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3 Reasons Why Institutional Investors Are Still Buying Single-Family Rentals


A recent article by Bendix Anderson in National Real Estate Investor “Institutional Investors Keep Buying Single-Family Rentals, In Spite of High Prices,” highlighted several reasons why the market for single-family homes as investments remain strong.

During the first six months of 2016 alone, institutional investors bought more single-family homes than in all of 2015, said the article. What’s more, according to RealtyTrac, institutional investors bought 2.9% of all single-family homes in the first 180 days of 2016. That’s up from 2.6% in 2015.

(RealtyTrac defines an “institutional investor” as someone who buys more than 10 rental houses a year.)

The buying trend has continued even while investor yields have declined in many markets, according to the article. “There are now 45 markets where the average cap rate on a single-family rental is less than 6.0%...up from 45 markets in 2015, out of the more than 400 counties tracked by RealtyTrac.”

Here’s why demand remains strong:

1. The Stock Market Has Many Investors Concerned

“A volatile stock market has made investors wary, Steve Hovland, director of research for HomeUnion, a real estate investment management firm, was quoted as saying. “Single-family rental housing is much more attractive than other options.”

2. Inexperienced Investors Have Been Selling

Investors who specialize in buying single-family rental houses have begun to buy from from less experienced investors. “There will be a handful of entities that will stay in the single-family rental business for the long-term,” said Daren Blomquist, vice president for data firm RealtyTrac. Smaller investors who may own one, two or three properties have become tired of the property management aspect of investing.

3. Property Brokers Have Begun to Sell Tenant-Occupied Homes

Unlike years ago, select residential property brokers are now selling packages of single-family homes with renters living in it. “Investors can save a lot of money by selling tenant-occupied single-family rentals,” the article said. “The friction cost of asking rental tenants to move out, fixing up the house and then leasing the house again after a sale can equal 8.0% to 12% of the cost of the properties.”

For more information on why you should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or harold.willig@springviewinvestments.com

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 17 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

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