While we understand that hindsight is 20/20, it is also precisely the reason that conducting a fresh retrospective on the heels of an event is most helpful in establishing clear and salient takeaways. We took it one step further for the 2019 IMN SFR Forum East in Hollywood, Florida, by gathering collective feedback from a diversity of viewpoints – from investors to lenders to brokers to vendors – from people who experienced the conference via the exhibition floor to the speaking panels to the cocktail bar.
What did we find? Below are the key themes and soundbites that we think best capture the current state of the SFR Industry.
SFR is Evolving
Many thought the SFR business would be a short-lived housing price appreciation play that would be over in a few years. Wrong. Operators continue to invest and evolve their focus—expanding into new markets, buying different types of assets and developing new technology-oriented rental models.
“A substantial ecosystem has blossomed to support the industry by offering capital, property management, appraisals, insurance, renovation and other services. Many individuals in the SFR space are on their second, third or fourth companies as they adapt to new opportunities.”
– Ryan McBride, COO of CoreVest
“Lots of operators report new equity infusions from deep capital pockets. What seems to be driving the renewed interest in larger pools with experienced operators? Yield, yield, yield. Finally, the premium is being placed on operating efficiency and yield. Sounds like a maturing business model.”
– Beth O’Brien, CEO of CoreVest
“SFR has now become a legitimate replacement or option for real money that may have been invested into apartments. Owners and operators are chasing yield and see it as a more profitable alternative.”
– Bruce McNeilage, CEO of Kinloch Partners
“SFR Funds are in acquisition, portfolios are in demand as one-off purchases are more difficult to find for the right yield. Scattered site portfolios will trade, but buyers prefer closer located (or even communities) for ease of management.”
– Gary Porter, Vice President and Nashwa Moussa, First Vice President at CBRE
“There continues to be more and more innovation in the sector, with both investors and service providers bringing new technology and services to the asset class. From an insurer’s perspective, many of these innovations allow us a nimbler and more accurate look into the risk characteristics of an investor’s portfolio.”
– Lee Rogers, President of RealProtect
“Lots of borrowers are aggregating as opposed to flipping. Long term holds are very much a part of most investors strategies as HPA has declined.”
– Micaela Lumpkin, Senior Vice President at CoreVest
“Most of the experienced players are still bullish on SFR despite cap rate compression, more modest HPA, and our long in the tooth economic expansion that is now 10 years old.”
– David Lichtenger, Managing Partner of Intrepid Capital Investments
“Turn key portfolio acquisitions are supplanting REO as the number one inventory liquidity source on market. Borrowers are now comfortable with the acquisition of stabilized product from a yield perspective and days of HPA are fading.”
– Ian Hardcastle, Vice President at CoreVest
“The number of borrowers at this event that claimed to own over 100 properties is substantially higher than last year. It appears a substantial portion of SFR properties that were owned by ‘Mom and Pops’ are starting to join larger portfolios.”
– Augie Jones, Relationship Manager at CoreVest
Build to Rent, Flavor of the Year
Build to rent is really a few different flavors. Everyone was talking about build to rent but further conversations showed that it was not a single strategy. Only a handful of players were purely building, renting and managing themselves. To the many more, the strategy was buying new build and leasing up. To others still, it was purchasing leased pools of new assets in bulk deals.
“Build to rent has been the most popular topic in the SFR industry and seems to be the direction most SFR operators are going to.”
– Bruce McNeilage, CEO of Kinloch Partners
“Home builders are ready to pivot – and hold more of their homes as rentals. This pivot seemed to have investors buzzing about more efficient, consolidated property management and novel build-to-rent methods.”
– John Prins, Vice President at CoreVest
“Build for Rent is the hot topic. Some SFR investors are starting to add this product to their portfolio and equity investors are very interested in this space.”
– Gary Porter, Vice President and Nashwa Moussa, First Vice President at CBRE
“Build to rent continues to be a hot topic and trend, as well as multifamily. Lenders and other service providers are quickly adapting to these trends and introducing products to capture the money that is flowing into these two sectors of the market.”
– Lee Rogers, President of RealProtect
“Obviously, the Build for Rent market is only going to continue to grow and it is important for us as underwriters to better understand the risks/positives associated with these portfolios so we can accurately price/rate them going forward.”
– Jeremy Gratton, Senior Underwriter at SES Risk Solutions
“Build to rent is the buzz expansion plan for many operators. The business has evolved from simple paint and carpet rehab and the opportunity to build to suit for rentals is a core competency of operators and a source of new investors in the space.”
– Samuel Harrity, Senior Vice President at CoreVest
SFR is a Defensive Play
Growth in rents and values may slow but the single family rental business is a great defensive play. There is softening in the luxury housing market and even a slowdown in traditional build to sell inventory but a closer look at single family rental shows no signs of that softening.
“Historical data suggests that growth in single family rental yields are not only counter cyclical but have never gone negative even in deep recessionary periods over the past several decades. Given the recently inverted yield curve and what that usually portends, this is probably a good thing for the industry.”
– Beth O’Brien, CEO of CoreVest
“The SFR space continues to attract very large investors including Sovereign wealth funds and some of the largest alternative asset managers in the world. Investors are seeing SFR as safe and a good hedge against Trade wars.”
– David Lichtenger, Managing Partner of Intrepid Capital Investments
“The rental operators have seen such success that Fix and Flip investors have pivoted to long term holds.”
– Augie Jones, Relationship Manager at CoreVest
Relationships Drive the SFR Industry
At this point in the SFR Industry, it’s apparent that most groups have shifted from being internally focused to reaching out to others in the industry to find ways to partner and grow. Many groups use these events to compare notes, determine best practices and in some cases, identify new business opportunities.
“Getting away from Miami Beach appeared to have the crowd focused more on the connections and partnerships. As the SFR market expands its institutional footprint and acceptance, SFR lenders and owners see a big expansion of available services focused on the space.”
– Samuel Harrity, Senior Vice President at CoreVest
“These events allow an opportunity for both clients and the team to ‘put a face to the name,’ network, and get to know those that they work with so closely. As a lender, we have the opportunity to connect like-minded or complimentary investors and operators to network, socialize, and perhaps even explore new joint ventures.”
– John Prins, Vice President at CoreVest
“In this stage of the SFR industry lifecycle, there seems to be a handful of key players that have established a name and that the greater community surrounding the industry recognizes.”
– Trevor Hanson, Analyst at CoreVest
“The networking opportunities are endless. This was the perfect opportunity for us to nurture existing relationships with investors as well as connect with new ones.”
– Nayeli Rosales, Social Media Specialist at CoreVest
“Everyone has their own preferred method and style of networking. It was great to experience these different interactions, whether it be at our booth, meeting room, private dinners or cocktails by the dock.”
– Kennedy Zamora, Events Specialist at CoreVest
“We always talk about this as a relationship industry; however, this was more apparent than ever this year at IMN.”
– Augie Jones, Relationship Manager at CoreVest
Parting Thoughts
Overall, we give much kudos to the organizers of IMN. The forum has definitely evolved with the shifting pace of the industry. CoreVest has participated in the SFR series and its different permutations since inception, and we often see a good reflection of the market through the conference setup, programming and panel makeup. The 2019 East Coast installment was no different.
It was yet another great opportunity for attendees to connect with key market participants, including fix and flip investors, rental investors, institutional investors, and other real estate and mortgage professionals for a few days of learning, lively discussion, and networking. We would like to thank all the respondents above for their feedback, and look forward to the upcoming IMN SFR Forum West in December of 2019
#IG
