- A new investment product is hitting the global market -- portfolios of performing rental homes with tenants and management in place.
- This drastically lowers the barrier to entry for investors securing retirement with residential real estate.
- A new industry is forming around this, and there might be room for you.
Single family rentals (SFR), an asset as old as the hills but only recently recognized as an asset class, are attracting attention from private equity investors who want to go beyond owning large rental portfolios and invest in the businesses of SFR.
Since 2012, when financial institutions began making large-scale investments in single family rental homes, the space has been validated by no fewer than 17 institutional investors acquiring and managing over 170,000 rental homes.
You could think of these companies as the largest homeowners in U.S. history, and the challenges they had to wrestle with were unprecedented. An entirely new industry was formed to create the data, technology and professional management systems needed to do what many thought was impossible — acquiring, repairing, leasing and managing thousands of homes across the country.
In the end, every company that attempted this figured it out. It wasn’t always pretty, but with the help of a new service industry we are calling the business of SFR, it got done.
Now the Business of SFR is in the spotlight and attracting attention from strategic investors who want to expand these businesses and offer the services created for Wall Street to everyone else. It’s a pretty compelling case; 37 percent of all the households in the U.S. are rentals. Someone owns those homes, and they view them as a financial instrument, not a home.
Financial technology, or fintech, is one of the hottest sectors in venture capital and strategic investment today. It’s all about creating better ways for people to move, stash, grow and spend their money.
The players in the space wish to relocate trillions of dollars from where they reside in old-fashioned bank accounts, 401(k)s, IRAs, credit accounts and mortgages into new, more efficient, convenient and profitable places. Disrupters are creating those places, and residential real estate is beginning to stake a claim.
Enter the performing rental, an investment product that produces a tidy 4 to 6 percent rental yield, plus 1 to 3 percent annual appreciation. It’s not an opportunistic investment to get rich quick but a stable, predictable, long-term investment. The kind of instrument that you use for securing a nest egg.
Now imagine thousands of these instruments being available to research, analyze, acquire and manage online. Fintech meets SFR. Stay tuned.