Single Family Housing for Rent

Does anyone on the forum operate in this space and willing to share some expert intel? We are underwriting a new business vertical for SFR rental product and I need some help understanding some of the mechanics including OPEX (we know the nominal OPEX costs are similar to MF but want more detail), income underwriting (nominal rents plus unique premium structure for yards, private garages, etc.). We also want to understand the mechanics of how homebuilders make money, beyond our basic understanding that they are looking for an 8-12% profit margin on invested capital plus 4-6% to cover overhead/GA, which translated to roughly 20-25% typical deal IRR.

Thank you!!

Comments (3)

Apr 2, 2020
Ricky Rosay:

we know the nominal OPEX costs are similar to MF

I'm not sure if that is the best starting assumption, MF has tons of economies of scale where a SFR may not. If you buy enough in a geographically dense area, it can be closer to true as you can hire full-time maintenance, leasing, etc.

The cost of acquisitions on SFR is really different, if you are buying existing and renovating. If you are doing the new "build to rent" like for a subdivision, that is totally different (but not that far from MF development).

I don't personally operate in this space, have some friends who do and some that used to. I think of it as its own industry, assuming it is similar to MF is too simple in my honest opinion.

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Apr 3, 2020

Starting to get into the space. In the underwriting phase for building homes to rent. Looking at signficantly lower IRRs than what you mentioned but also holding for a while and not underwriting any savings on opex on economies of scale

Apr 3, 2020