Single-family rental homes comprise more than one-third of all U.S. rental properties — about 16 million currently, with another 13 million new rental households expected to be formed by 2030. Since U.S. housing stock is not keeping up with this future demand, the sector should enjoy a significant tailwind given these favorable supply/demand trends.
Not surprisingly, demand for single-family rentals is at an all-time high and showing no signs of slowing.
There are many attractive characteristics to the single-family rental asset class. For starters, returns have historically moved independently from the stock market, meaning they lack correlation. In fact, data compiled by Roofstock show that single-family home prices and stock prices are almost perfectly uncorrelated. This means the ups and downs of the stock market have almost no direct impact on home prices, which tend to change in value more slowly and be influenced by numerous factors such as the strength of the local economy and amount of supply added.
If you’re a newcomer to single-family rental investing, one way to think about it is like an inflation-adjusting bond with an equity kicker. The rental income less operating expenses generates current distributions — like the coupon on a bond — and rents can be adjusted annually, providing inflation protection. Finally, the equity “kicker” comes in the form of building wealth as your tenant pays down your mortgage for you while the property can grow in value over time. It’s entirely possible to get a nice double-digit overall return on your equity over an extended holding period.
Read Full Article [Source: www.marketwatch.com]