DS News

48 C O V E R S T O R Y / D A V I D W H A R T O N 48 Single-family rent prices have been on the rise for the better part of a decade now, according to the CoreLogic Single- Family Rent Index (SFRI), with the housing inventory shortages that plagued markets across the country during 2018 only strengthening single-family rental's (SFR) growth potential. A January 2019 white paper by Freddie Mac ("Single Family Rental: An Evolving Market") revealed that SFRs are the largest source of rental housing in America, providing housing to 25 million Americans and valued at more than $4 trillion. With more potential homebuyers opting to rent—whether out of choice or necessity—the SFR sector's potential has also proven to be a boon for investors eager to find the next winning strategy. While SFR can be a profitable area for the savvy investor, institutional investors are also staking increasing claims in the sector. While many were drawn to the sector due to the glut of distressed inventory during and in the aftermath of the financial crisis, today's institutional SFR investor must be more strategic, finding the right markets for a solid ROI and crafting a game plan that acknowledges the realities of today's market. Noting where these institutional investors are targeting can also help shape the individual investor's strategy, taking into account variables such as scalability, affordability,and product demand. With SFR's potential showing no sign of diminishing, DS News spoke to some of the industry experts who spend their days in these particular trenches. Here's what they told us about the state of SFR investment in 2019. THE INVESTMENT OUTLOOK Charles Sells, Founder and Managing Director, e PIP Group, told DS News that speculation about a possible recession is preoccupying some investors with "what if " scenarios spurred by uncertainty. "Investors have all talked about that 18-month window [for expecting a market correction]," Sells said. "'Alright, it's going to happen in 18 months.' Well, that was six months ago. Traditional homebuyers (not investors) are just playing the wait-and-see game. ey don't want to buy right now because they're afraid they'll end up in upside-down mortgages. ey're all just hanging tight, not wanting to make that move." However, Sean Miller, President, PointCentral, told DS News that the market for single-family rentals (SFR) remains strong. "Owners and operators are trying to up their game as a way to serve that strong demand," Miller said, "whether that's combining portfolios or adding to their existing portfolios." Overall, Miller predicted that 2019 would be another strong year for SFR. "If I was an investor I'd be cautious," said Jay Tenenbaum, VP, AZP Capital. "I don't know that we'll be having the same conversations at the end of 2019. We know a correction is coming—we just don't know when." Tenenbaum said that he believes the market is simply behaving in a healthy and rational way. "People who are analyzing the numbers and the returns are excited to get in even at today's prices." He added that the housing shortage has helped spur the rental market, as even potential buyers who can afford to buy have not necessarily been able to find homes in In an era of high demand, low defaults, and affordability challenges, here's why single-family rental investment has become a dominant force.

• Cover