Over the past decade, the market for single-family rentals (SFRs) has evolved and emerged as an institutionally viable asset class. In a few years, we will likely look back and consider 2019 to be the sector’s inflection point, where it transitioned from a niche-alternative asset class to a mainstream property type. As the sector gains interest from both investors and renters alike, build-to-rent strategies have emerged as a solution to match supply levels with growing demand.

1. Single-Family Rentals
Q4 2019

2. 1
Single-Family Rentals Q4 2019
State of the Single-Family Rental Market
Over the past decade, the market for single-family rentals (SFRs) has evolved and
emerged as an institutionally viable asset class. In a few years, we will likely look back
and consider 2019 to be the sector’s inflection point, where it transitioned from a
niche-alternative asset class to a mainstream property type. As the sector gains interest
from both investors and renters alike, build-to-rent strategies have emerged as a
solution to match supply levels with growing demand.
As younger households grapple with the ongoing student debt crisis and prohibitively
large down payment requirements, SFRs have provided an alternative to
homeownership, keeping the prospect of a suburban lifestyle attainable. Millennials
aren’t the only age group who is weighing the positive aspects of SFRs. The
homeownership rate for householders between the ages of 35 and 44 is the furthest
below its pre-recession highs compared to all other age groups.
Challenges with attaining homeownership and the growing number of housing options
across the U.S. have combined to increase the appeal of renting. The SFR market
continues to benefit from persistent demand growth, technological innovation and
economies of scale. When you also consider the SFR market’s attractive borrowing rates
and return margins, it’s easy to say the wind is in the sector’s sails heading into 2020.
Note: Chandan Economics defines SFRs as properties containing less than five units for all performance
metrics data. For SFR construction starts data, we only consider one-unit properties.
Source: Arbor/Chandan Economics Single-Family Rental Investment Trends Report
• Cap Rates Ticked Up to 6.5%
• SFR Return Premiums
Widened to 4.7% Above U.S.
Treasurys
• SFR Housing Starts Totaled
41,000 Units as of Third-
Quarter 2019, Accounting for
3.7% of All Single-Family
Construction

3. 2
Single-Family Rentals Q4 2019
Source: Chandan Economics' Analysis of Census Bureau Data
SFR Occupancy Rates
United States, Quarterly
80.0%
84.0%
88.0%
92.0%
96.0%
100.0%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
Occupancy Rate (Transacted SFR) Occupancy Rate (All SFR)
Occupancy rates on transacted SFRs jumped up to 97.6% in the fourth quarter of 2019, up 3.4% from the third quarter. Across all SFRs, as
measured by the U.S. Census Bureau, occupancy rates average 94.2%. While the Census Bureau’s measure casts a broader net and is less
volatile, it follows a similar trend line of improvement as this cycle has lengthened.

4. 3
Single-Family Rentals Q4 2019
Source: Chandan Economics
SFR Cap Rates
United States, Quarterly
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
12.0%
1Q11
2Q11
3Q11
4Q11
1Q12
2Q12
3Q12
4Q12
1Q13
2Q13
3Q13
4Q13
1Q14
2Q14
3Q14
4Q14
1Q15
2Q15
3Q15
4Q15
1Q16
2Q16
3Q16
4Q16
1Q17
2Q17
3Q17
4Q17
1Q18
2Q18
3Q18
4Q18
1Q19
2Q19
3Q19
4Q19
SFR Cap Rates 10-Year Treasury Spread
Cap rates on SFR properties peaked at 11.0% as home prices bottomed out in 2012. The formalization of the SFR sector in the intervening
few years has meant greater cap rate stability. Generally, national SFR cap rates have hovered between 6% and 8% for the past six years.
SFR cap rates ticked up to 6.5% in the fourth quarter of 2019, up 10 basis points (bps) from the prior quarter and 29 bps from a year earlier.

5. 4
Single-Family Rentals Q4 2019
Source: Chandan Economics
SFR Debt Yields
United States, Quarterly
8.0%
9.0%
10.0%
11.0%
12.0%
13.0%
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
SFR Debt Yields
Debt yields rose in the fourth quarter to 11.3%, the highest rate
since 2015. The initial estimate is up 43 bps from the third
quarter and 144 bps from fourth-quarter 2018.
Source: Chandan Economics
SFR Debt Encumbrance
United States, Quarterly
$6.0
$7.0
$8.0
$9.0
$10.0
$11.0
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
SFR Debt per Dollar of NOI
Debt encumbrance has now fallen in four of the last five quarters,
dating back to the high watermark of $10.17 set in third-quarter
of 2018.

6. 5
Single-Family Rentals Q4 2019
Source: Chandan Economics
SFR Loan-to-Value (LTV) Ratios
United States, Quarterly
LTVs in the fourth quarter rose for the second consecutive
quarter, jumping by 83 bps to 64.8% — up 131 bps from fourth-
quarter 2018. Still, levels of leverage are well below the recent
high of 68.6% observed at the end of 2017.
Source: Chandan Economics; Federal Deposit Insurance Corporation
Residential Default Rates
United States, Quarterly, Loans Secured by 1- to 4-Unit Properties
60.0%
62.0%
64.0%
66.0%
68.0%
70.0%
4Q14
2Q15
4Q15
2Q16
4Q16
2Q17
4Q17
2Q18
4Q18
2Q19
4Q19
SFR LTV Ratios
Default rates have declined in 27 of the last 28 quarters and
currently sit at 1.8%. The housing market’s return to health paired
with the SFR sector’s favorable long-term outlook has created a
need for supply beyond distressed sales or vacant conversions.
0.0%
2.0%
4.0%
6.0%
8.0%
10.0%
3Q04
3Q05
3Q06
3Q07
3Q08
3Q09
3Q10
3Q11
3Q12
3Q13
3Q14
3Q15
3Q16
3Q17
3Q18
3Q19
SFR Default Rates

7. 6
Single-Family Rentals Q4 2019
U.S. Recession
0.00%
1.25%
2.50%
3.75%
5.00%
6.25%
0.0
10.0
20.0
30.0
40.0
50.0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Build to Rent (Units, Thousands) Build-to-Rent Share (%)
Based on an analysis of Census Bureau data, between 1975 and the start of the recession in 2007, SFR accounted for a little less than 1.6%
of all single-family construction. The SFR share of single-family starts has since soared. In 2013, the SFR construction share reached a peak
of 4.9%, and today it remains elevated at 3.7%.
Source: Chandan Economics' Analysis of Census Bureau Data; National Bureau of Economic Research
Build-to-Rent Single-Family Housing Starts
United States, 12-Month Average, 1- to 4-Unit Properties

8. 7
Single-Family Rentals Q4 2019
Source: Amherst Capital, “U.S. Single-Family Rental – An Emerging Institutional Asset Class,” November 2016
SFR Market Value
Estimated Values of Commercial Real Estate Sectors, United States, Trillions
$3.1
$3.5
$2.2
$2.7
$1.6
$0.9
0.0
1.0
2.0
3.0
4.0
Single-Family Rental Multifamily Office Retail Industrial Hospitality
Amherst Capital estimates the value of the SFR sector to be $3.1 trillion, only slightly lower than multifamily’s value, and larger than the
estimates of other commercial real estate sectors such as office, retail, industrial and hospitality.

9. 8
Single-Family Rentals Q4 2019
Source: U.S. Census Bureau, American Community Survey, 2018
22.3
53%
19.5
47%
Single-Family Rentals Multifamily
SFR Market Share
Renter-Occupied Housing Units by Units in Structure (Millions)
The nation’s rental market had a total of 41.9
million renter-occupied housing units as of
2018, according to the U.S. Census Bureau’s
latest American Community Survey.
SFRs represented 53% of total renter-
occupied housing units (22.3 million units,
including two- to four-unit properties), while
multifamily properties accounted for 47%
(19.5 million units, including properties with
five-plus units)..
Note: Mobile home and boat, RV, van, etc. properties are not included in data

10. 9
Single-Family Rentals Q4 2019
14.7
35%
7.6
18%
13.7
33%
5.8
14%
Single-Family Rentals (1-Unit) Duplex-Quadruplex (2-4 Units)
Small Multifamily (5-49 Units) Large Multifamily (50+ Units)
When breaking down the asset classes
further, SFRs represented 35% (14.7 million
units) of total renter-occupied housing units,
duplex-quadruplex represented 18% (7.6
million units), small multifamily represented
33% (13.7 million units), and large
multifamily properties represented 14% (5.8
million units).
Source: U.S. Census Bureau, American Community Survey, 2018
Note: Mobile home and boat, RV, van, etc. properties are not included in data
SFR Market Share
Renter-Occupied Housing Units by Units in Structure (Millions)

11. 10
Single-Family Rentals Q4 2019
U.S. Recession
50.0%
52.0%
54.0%
56.0%
58.0%
60.0%
15.0
17.0
19.0
21.0
23.0
25.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Single-Family Rentals (Millions) Single-Family Rental Market Share (%)
Source: U.S. Census Bureau, American Community Survey, 2005-2018
There was a net increase in SFRs in nearly every year from 2008 to 2012. As the economy gained strength, and jobs and incomes rose, the
SFR market share of total renter-occupied housing units started to decline beginning in 2015.
Note: Mobile home and boat, RV, van, etc. properties are not included
SFR Market Share
Renter-Occupied Housing Units by Units in Structure (Millions), 1- to 4-Unit Properties

12. 11
Single-Family Rentals Q4 2019
20.6
80%
4.0
16%
0.3
1%
0.9
3%
Individual Investor LLP, LP or LLC
REIT/Corporation All Others
Of the 47.5 million total housing units included in the U.S. Census
Bureau’s Rental Housing Finance Survey (RHFS), 24.3 million
properties, or about 51%, were owned by individual investors.
However, individual investors own 80% of single-family rentals,
a total of 20.6 million units.
The largest ownership share of properties with 50 or more units
are limited partnerships, at 68%. Individual investors own less
than 7% of units in these properties.
Properties with 5 to 49 units are more segmented, with individual
investors owning a 32% share and limited partnerships owning
53%.
Composition of Single-Family Rental Ownership
Rental Housing Finance Survey, Percent of Units (Millions)
Source: U.S. Census Bureau, Rental Housing Finance Survey, 2015
Note: Single-family includes one- to four-unit properties.

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