Single-Family Rentals: Growin’ Up

For single-family rentals, “the near-term operating outlook is favorable in absolute terms and relative to many other property types,” writes Pawlowski.

NEWPORT BEACH, CA—The single-family rental sector, a newly institutionalized property type, is less well known and more fragmented than other sectors. The vast majority of single-family rentals are owned by small investors and mom-and-pop operators, while the publicly traded REITs only own ~1% of all single-family rental homes in the U.S.

With a history of less than five years in the public-market, many mutual fund and hedge fund managers are still trying to understand the space. The initial public-market track record for the REITs was poor from mid-2013 through early 2016, when they began to dramatically improve operations. Big operators are proving they can control costs, improve margins and grow rents. The near-term operating outlook is favorable in absolute terms and relative to many other property types.