What is Blackstone's buy box for single family homes?
I keep seeing articles about institutional investors buying single family homes. Blackstone, AMH, Progress Residential, etc. What is their buy box? What metrics are they looking at? The articles are saying they buy in major metros, so I'm assuming cash flow isn't great?
What I've seen - 1980 vintage, 3/2 minimum, 1200 sq ft min, in at least a B- neighborhood and looking at a net yield for 5.5-6%. Right now, yes it does not cashflow which is why you see almost all of the institutions above as net sellers right now. Transaction volume very low while leverage is negative. In order for them to buy, they need rates to drop to around 5%, home prices to drop, or rents to rise. While institutions haven't made up a large percentage of purchases in the SFR market, the only properties that fit the criteria above are primarily homes in the 150-400k range ( competing with all the first time home buyers). Personally, don't think its a good thing they are allowed to be in the space despite the spin from these institutions.
That makes sense. Thank you
This is broadly correct. Scattered site acquisitions are rare, it's been essentially frozen since 2022. I'm out of it now but my last yield target was 5.5%. All the momentum has moved over to BTR.
One important point to mention would be the need for scale efficiency. Institutional buyers will want something they can park a large amount of capital in, and be able to underwrite each “unit” relatively the same. This translates to BTR communities, or other SFR with a large degree of homogeneity.
I’m interested in learning which/if companies are comfortable underwriting truly unique portfolios, and how that works.
To my point above, I think there’s a lot of value still out there for small players and individuals to assemble truly unique asset portfolios. This may be more specific to older markets that haven’t seen such large scale SF developments, but I believe there’s value in owning “unique” homes in neighborhoods assets aren’t the same as the house next door. I think this presents a challenge for institutional dollars as it’s harder deploy capital, but perhaps operators that can present a strong historical basis of operations can assemble portfolios and sell them.
thoughts?
Possibly, but you just described why STR hasn't become institutionalized yet. Some groups might be willing to take properties outside of their buybox if cashflow is enough. Right now though portfolio sales aren't great because the yield required for these institutions is too high ( would need a large discount from current market prices), which is why you see portfolios broken down and sold as single properties. First time home buyers don't care about yields. Definitely something that has saved the SFR space ( plus fixed debt) vs commercial real estate.
What do you mean by unique homes? What type of properties fall in that bucket?
Must be competing against, and price out first time home buyers
Two words. Headline risk. Also very hard to foreclose on primary residences. Blackstone ran into trouble with this.
I'm seeing a different trend recently in posts for areas in Philadelphia, Boston, Washington DC, Chicago, and some of Atlanta. In Wealthy neighborhoods, think 1.2M+ for a house they are latching onto this trend of or headline that's been popping around for wealthy renters. People that don't want the hassle of homeownership. They will find a property the individual wants to go in, buy it, and rent it to them, then keep it once the person moves. The above comments are what we see from institutional platforms. But has anyone noticed the trend I bring up? I talked to a realtor in Metro West Boston and one in NoVa and both had buyers doing this.
Is there more to it than buying a house in a nice neighborhood and renting it out? Like are there some sort of advantageous terms they are getting from the renter? Or some sort of agreement between renter and owner, other than a simple lease?
Eum aperiam id non. Delectus aut ad voluptas minima aut. Qui eligendi laboriosam excepturi soluta velit.
Sed incidunt facilis sunt amet. Esse ipsa occaecati pariatur tenetur labore quia. Eligendi et omnis saepe libero qui. Cupiditate officia maiores eaque ut illum ea deleniti. Ullam illo inventore in qui et libero. Ducimus tempora amet omnis doloremque veniam odio.
Id magni dolore voluptatum voluptatem in sint explicabo. Sit et error praesentium reiciendis nihil temporibus.
Rerum perferendis ut tenetur consequuntur quo aut. Sed numquam praesentium in alias qui sed aut. Rem animi aut hic quis illo possimus illo commodi.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...