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Large Single-Family Investors Ramping Up Inventory

Single-family investing is a profitable niche. Big companies continue to expand their inventory, but it’s unclear how much they can grow before there’s a public backlash.

NEW YORK – Wall Street firms are more eager than ever to buy family homes, evidenced by Blackstone’s real-estate investment trust (REIT) recent purchase of a portfolio of apartments for $5.1 billion from insurer American International Group. In June, the investment firm also spent $6 billion on Home Partners of America, a company that owns more than 17,000 houses across the United States and offers renters an option to buy.

In addition, private-equity giant KKR launched a new division that will buy homes to rent them out.

Large investors’ single-family home activity is expected increase now that the COVID-19 pandemic has made owning family homes more attractive. While the rents collected from commercial real-estate assets such as malls and offices took a hit during the COVID-19 crisis, most private residential tenants continued to pay up.

Family homes could be an even better long-term bet than owning e-commerce warehouses. Real-estate research firm Green Street estimates that renting out U.S. single-family homes will deliver annual returns of 6.6%, compared with a forecast of 6.3% for industrial property.

However, the industry generally expects a public backlash at some point, though it’s uncertain how many family homes the financial giants can snap up before that happens.

Institutional investors already own 55% of the U.S. supply of multifamily homes, typically condos. However, they’re minnows in the most appealing part of the housing market. Currently, just 2% of all single-family properties available for rent in the United States are in the hands of institutional investors, according to Amherst.

Source: Wall Street Journal (07/23/21) Ryan, Carol

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