IMN held their annual Single-Family Rental Investment Forum (West) this past December in Phoenix, Arizona, a major industry event that brings together all the major players in the Single-Family Rental (SFR) space in order to discuss where the market is headed and identify emerging opportunities for growth in the sector.
The Roofstock team was on hand to connect with industry colleagues and solidify the position of our marketplace as the technological leader in the investment property market. Our very own Gary Beasley (formerly CEO of Starwood Waypoint, a major REIT in the SFR market) moderated a panel of execs from several of the largest institutional investors discussing the outlook of the market from their perspective.
We sat down with Roofstock’s CEO Gary Beasley, Brent Long, Head of Multi-Asset Strategy, and Andy Boyum, Director of Asset Management, to talk about their takeaways from the conference.
Trends in the Single-Family Rental Market
What were the current market trends being discussed in the Single-Family Rental market?
- GARY: Investors have become increasingly attracted to the value proposition offered by the Single-Family Rental (SFR) market as they’ve become more familiar with the asset class and its long-term stability.
- BRENT: Industry skeptics were unsure that the Single-Family Rental asset class would remain viable beyond the end of the recession – clearly that concern has not been borne out. The evidence has instead positioned SFRs as a strong and maturing long-term business.
- ANDY: The Single-Family Rental market has shown itself to be a proven, stable, and long-term investment strategy for generating returns in the real estate sector.
Key Indicators of Maturity in the Single-Family Rental Market
What are the recent developments in the Single-Family Rental asset class?
- GARY: We’re seeing strong evidence that the Single-Family Rental market continues to expand and mature, as demonstrated by the improving metrics and rising stock prices of the institutional investors in the sector.
- ANDY: Blackstone Group’s decision to take Invitation Homes public is the most recent development to indicate strong long-term growth in the SFR market.
- BRENT: The operating platforms of institutional investors, such as Invitation Homes, has matured significantly, indicating that the SFR market is poised to see significant growth in the coming years. The entry of newer technology-driven platforms in the market, such as Roofstock, that are making SFRs more accessible also indicates growing interest amongst individual retail investors.
Future of the Single-Family Rental Market
What is the consensus amongst fellow stakeholders in the Single-Family Rental market about where the industry is headed?
- GARY: As investors begin trying to assess the potential impact of the incoming administration on the economy and the SFR market, the overall assessment is that lower regulation and real estate friendly policies will prevail. With inflation likely to increase in the coming years, real estate will potentially become even more attractive as a hedge against inflation.
- BRENT: Given the sheer size and potential of the sector, the nationwide inventory of Single-Family Rental homes totals over 15M and over 97% of it is in the hands of small-to-medium investors, there is a vast market for buyers and sellers of SFRs to tap into.
- ANDY: Shifting demographics across the country are also advantageous to the rental property market, as millennials are considering home ownership later in life or foregoing it entirely in favor of renting.
- BRENT: The previously mentioned IPO of Blackstone Group’s Invitation Homes is again another strong indication that institutions anticipate the market will continue to grow and consolidate.
- GARY: Much of this growth and consolidation is due to advances in technology that are making it easier for investors to identify, acquire, and operate a large number of homes across markets. Geography is less of a barrier than it once was.
The Role of Technology
On your point about the effects of technology on the Single-Family Rental market, how else will technology continue to influence the business model?
- GARY: Roofstock is a great example of how technology is enabling consolidation of a historically fragmented market through an innovative online marketplace that allow players large and small to transact with each other more seamlessly than ever before.
- BRENT: Institutional investors continue to develop underlying management technologies and techniques that will further enhance the efficiency and cost effectiveness of their operations. These benefits of scale have traditionally been limited to the large players, but increasingly, new startups are developing technology platforms to help support smaller investors with managing their properties as well.
- GARY: On the acquisition side, the influence of increased transparency in the market and the availability of data cannot be understated. Tools and research that used to be limited to institutions are now much more easily accessible to investors of all sizes.
- ANDY: Friction costs are decreasing due to technology, as property acquisition and management becomes more efficient. The ability to buy and sell properties without vacating a tenant is a great example of this, helping to create much more seamless transactions. These same technologies also allow for significant improvements in portfolio optimization.
- GARY: A lot of these enhancements really come down to increased liquidity in the market, something that has historically been lacking from the sector. The Roofstock marketplace is bringing together all of these technological advances – in the form of efficiency, transparency, and cost savings – to make the sector more accessible to investors of all sizes.
The Value Proposition of Roofstock in the Space
What was the reaction to Roofstock’s value proposition for greater liquidity, transparency, and efficiency in the context of the SFR market going forward?
- ANDY: We kept hearing from buyers and sellers that maintaining a tenant in place is a significant efficiency gain for both parties. Big players have taken notice of Roofstock’s entrance into the market and the value proposition it offers investors both big and small.
- BRENT: Making SFRs more accessible to retail investors provides the entire market with greater liquidity, which is a win for everyone, and makes SFRs an even more attractive asset. Roofstock’s marketplace has the potential to bring together investors in this highly fragmented sector into a single platform. That reduced fragmentation will drive deal flow and increase liquidity in the space.
- GARY: Greater liquidity is a huge asset for all investors in the SFR market, regardless of size. People who invested in the 2010-2014 timeframe are starting to explore how to get liquidity; Roofstock offers a uniquely attractive solution in this regard.
- ANDY: Instead of a “race to the bottom” in terms of fees or costs, the sector is increasingly looking for products and services that offer strong value adds. Roofstock’s goal is to help people transact more cheaply, easily and efficiently than before.