Looking at Debt Yields for recent Single-Borrower SFRs vs some Freddie Mac MF securitizations and the Debt Yields on the SFRs are much lower than the traditional MF deals.
I'm talking about sub-5.00% vs. ~7.00%
Can someone explain why investors are willing to accept much lower DYs on SFR deals than good ole Freddie Mac K-deals, which are like the lowest risk RE deals that exist and have proven track records through multiple downturns???
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Pricing is driven by cost of capital, remember investors in SFR are competing against homebuyers with a 4%, 30 year fixed rate loan. That means comparisons against traditional MF are apples and oranges.
Investors in SFRs can easily get 4%/30-yr money. That's not different than MF or SF detached financing.
The underwriting is virtually identical other than you might have the option of selling SFRs off as SF detached homes.
I even called KBRA analyst and asked this same question. Their best answer was investors like the granularity of SFRs b/c there's not 10-20 very big transactions that make up the vast majority of the typical MF CMBS pool. While I get what they're saying, I don't see how that should change the underwriting and allow more leverage on SFR deals than MF.
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