TheMReport

16 | TH E M R EP O RT COVER STORY SFR market is poised for even more growth in the days ahead. A Fragmented Market I f you talk to most experts, the single-family rental market is a diverse one, with dozens of nich- es, specialties, and verticals, and for someone just getting into the space—or simply pivoting from a more consumer-based model—this means lots of opportunity to expand and grow. "On its surface, it looks like a massive market," Ball said. "Then when you climb underneath it, you find out that no, it's really pretty fragmented." Lenders in the SFR space target all sorts of niche audiences. Take Visio Lending, for example, which works mostly with landlords— those smaller-time investors who rent out their properties themselves. There's a need for lenders like these, according to Tesch, whose RCN Capital also targets smaller investors—ones who rent their properties out or fix and flip them. Most traditional institu - tions, he says, just won't finance these types of buyers more than a handful of times. "Time and time again, we hear that our investors are capped out by traditional banks at five, six, or seven properties," Tesch said. "After that, the banks don't want to have anything to do with it." According to Hovland, there's also a need for lenders that can handle larger-size investors, too. "Buying 300 homes is a really challenging thing to do," Hovland said. "Overcoming that hurdle and the lending piece to that is probably the biggest revolution we're going to see in the SFR market over the next three years." But investor size isn't the only way an organization can differen - tiate itself in the SFR space. Other companies specialize in types of property—occupied or vacant—or focus on investors within specific demographics or geographic areas. Still, while many in the space choose a highly targeted, drilled- down niche, other brands opt for a broader approach, like Altisource, which not only offers a sales platform via its Investability brand, but also property management, renovation services, and leasing brokerage. This one-stop shop model aims to "reduce as many friction points as possible" for the investor, according to the com- pany's CRO Dennis Cisterna. Whether the approach is super- targeted or more comprehensive, one thing's for certain: Regardless of how an organization decides to frame its services in the single- family rental market, the options are there—and they're endless. Lending to Landlords F or those looking to pivot from a more consumer-based lending model to one aimed at investors and landlords, it's im- portant to switch strategies, too. According to seasoned SFR vet- erans, there's an inherent difference between traditional lending and lending to investors and landlords— particularly because of the nature of the customer relationship. Unlike in traditional homebuyer transac- tions, an investor isn't looking for a one-and-done lender. They want a partner—someone they can rely on in the long term, month after month and year after year. "It's a repeat clientele, and it's repeat transactions," Cisterna said. "With real estate investors, we're not looking to serve one customer once every seven years. We're looking to serve a customer 200 times in a year." But getting those investors to come back time and time again? That's not as easy as simply giv - ing them the financing they need. In the investor space, it all comes down to service. "It's all about customer service," Tesch said. "It's all about hav - ing that relationship between the company and the customer. In the financial world, people lose track of who's paying the bills. I don't quite know why that is." Service is where lenders can truly differentiate themselves from others in the industry—and it's often an area where traditional lenders lag behind, according to Green. "There's a gazillion places to get a mortgage," Green said. "The customer experience you're going to get there is not neces - sarily something that will leave you saying, 'Wow, I just love my mortgage company.'" According to Charlie Fitzgerald, CEO of Affinity Venture Partners, in the inves- tor world, great customer service requires hands-on, one-on-one work. Lenders need to find out each investor's unique needs and goals and come up with creative solutions to help them see success. "I just think the relationship side of business in general—and certainly in an industry where some big dollars are being talked about—is really important to maintain," Fitzgerald said. "Companies and service provid - ers need a fundamental belief that it's really about relationships. It's about finding out as much as I can about my client and what their needs are." Following in Multifamily's Footsteps L enders and servicers don't have to completely rewrite history to get into the single-family rental space. In fact, since Fannie Mae struck a deal with SFR megalith Blackstone Group in February, financing real estate investors may soon be easier than ever. According to Greg Rand, CEO of OwnAmerica, the deal was a signal that a more SFR-friendly market is on its way. "Lenders who originate service loans that are, essentially, Fannie, Freddie, and FHA products, I think they could expand those products," Rand said. "So you don't have to be an initial lender with SFR, like with a custom- made SFR product. You can actu - ally just be a mortgage banker. You get to penetrate this side of the market because those government entities and GSEs, I think, are go- ing to open up the doors to it." And they just may well. Hovland says he expects Fannie Mae to introduce a new SFR- specific product in the near future. "I wouldn't be surprised, from the people I've had conversations with, if Fannie Mae unveiled a new lending program in the next 18 months that opens up that 11-to 100-unit SFR lending arm," Hovland said. But the Fannie Mae deal did more than just open up potential new lending opportunities; it was also a sign—a sign that, like many in the industry had postured, the single-family rental market is following in the footsteps of multifamily, becoming more insti - tutionalized and more important every year. "On its surface, it looks like a massive market. Then when you climb underneath it, you find out that no, it's really pretty fragmented." —Jeff Ball, CEO and President of Visio Lending

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