Where Wall Street is most likely to cash out of the single-family rental market

by 19 Dec 2014

By Daren Blomquist, RealtyTrac Vice President

After nearly three years and hundreds of thousands of property purchases, the nascent single-family rental industry is at a crossroads in terms of future growth and long-term staying power. So how will these players will cash out of their property portfolios given the strong home price appreciation over the past few years — and if so how that liquidation would impact local markets with a high density of single family homes purchased as rentals?

RealtyTrac data shows very few of the large institutional investors involved in the single-family rental market are selling off in large quantities, but home price appreciation has given those investors a good opportunity — and motivation — to sell and realize a solid return on many of their properties in many markets.

The housing data provider analyzed more than 200,000 purchases made by institutional investors (10 or more purchases during a calendar year) from January 2012 through August 2014, evaluating the potential return investors could realize by selling these properties now.

On average those 200,000 properties were purchased for $167,556 and have a current estimated value of $211,897, a potential gained equity return of 26% or $8.9 billion if all of those properties were sold.

Top four single-family investors have gained 23% in equity
Four of the largest investors involved in the single family rental market have a potential of $1.2 billion in gained equity, or a 23%  return, on properties purchased in the last three years (and that is just among the subset of properties with sufficient sales price and valuation information available).

Among the largest institutional investors involved in the single family rental market, Blackstone/Invitation Homes had the most purchases with price and value information available over the past three years with 14,108, followed by American Homes 4 Rent (12,811), Colony American Homes (4,935) and Fundamental REO/Progress Residential (3,208).

When broken down by MSA (filtering out MSAs with at least 100 purchases by a single investor), the highest potential percentage return on gained equity were for properties purchased by American Homes 4 Rent in Chicago (43%), properties purchased by Colony American Homes in Palm Bay-Melbourne-Titusville, Fla. (42%), and in Orlando (36%), and properties purchased by American Homes 4 Rent in Columbus, Ohio (36%), Indianapolis (35%), and Atlanta (34%).

Properties purchased by Colony American Homes over the past three years have the highest percentage return on gained equity among these top five buyers, with 28 percent, followed by Blackstone/Invitation Homes at 23 percent, American Homes 4 Rent at 23% and Fundamental REO/Progress Residential at 13%.

Properties purchased by Blackstone/Invitation Homes over the past three years have the most potential dollar value in gained equity, $523 million, followed by American Homes 4 Rent ($409 million), Colony American Homes ($198 million) and Fundamental REO/Progress Residential ($67 million).

When broken down by further by year of purchase, the highest potential percentage return on gained equity were for properties purchased in 2012 by Colony American Homes (42%), properties purchased in 2012 by Fundamental REO/Progress Residential (38%), properties purchased in 2012 by American Homes 4 Rent (32%), and properties purchased in 2012 by Blackstone/Invitation Homes (31%).

Click here to read the full report.
 

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