The 2020 IMN Single Family Rental (SFR) Virtual Forum was a two-day event that featured 2,000 attendees and 80 speakers in keynotes and breakout sessions.
I was only able to attend Day One, since the next day we were en-route to dropping off our youngest at college. There were many sessions to choose from. I elected to listen to:
- the keynote, which gave a state of the SFR industry;
- a financing overview;
- an economic overview of where are we in the real estate cycle;
- a panel of CEO’s talking changes and future trends in real estate;
- a breakout on buy and hold acquisitions (since that’s what we do specifically);
- and a women’s power hour, which featured various female real estate professionals. That hour was split between defining professional and personal success and a discussion on the current environment.
Millennials prefer to rent
That Millennials prefer to rent was the major takeaway of the opening panel hosted by Jeff Cline, CEO of SVN | SFR HubAdvisors, a brokerage that specializes in single-family rentals (SFR). Additional speakers included investors and property managers.
That renting is an actual lifestyle choice and not just a default for people who can’t afford to buy makes SFR a particularly attractive real estate sector. That more people are working from home is another trend favoring SFR. It is currently the strongest performing real estate sector, over multifamily, urban housing and commercial real estate.
People are moving from the HCOL areas to medium-sized cities
Another key trend is the high performance of Tier 2 and 3 markets – i.e., markets outside of the major cities.
Phoenix was mentioned by all the panelists. Atlanta, Dallas, Raleigh, Nashville, Austin, Las Vegas, and even Indianapolis were some of the other cities mentioned. We actually exited Indy last year, in anticipation of an economic downturn, selling our entire portfolio of five single-family rentals.
However, the panel was specifically talking about workforce housing (housing aimed at the middle class) as being a strong performer in SFR, and we had invested in lower income, C-class neighborhoods.
Institutional investors outperform mom and pop landlords
Finally, the panel highlighted the strong performance of large institutional investors in the SFR space and the challenges of the mom and pop landlord.
The large investors who have thousands of rentals have invested in technology, in-house maintenance and other ways to reap economies of scale. These investors were rewarded with collection rates in the high 90% range, even during the pandemic.
On the other hand, mom and pop are suffering with collections in the 75% range on average, particularly with the eviction moratorium.
Financing took a pause, but is again readily available
The financing panel featured a range of executives in different areas of real estate finance – a lawyer for private placements, a 1031 accommodator, a mortgage lender, an institutional debt and equity lender, even a private money lender. All described the financing landscape as back to pre-pandemic levels – i.e., leverage is available and rates are low.
There are more headwinds for the mom and pop landlord, however, as the panel was seeing capital move to the institutional investors. Money is going to large portfolios, not single or even a handful of units. While SFR as an asset class is getting financing, the money is going to large, experienced investors.
Outside of this conference, I have been hearing from individuals about how difficult it is to get financing, especially refinancing and pulling cash out, so this anecdote totally supports what many of the speakers were saying.
We’re happy but cautious
The other panels echoed similar real estate findings – renting is here to stay, smaller cities will benefit, large SFR players will benefit. I feel good about our SFR portfolio being in smaller cities and with rents over $1,000, therefore targeting the WFH professional. Even our vacation rentals in Costa Rica are properties that can be converted to long-term rentals, and in fact, we have started to host longer stays of a month or longer.
That said, the danger signs for mom and pop landlords obviously affect us. We had a vacancy at one of our units this past year which took months to fill. During the conference, several speakers noted how the large property managers field hundreds, even thousands, of inbound calls from prospective renters and build a ready waitlist to keep vacancies short.
With thousands of units, they can support that infrastructure and marketing and have the breadth of available units where people will want to sign up for a waitlist. As a mom and pop with just a handful of units in disparate locations, we will never have that scale or appeal.
In addition, if you’re thinking about waiting for the recession to deepen and deals to be had, multiple speakers noted this will likely not happen. While they agree that some sellers will come under distress, institutional investors are already on the hunt. They have relationships at the bank and can buy large amounts of distressed property without the bank having to market outside. They can blanket whole neighborhoods to find the desperate sellers. In fact, several of the speakers were mom and pop landlords themselves but were also buying for institutional investors. There will be lots of competition.
Our next steps
Even with the competition from larger players for deals and financing, we’re still bullish on rental real estate. This pandemic has made clear what the true necessities are, and housing is one of them. Having a nice living environment – which for the immediate future is also many people’s working environment – is going to make well-run properties even more attractive.
We have built up our portfolio to focus on spacious, but not too large (and therefore expensive to maintain) units. They are located and priced to appeal to the knowledge professional who is more recession-resistant. We’ll continue that mid-sized, mid-price range focus as we look at future deals. Even our Costa Rica properties fall into that category, and once borders open, we plan to look at additional international deals in the same category.
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I thought the IMN SFR Forum was excellent – well-run, experienced and engaging speakers, relevant topics. I definitely plan to attend future conferences.
How about you? What real estate moves are you making?
We are Scott and Caroline, 50-somethings who spent the first 20+ years of our adult lives in New York City, working traditional careers and raising 2 kids. We left full-time work in our mid-40’s for location-independent, part-time consulting projects and real estate investing, in order to create a more flexible and travel-centric lifestyle. 
Financial independence and early retirement is not something we originally focused on, but over time realized it was possible. Our free report, 
