Financial services firm Keefe, Bruyette, and Woods (KBW) reports a general increase in the rental market brought on by the recession. This fact coupled with elements of the gradual Real Estate market recovery such as low inventory and strong re-sales suggests broad institutional investment in single-family rental properties could emerge as an appealing market.
“While the single-family rental market has historically been fragmented, institutional interest has increased sharply,” said Jade Rahmani, the report’s author and VP of KBW. “The large foreclosure inventory and drop in home prices have created the possibility for institutions to generate attractive cash returns of 5-7 percent and total returns including home price appreciation of over 15 percent annually.”
“We expect the large single-family rental companies to experience growth over the next 12-24 months with [the] introduction of leverage and consolidation of smaller players as potential drivers,” Rahmani continued. “We believe the sector has the potential to emerge as a long-term institutional asset class. We expect ramping lease-up capacity to drive improved occupancy, leading to positive operating income.”
With low rates of return on some of the more secure investments, the Single-Family rental market should be considered as a potential investment opportunity. In the local rental market a slight increase in rents are being seen and in many cases a positive cash flow can be generated with modest initial investment.
If you are interested in a snap shot of the current Inland Empire rental market feel free to contact us.