Paul Gozzo writes about single-family rentals, their growth since the housing crisis in the mid 2000s, and what to expect from this new, booming sector of the real estate industry.

1. Single-Family
Rentals
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2. Approximately 15 million SFR units are owned by
mom and pop landlords, which means they’re
geographically expansive. Only about 2% of the SFR
units are owned by institutional investment firms.
Compare that to the more than 55% owned by
institutional investors in the multifamily rental
market, and you can see that the SFR asset class
from an institutional perspective is still very much in
its infancy.
Coupled with this new generation of tenant that
clearly wants to rent houses and we have the basis
for much more growth in institutional ownership of
SFR assets. In short, now is as good of a time as ever
to invest in or grow your SFR investments!

3. The American Dream of a white picket fence,
nuclear family, and a mortgage may be shifting.
Why? Well, some of it is undoubtedly thanks to the
Great Recession. But there may be more than meets
the eye when it comes to homeownership falling out
of favor with the new generation of would-be
homeowners.
This brings us to single-family rentals. Again, this
booming sector of the housing market grew mainly
in response to the detrimental downturn of
2008/2009, and all of us in Real Estate watched it
rise like a phoenix in heat around 2011. But I want to
take a more in-depth look at the SFR sector. I think
there’s more than meets the eye.

4. The Genesis of the SFR Genius
From 2005 to 2015, 56% of the gains in the rental
housing stock were due to single-family homes. The
number of Americans living in rental homes has
soared to a staggering 37%, the most substantial
amount since 1965.
The single-family rental asset class is mostly a
product of the housing crash, no arguing that point.
But the truth is, single-family rentals have been
around for decades, and more research into the
subject may prove some ulterior motives in the
collective unconscious of those renting than a little
shortage of cash or distrust of the housing market. A
factor that appears to be as important as finances in
the SFR sector is the emerging desire for
experience.

5. So, what am I talking about?
Well, we have to realize the dream of
homeownership is not a goal that is as much of a
priority to the current generation of would-be
homeowners as much as it once was to generations
before. With the booming digital age in full force,
different cultures and destinations are available to
people more than ever before. People are more
likely to move around from one job to another, and
they are also less likely to want to drop all of that
cash on a down payment for a house. More than
ever, people strive for a sense of portability.

6. You see, the recent influx of investors in the SFR
market and more SFR units now than ever before
may not solely be a product of the Great Recession.
In fact, it may be birthed out of a desire to
experience; people, places, and the world for all it is.
In other words, one part may be the recession which
created the stock, while the other part may be the
audience for that stock. The boom does not exist
without both sides participating nor is it sustainable.
The Future of SFR as an institutional asset class
Single-family rental funds and REITs don’t see
themselves as a threat to single-family or
multifamily builders, but rather as an alternative to a
new generation that may not fall into the categories
of typical homeownership. With that in mind,
investment opportunities are numerous here, too.