Wall Street is bullish on rentals

Ryan Heenan
Ryan Heenan
Published on July 25, 2018

Investors are predicting that Americans will increasingly choose to be renters, and they’re buying up even more single-family homes, especially in areas with fast-growing economies, to stay ahead of the trend. A rising number of apartments in recent years has increased vacancies and driven down rental yields, prompting investors to turn back to single-family homes for rentals.

The number of homes purchased by major investors in 2017 was about 29,000, up 60 percent from the previous year, according to Amherst Capital Management LLC, a real estate investment firm. Investment firm Pretium Partners LLC recently announced that it had raised more than $1 billion to add 26,000 rental homes to its portfolio.

In markets with low inventory, investors are building new homes. They are also targeting wealthier tenants, who tend to have children and need more bedrooms than apartments can offer, and who may be more willing to weather rent increases in order to remain in a good school district.

Locally, we have seen a number of New York-based investors purchasing homes in Ardmore, Wayne, and Malvern. While Philadelphia is dominated by large-scale apartment and condominium projects, smaller scale investors are finding Philadelphia’s suburbs to provide more value.

For out-of-state investors, purchasing single family homes will require a local management company that can handle maintenance and tenant oversight for separate locations, rather than a traditional all-in-one rental complex. 

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