There’s a challenge across many real estate markets, and that’s a shortage of inventory. The solution for many institutional investors looking for the next venture? iBuyers—companies that buy directly from homeowners using cash reserves—are offering up fresh investment opportunities while other sources of inventory are dwindling.
Nearly one in 10 homes sold in 2018 (as of press time) by two leading iBuyers—Opendoor and Offerpad—were purchased by institutional inventors that bought a minimum of 10 homes, according to a new ATTOM Data Solutions study. These 743 homes represent 9.6 percent of all sales by the two iBuyers, up from the 293 institutional investors sales in 2017 and the 65 in 2016 (6.6 percent and 3.9 percent, respectively).
“Tight inventory is a common challenge facing both individual and institutional single-family rental investors across the country,” said Daren Blomquist, senior vice president with ATTOM Data Solutions. “Meanwhile, the appetite for more SFR inventory continues to grow as a new wave of institutional capital builds. Industry innovators are rising to meet this challenge through a variety of inventory-inducing channels, including off-market, build-to-rent and iBuyer initiatives.”
What’s the makeup of these iBuyer transaction partners? They’re all reportedly companies related to the top three institutional investors—Cerberus SFR Holdings, LP, CSH Property One, LLC and TAH Holding, LP—that are purchasing single-family homes as rentals, possibly as a way to reignite a business that has struggled in recent years. In fact, overall transactions are down for institutional investors—their purchases represent only 2.3 percent of all U.S. home sales for 2018, a decrease from 2.9 percent in 2017 and a sharp drop from 7.4 percent in 2012, according to ATTOM’s research.
“There are a lot of buyers, both big and small, looking to grow their SFR portfolios and inventory is very tight,” said Kevin Ortner, CEO of Renters Warehouse, a company that manages over 22,000 SFR properties in 42 states. “This is leading to creative ways to find new product—from build-to-rent programs, off-market inventory programs and iBuyer initiatives. There are several firms positioning themselves to be able to help bring supply to meet the demands of investors, and I expect that will continue to grow. I’m also seeing investment in technology and data across the space allowing greater scale, efficiencies and insights.”
“A properly-priced rental home today…there is almost limitless demand for it,” said Gary Beasley, CEO and co-founder of Roofstock, an online marketplace for SFR properties also working to build SFR inventory for retail and institutional buyers. “We have to get creative about how to attract this inventory, and, if it isn’t available, to create it.”
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