July 2016 - Lessons Learned

TheMReport — News and strategies for the evolving mortgage marketplace.

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TH E M R EP O RT | 57 O R I G I NAT I O N S E R V I C I N G A NA LY T I C S S E C O N DA R Y M A R K E T ANALYTICS THE LATEST SFR Markets Rife With Opportunity Florida is definitely one place investors should eye, as are several other cities spanning America's top metros. P ositive data indicators in the growing single-fam- ily rental (SFR) market signal ample opportuni- ties for investors to profit and flourish in this space. Which markets provide the most op- portunity for SFR investors? RentRange identified the top 25 metropolitan statistical areas (MSAs) with the largest rental rate increases from last year and highest gross yields, or the total annual income an inves- tor receives from an investment property divided by the price or value for the property, for the first quarter of 2016. The report showed that Florida cities led single-family rental price growth for the first quarter, and Wisconsin and New York should be on investors' watch list for the year. "The single-family rental mar- ket across the U.S. continues to offer significant opportunity for investors," said Wally Charnoff at RentRange. "The robust data available today empowers even non-institutional investors to analyze geographies and select the investment locations throughout the U.S. that are most opportune, as opposed to being limited to their own backyard." The RentRange data shows a shake-up in the top 25 MSAs for rental rate increases, with three new markets taking spots in the top 10 compared to last quarter: Naples-Marco Island, Florida; Syracuse, New York; and Milwaukee-Waukesha-West Allis, Wisconsin. CEO of Invitation Homes John Bartling said in an inter- view that SFR offers tremendous opportunities for investors to realize an attractive risk adjusted return. "As an industry, the U.S. hous- ing economy is evolving, rental demand is surging, and profes- sionally managed single-family rental homes will continue to be a desirable option, with a quality of choice, for many Americans," he said. "At the same time, the industry is maturing and investors are becoming more sophisticated about the asset class." MReport recently talked with Fiona Simmonds, Chief Development and Administration Office for B2R Finance, to discuss the rental market, what investors need to know going in, and the role technology plays in the space. Simmonds stressed the im- portance of having an education about financing options in the single-family rental market. "There are a number of differ- ent ways to apply for financing, everything from traditional banks and government entities all the way to the other end of the spectrum, hard-money lenders," Simmonds said. "Each one of those comes with its own set of rules and regulations that may work for some investors and may not work for others. That also depends on the number of houses that you have as well, so those parameters may change as your portfolio grows." On the technology front, Simmonds added, "getting a mortgage has been one of the most difficult processes for any- one, whether it's owner-occupied or otherwise. We want to help alleviate some of the pain points. This doesn't indicate that there are lower requirements when it comes to borrower qualifications, but all things being equal, having technology helps facilitate the ap - plication process. We see that as a huge differentiator." Morningstar's April 2016 Performance Summary Covering All Morningstar-Related Securitizations found that March's property-level data for 24 single-family rental securitizations showed a "stable" performance for the single-borrower, single-family rental asset class. "Vacancy rates and delinquency rates generally remained steady or improved," authors Brian Alan, Brian Sandler, and Rohit Jadhav wrote. "Retention rates remained high for majority of the deals. Turnover rates increased for the third consecutive month in line with the increase in lease expira - tions." Five Star Institute President and CEO Ed Delgado recently announced the formation of the Single-Family Rental Association (SFRA), a member-led conduit for connection and training in the growing single-family rental market. The SFRA will lead the single-family rental sector in iden - tifying emerging trends, discussing solutions, and formulating best practices. "The Single-Family Rental Association will be leading the dialogue on best practices and new business opportunities in the single-family rental market," Delgado said. "The SFRA will fill the gap as a resource for a sector that has been largely underserved and often misrepresented." The SFRA will offer ongoing training and education, network - ing, and business opportunities, in conjunction with the Five Star Institute's Second Annual Single-Family Rental Summit on November 1–3 at the Frisco Conference Center at the Embassy Suites Hotel, Frisco, Texas.

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