SFR Insider ? September 2023 ? Q3 SFR Market Wrap-up + Looking Ahead to Q4
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.
Q3 Market Insights from Roofstock’s Institutional Services Team??
In Q3, we saw an encouraging shift in the way investors are engaging in the market compared to their activity in the first two quarters of 2023. Here are some of the key insights gleaned from active deals and our ongoing conversations with top SFR owners.??
Investors are more actively looking at one-off and portfolio opportunities?
We’ve seen an uptick in sellers, many of whom were unwilling to bend on pricing at the beginning of the year, come back to the table to see if offers are still available from buyers. On the buy side, Roofstock VIP, our institutional marketplace for high-volume acquisition partners reported a 25% quarter-over-quarter increase in submitted offers, 209% quarter-over-quarter growth in offer acceptance rates, and a 33% decrease in bid-ask spread since Q1. We feel this recent movement from both sellers and buyers bodes well for an uptick in overall transaction activity.
On the portfolio side, we've seen active portfolios garner more than 60 executed NDAs in the past month. This kind of activity is akin to 2021 when we were in a very different market. We expect pull-through rates to be lower than two years ago because investors are still just dipping their toes into the market. But this does indicate that owners are getting back to transacting in a way we haven’t yet seen in 2023, and it certainly warrants attention.
Actively looking for investment opportunities? Reach out to [email protected] for one-off deals or [email protected].
Long-term land deals are back in style for Build-to-Rent?
At the beginning of the year, we saw investors shift their attention away from long-term land deals to more immediately actionable inventory with 3–6-month delivery timelines. But the winds are starting to shift back towards the long-term view, and it’s now affecting how we’re recommending that our clients position their BTR inventory in the market. For example, 6 months ago, if you were taking a BTR portfolio to market with a mix of assets (30+ scattered site homes that have already been delivered and 10+ communities that were going to be delivered over the next three years,) we would have made the “30+ scattered site homes” the headline item. But now, in the same portfolio, it might be more advantageous to market the 10+ communities to be delivered over the next three years.?
Interested in deploying into BTR? Get in touch with our team at [email protected].
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Capitalization rates will likely stay below interest rates for the foreseeable future?
For newer players in the SFR space, the idea that cap rates could continue to hover below interest rates is mind blowing. In 2021, everyone wanted to invest in single-family. Private equity groups could easily hit high teens total returns by employing a lot of leverage to make the numbers pencil. While we’re clearly in something of a transition period, we do not expect interest rates to come down appreciably in the near future. However, this doesn’t necessarily translate to a lack of opportunity in SFR. Historically, the single-family asset class has been financed with significantly less leverage than we saw at the peak of debt-financed purchasing in 2021. Leverage can still be very accretive to your internal rate of return, even if your interest rate is above the going-in cap rate, thanks to the combined power of rent growth and increased operational efficiency.
Looking for the best time to jump into the market? Get a free analysis from our team at? [email protected]
Product Highlight: Roofstock S3 (Scaled Seller Services)?
MLS sales execution remains relatively strong despite the current interest rate environment due to the general scarcity of supply in the market and continued owner-occupant demand. Yet selling homes effectively at scale requires significant resources to operationalize individual sales teams across multiple regions and markets. We’ve responded by developing a new way to work with Roofstock, allowing owners to stay in the loop but above the fray, as we work to maximize speed and proceeds. Roofstock S3 is an end-to-end solution for institutional sellers to efficiently dispose of assets on the MLS.
We're proud to support 10 institutional sellers today, including some of the largest operators in the space.
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.