multifamily apartment buildings, and residential income properties listed for sale. Each listing contains a property description, photos, and details, including cap rate and occupancy rate. Investors interested in more information can contact a seller by phone or email.
How to finance an SFR portfolio
SFR portfolios are generally financed with SFR portfolio loans. Rather than obtaining an individual loan for each rental property, portfolio lenders offer a single loan for multiple rental properties.
Instead of selling the loan to the secondary market, as many traditional residential loans are, a portfolio lender keeps the loan on its own books or sells the loan to a private investor.
Because portfolio loans are not sold to entities such as Fannie Mae or Freddie Mac, portfolio lenders are not restricted by traditional federal lending guidelines. This allows a portfolio lender to offer loans for an unlimited number of properties with no maximum loan limit and a variety of loan programs, including:
- Fixed-rate permanent financing
- Adjustable-rate permanent financing
- Bridge short-term loans
- Lines of credit
- BTR loans
Portfolio loans are generally asset-based, which means a lender will primarily consider property asset values and cash flow generated, and, secondarily, a borrower’s credentials. However, in exchange for this flexibility, interest rates and fees are generally higher with portfolio loans, and loan terms are usually 10 years or less.
As with any type of financing, it’s vital to interview several portfolio lenders before deciding.
SFR portfolios can be great investments. SFR portfolios can generate multiple income streams and real estate portfolios are easy to diversify by geography, property class, and investment strategy. When the time comes to sell, SFR portfolios offer multiple exit strategies, including trading individual properties, selling an entire SFR portfolio, or conducting a 1031 tax-deferred exchange.