The rate of site-specific market studies doubled in January—an indicator that developers and investors are eyeing land at a high rate for built-for-rent housing, according to Forbes. The flow of capital into the single-family built-for-rent (BFR) sector has increased at an elevated pace since mid-2020. Last year, investors dedicated billions of dollars to the BFR sector, with Pretium Partners and Area Management dedicating $2.5 billion and JP Morgan dedicating $625 million, to name a few. The total capital funneled into BFR housing will exceed $10 billion, reports Forbes, but expect that number to be higher in 2022 and 2023.
Margaret Whelan of Whelan Advisory has been advising several operators in raising this capital, and is watching the relationship between equity and debt. “While equity investors are aggressively positioning to take advantage of the growth in this nascent segment, lenders are also getting involved. Advance rates are increasing as assets are closer to delivering stabilized cash flow, which will allow equity commitments to be recycled and facilitate even greater growth,” said Whelan. This is the way the momentum in this space is spinning up.
There is a lot more money that has yet to enter this niche. Only 2%-3% of all of the single-family homes for rent in this country are currently owned by institutional investors. Those investors have suddenly shifted their attention to this space, and that shift is still going on.