SFR Insider ? August 2023 ? SFR Market Insights + more
With over $6B in single-family rentals (SFRs) acquired, operated, and sold, Roofstock is a leading platform enabling institutional investors, real estate investment trusts (REITs), builders, and global asset managers to buy, manage, and sell SFR properties and build-to-rent (BTR) communities at scale.
Our institutional team represents buyers and sellers on the largest SFR portfolios in the market and has closed transactions totaling over 7,000 homes in the past 24 months. We prize ongoing collaboration with SFR owners and operators across the industry. We’re always available to discuss current market dynamics and offer our insights, irrespective of your current brokerage needs.
Key Insights from Roofstock's Institutional Services Team
Over the last few months, we’ve seen an uptick of inbound inquiries from SFR owners seeking advice on the best way to maximize the value of their portfolio. Here are some of the key insights gleaned from those ongoing conversations.??
Investors are readying portfolios to jump into the market sooner rather than later?
Institutional owners are continuing to take an in-depth look at how they can best position themselves to maximize value and optimize cashflow on existing assets. Many investors are taking a hard look at the bottom 10-20% of their portfolios. Pruning those assets now means they can free up capital to re-deploy when the time is right and it also can make the remaining portfolio much more attractive to today's more discerning buyers.
However, unlike the start of 2023, when owners were more inclined to sit on inventory and capital while waiting for the market to settle, investors seem to be accepting that interest rates probably won't drop significantly in the near future. They are making strategic adjustments to engage within the current market conditions. In addition, there’s a large pool of owners with 30-year mortgages at a very low fixed rate–who are therefore unmotivated to sell. These conditions are impacting the natural flow of homes coming to the market–keeping inventory tight and values stable. On the buy side, we’ve also seen an increase in activity over the past few months from large players, who are starting to acquire opportunistically while others continue to sit on the sidelines. These conditions are putting more of a fire under institutional sellers to evaluate the optimal timing and structure to get to the market.
Interested to learn how your portfolio stacks up? Get insights from Roofstock’s proprietary portfolio diagnostic platform at [email protected].
Build-to-Rent continues to be an SFR darling?
Some operators, who have historically invested into both scattered site and BTR, are choosing to focus solely on BTR for the foreseeable future. At the start of 2023, we heard conversations amongst investors that developers and builders would need to provide large discounts to get inventory off their books. And we did see a week or two where the bid ask gap appeared to be shrinking, but this was short-lived.
Developers and builders have become very nimble in their approach to offloading BTR inventory. As operators are nearing quarter ends, they are offering slightly larger discounts to institutional investors. However, once those are filled, developers and builders often go back to transacting with owner occupants.?
Headed to the IMN BTR West conference in Vegas? Schedule a meeting with our team at [email protected].
Sellers are utilizing a blended MLS and portfolio strategy for better returns?
Two years ago, a typical a seller might have come to market with a 500+ home portfolio that contained a mix of assets (e.g., low cap rate/below market rents, poor school districts, higher crime areas) and still expect it to trade at a competitive price. Those days appear to be gone for the time being.
In response, investors are starting to incorporate channels like the MLS into their disposition strategies. Rather than selling 500+ homes as a full portfolio, they might sell 150 homes on the MLS and 350 homes in a portfolio optimized to fit today’s buyer expectations. Selling the assets that were the outliers in terms of characteristics on the MLS allows investors to both maximize their returns and speed up the portfolio trade.
This is an opportune time to remind would-be sellers that it’s important to consider maximizing value by comparing gross proceeds vs. discounted net cash flow. Discounted net cash flow is gross proceeds, less commission, less property repairs (if required), plus gross rents and less opex over the time sale horizon. All these cashflows are then discounted back to their present value using a pre-determined cost of capital assumption.
For example, selling all 500+ homes on the MLS might appear to fetch the highest value on a gross proceeds level. But once you consider the time it will take to sell each asset individually (often several years), the net proceeds will be worth less over the long term (discounted net cash value).
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Looking to employ a blended strategy with your portfolio? Reach out to our portfolio services team at [email protected]
Roofstock's Seller Services
At Roofstock, we offer a holistic approach across multiple channels to get you the best return on your investment. Our team can provide a comprehensive portfolio analysis based on your unique assets, as well as provide strategy and execution on the best disposition. In addition to our portfolio channel, Roofstock incorporates the following services into our sales execution strategy:
Interested in getting a free analysis of your current portfolio? Schedule a call with our team at [email protected]
Introducing Justin Yagerman Head of Capital Markets?
As part of our effort to deepen Roofstock’s institutional capabilities, we’re pleased to welcome Justin Yagerman, our new Head of Capital Markets. With over two decades in both public and private markets, Justin has a proven track record of building long-term relationships with, and driving successful outcomes for, institutional investors. He will lead business development efforts with investors who seek opportunities in the $4 trillion SFR asset class.
Prior to Roofstock, Mr. Yagerman was an Executive Director for Invesco Private Capital and Head of Business Development for the group. In this role, he led a variety of global functions, including product development and structuring, client and market strategy, business development, investor relations, and fundraising across the private capital business.
Roofstock Attending the IMN BTR Conference in Las Vegas?
Our team is headed to the IMN BTR West Conference in Las Vegas September 12–13.
Don’t miss our panels
If you’re interested in learning more about Roofstock’s BTR capabilities, set up some time to connect with our team at [email protected].
No Agency/Fiduciary Relationship: This newsletter, the information on the marketplace, and the information received from Roofstock employees is intended for informational and educational purposes only. It is not real estate, investment, or financial planning advice. Roofstock is not your advisor or agent unless expressly specified by Roofstock Realty, LLC. Please consult your own experts for advice in these areas.