MReport July 2017

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TH E M R EP O RT | 9 MDWELL How big data can unlock the next trillion-dollar real estate investment opportunity D espite its enormous poten- tial as a major asset class, the U.S. single-family rental market remains one of the hardest nuts for large investors to crack. A lack of reliable and centralized data has made investing in the space feel like trying to find the best lumber in a forest from a mile away. Investors want to buy ad - ditional investment properties—but they don't know where to look. That all will be changing soon. Thanks to innovation in data science and predictive analyt - ics, it will be easier than ever for investors to find the information they need to dip their toes into the single-family rental market. Companies such as HouseCanary, a San Francisco data analytics start-up, are working to unlock the SFR market, and using big data could be the key. "We believe that making this information widely available will increase transparency, improve the availability of financing, and drive further investment in the single-family rental asset class," said Jeremy Sicklick, CEO and Co-founder of HouseCanary. We reached out to the com - pany about the HouseCanary Rental Investment Index (known as the HCRI Index), which shows investors the Effective Gross Yield for every state, top 50 U.S. Metro Statistical Areas (MSAs), ZIP codes, and blocks. Even beyond simply taking the yield temperature in every major MSA, HouseCanary's Match & Append service gives investors access to valuations for nearly 100 million residential properties covering 90%+ of the U.S. market, all avail - able instantly on a spreadsheet with critical data points, such as sales history, value forecast, and rental yield for starters. This level of transparency is un - precedented in a market notorious for its opacity, and could spark a 21st-century land grab as inves- tors compete for the impressive returns the market can provide. The right information is essential to any smart investment, and this data revolution might finally give investors the chance to see the residential forest for the trees. The Single-Family Rental Market 21st-Century Land Grab St. Louis Metro: Single-Family Yield Distribution Histogram SFR MARKET INSIGHTS Acquisition is the clear focus: Over the last 12 months, investors with >250 properties have collectively purchased over 55,000 homes. Yields are still attractive: 54 percent of 1.5 million current MLS listings underwrite to 8 percent gross yield or better. The SFR Market is still fragmented: In a market of >20 million SFR properties, large owners (holding > 1,000 homes) still represent less than 2 percent of the market. "Rentership is the new standard: The rental market added 7.2MM new renters from 2009 to 2016" – JP Ackerman, VP of Client Development, HouseCanary Yields vary greatly within even the most attractive MSAs: For example, in Atlanta, top zip codes generate 25.1 percent gross yield, while the lowest generate only 4.4 percent. Effective Yield 80k 90k 60k 70k 50k 40k 30k 20k 10k Properties 0k 3% 4% 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% St. Louis Metro: Single-Family Yield Distribution Heatmap *Defined as [(Annualized HC Rent—Annual Property Tax)/HC Value] by U.S. Census Block Group More available at

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