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Single-Family

Hurricane Season Is Just Around the Corner

Are you Prepared? By Shawn Woedl AccuWeather recently released its 2023 Atlantic hurricane season forecast, and although predictions point towards a less active season, it will still bring certain dangers and the potential for property loss. Tropical weather forecasters at AccuWeather are projecting 11-15 named storms, with four to eight expected to reach hurricane strength. The Atlantic hurricane season begins June 1, so now is the time to prepare your properties and tenants in hurricane-prone areas. Catastrophic Losses Have Affected the Property Market The extreme weather events of 2022, Hurricanes Ian and Nicole especially, caused a significant shift in the insurance market. Many carriers in Florida have suspended writing new business to assess their financial situations and ability to stay afloat. Unfortunately, this also means that substantial rate increases are imminent as carriers attempt to keep pace with costly insurance losses. Although Hurricane Ian missed Louisiana, carriers are still feeling the impact of the 2020 and 2021 hurricanes. Properties in Louisiana have a high chance of incurring costly losses, making it difficult for carriers to maintain a healthy book of business. Many insurers have already canceled existing policies or announced they will not be renewed. Other parts of the country are also seeing changes in property insurance. Rates and losses are being evaluated across the board due to the increased severity of inclement weather. Stricter underwriting guidelines and higher standard deductibles will make it difficult to find coverage in states like Alabama, Florida, Louisiana, Mississippi, and Texas. Hurricane Mitigation Tips Natural disasters don’t wait on humans to be ready to respond. Preparing your properties and tenants well in advance of a hurricane risk can help save thousands of dollars and maybe even a life. Prepare your property »          Trim trees and shrubs well in advance of a storm so they can withstand higher winds. »          Secure loose gutters and clear debris to prevent water damage.  »          Reinforce security of the roof, windows, and doors. Brace garage doors. »          Move exterior furniture, yard ornaments, or play equipment indoors. »          Cover all windows — permanent storm shutters are best, or board windows with 5/8” marine plywood. Tape does not prevent windows from breaking. »          Ensure that the sump pump’s backup battery is working. »          Purchase a portable generator for use during outages. Store it outside, away from windows and doors, and protected from moisture. NEVER try to power the house wiring by plugging a generator into a wall outlet. Prepare your tenants Advise tenants to stay alert for updated emergency information and follow shelter-in-place guidelines: »          Close and lock all windows, doors, and storm shutters. »          If flood waters rise to dangerous levels, go to the highest level of the building, and call 911. Do not climb into a closed attic; individuals may become trapped. »          In case of high winds, go to a small, interior, windowless room on the lowest level. »          Have adequate supplies in an emergency go-bag; several days’ worth of water, non-perishable foods, medication, and pet supplies. »          Follow instructions from local authorities. »          If advised to evacuate, do so immediately. Do not drive around barricades. Do not walk, swim, or drive through flood waters. Stay off bridges over fast-moving water. Do not go back to the affected area until local authorities advise it is safe to return. The Differences Between Wind/Hail, Named Storm, and Flood Coverage Hurricanes and other severe storms may involve many causes of loss simultaneously, which might not all be covered by the same insurance policy. The following coverages, though not exhaustive, may kick in at various points during the hurricane season. Wind/Hail Most standard policies for investment properties include wind/hail coverage. Although, in some states, it may be excluded and needs to be purchased as an endorsement. Wind/hail primarily covers damage caused by heavy winds, tornadoes, and hailstorms. These weather phenomena can be common in coastal locations and Midwest areas and may lead to roof damage, broken windows, or damage to detached structures like garages or sheds. This cause of loss often carries a separate deductible from other perils, such as fire. This is typically a percentage of the insured value, which can differ based on the property’s distance to the coast. So, if your property deductible is $2,500 and you own a single-family insured to $200,000 with a 5% wind deductible, you are responsible for $10,000 before insurance payouts begin. Named Storm As soon as a storm is given a name by the National Weather Service, standard wind/hail coverage no longer applies. For damage caused by a named tropical storm or hurricane to be covered, your property policy must include Named Storm coverage. It is important to understand that damage caused by a rain or storm surge may or may not be covered depending on the situation. If a windstorm or hurricane is determined to have created a “storm-caused opening,” such as lifted roof shingles or a broken window allowing rainwater to enter the home and causing damage within the property, damage may be covered. However, if water enters the home due to a “storm surge” (an abnormal rise of water levels due to the presence of a storm) it would be considered a flood. Flood Flood coverage is almost always excluded from a property policy and must be purchased as a separate policy or endorsement to be covered. A flood occurs when two or more acres of dry land or two or more properties are overrun by water or mudflow. Flood coverage can be purchased through the National Flood Insurance Program (NFIP) offered by FEMA. Private options that typically waive the waiting period associated with NFIP are also available. A Flood policy will also come with its own deductible. Other Coverages to Consider If you own properties in a hurricane-prone area, you must discuss exposure with your agent to ensure you are comfortable with the coverage you have. Below are a few additional coverages you may want to consider. Other Structures Detached structures, such as a shed or garage, need

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From Portfolio Asset to a Rental Home

A New Perspective on SFR Management By Nickalene Badalamenti-Kalas The housing crisis of 2008 sent seismic waves through communities across the country and left a lasting impact on how investors and property management companies handle single-family rental property management. That event will not be the last of its type, and the lessons it imparted to investors, property managers, tenants, and their communities bear continual scrutiny as the housing market is buffeted by economic pressures both natural and manmade. The essential truth that should remain foremost in the minds of thoughtful investors and property managers is that people do not want a house. They want a home: a safe, sound, secure home they can make their own, within an attractive and economically stable community of like homes. Asset management strategies that proceed from this fact — with full transparency and regulatory compliance — will result in consistently satisfied stakeholders. All stakeholders. An Ounce of Prevention This shift in perspective — treating properties as private homes rather than numerical assets — is particularly critical when considering at-risk properties where occupancy is uncertain. Home deterioration is an exponentially accelerating process, and rapidly leads to plummeting home values and community blight. Timely and direct asset stabilization, as well as preventive and ongoing maintenance activities — utilizing experienced tradespeople with specific skillsets — can forestall this trend and stabilize properties and values. Here are important considerations in the process. Monitoring  Proper care and monitoring of at-risk homes are paramount. The recent popularity in single family rentals, pandemic protections, economic instability and severe weather events have created a perfect storm for homes that may be slipping through the cracks. Monitoring delinquency trends, resident and municipal concerns, and being proactive can directly stabilize homes and communities. Having an experienced asset management partner, with nationwide, dedicated, and expert field-service representatives on the ground, can help identify and alleviate these risks. Inspection  Once a home becomes at-risk, a proper and thorough review of assets should be made, within legal limits. Proper training, oversight, and support of the process is extremely important. Inspectors should understand the spirit of this often-delicate task, while still providing accurate and complete documentation of the property’s condition and occupancy. This is another area where expert asset management professionals can deliver a fast, technology-enabled inspection — fully documented with geo-tagged and time-stamped photos — that meets all code compliance regulations. Equally important is the process by which these data are processed. There are numerous indicators for a successful occupancy determination. Correct reporting of utility status, condition of home and grounds, postings on the home, presence of personal property, and in many cases neighbors can be helpful. Inspection reporting should have triggers that notify stakeholders of areas of concern. Negative utility status, signs of theft, vandalism or fire should be immediately reported to the client. Complete and prompt reporting are key to filing claims, chargebacks, and overall asset stabilization. In cases where eviction is unavoidable, the need for experts on the ground to manage protocols such as cash-for-keys — and to coordinate in full compliance with every agency – becomes clear. Be Proactive When legally possible, an investor or property manager should take all necessary steps to preserve and protect the asset. Homes are not designed to be left open to the elements with non-working utilities. Neglect and deferred maintenance come with telltale signs: overgrown lawns, debris and detritus accumulation, and excessive postings are indicators of vacancy, and can lead to further violations, theft, or vandalism. The condition of the home interior is equally important. Homes should be free of infestation and intrusion. Any signs of mold, mildew, or roof leaks should be reported with location, size of area, cause, and remediation plan. All physical hazards — broken steps, handrails, tripping hazards — should be proactively addressed. Exposed utilities including gas, water and electricity should be properly capped off, regardless of present utility status. Plumbing, electrical and HVAC should be in good working order and up to code  Communication Residents and municipalities are at ground zero for “keeping small fires from becoming large fires” and being proactive with residents when asset stabilization concerns arise. Being available, transparent, and providing effective violation resolutions with full code compliance will help prevent potential legal and reputational risks in the future. Right Vendor, Right Time, On Time  Third party partners range from general contractors, trade partners and handymen to licensed field service professionals, locksmiths, debris removal and storage companies. It is essential that the correct vendor partner be engaged for each required task. Again, we see the importance of utilizing an asset management partner who has established relationships with a seasoned service vendor network. They will be experts at their craft, with the experience to know the most efficient solution to any challenge, and the technology tools to accelerate the process. Market- and Tenant-Ready The considerations outlined above reflect a shift in perspective that leads not merely to new tenancy, but enduring tenancy that drives property preservation, increases value, and enhances communities.  But this is not a simple process, nor a responsibility to be lightly assumed. From the legally and emotionally charged eviction process, to the regulatory minefield that is home inspection, stabilization and preservation, moving a property to a market- and tenant-ready state requires expertise, on-the-ground experience, and resolute attention to detail at every stage of the process. An asset management partner that can deliver that level of end-to-end performance is the servicer’s strongest ally.

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The Evolution of the Single-Family Rental

Investors Need to Plan for the Economic Shift Everyone is Feeling Right Now By David Hicks Real estate investing can be a great way to curate long-term, and even generational, wealth. The most common type of real estate investment is single-family rental (SFR) – as opposed to multi-family or commercial properties. Reportedly, there are 108.5 million Americans who rent their housing and 35% of those rentals are single-family homes. Sure, those facts and figures are promising, but is this type of investment still a viable option? What does the future of SFR real estate look like? In the wake of COVID-19, the current inflation troubles, and the record high interest rates, landlords and property managers need to plan for the economic shift everyone is feeling right now. There are a few factors to consider if you are contemplating the road to becoming a residential real estate tycoon. What are Single-Family Rentals and Why are They So Popular? By definition, a single-family rental is a home that is leased to a family or an individual. The property could be a standalone home, townhouse, flat, or apartment. Single-family homes are the most popular type of housing in the U.S. In fact, there were 82 million single-family units across the country in 2021. Tenants tend to be attracted to this type of rental because they do not have to worry about caring for a house. Owning a home takes a lot of work and everything rests on the owner. When you rent, there is always someone you can call to fix a towel rack that may have fallen or update an appliance that gave out. SFR real estate allows families to live in quality homes in nice neighborhoods without the hassles of owning the property. Plus, many single-family rentals have the amenities of a luxury apartment building, such as fitness centers or entertainment areas. These perks, coupled with extra outdoor space for families with small children or young couples with pets, make these types of rentals ideal. COVID’s Impact on Single-Family Rentals With the “zoom town” boom during the pandemic, the supply of homes for sale was not able to keep up with the demand – causing cutthroat bidding wars that resulted in houses being sold for much higher than the asking price. This accelerated the growth of SFR real estate. Single-family rentals allow millennials — the smallest group of homeowners in the country — the chance to embrace the suburban lifestyle without having to drop a large down payment or feel the strain of a monthly mortgage. With most of this demographic feeling the weight of resuming student loan payments, homeownership seems to be a far-off goal. Even if the Supreme Court rules in favor of President Biden’s student debt relief plan, many millennials may still have remaining balances to pay off. The interest-free forbearance, which has been extended nine times since March 2020, gave borrowers a chance to build their savings, just not for homes. However, with more companies shifting to work-from-home or hybrid schedules, younger employees can move away from expensive city living to take advantage of more space for fewer dollars. Additionally, if young renters want to move to another part of the country in a few years’ time, they have more freedom to do so without the strings of homeownership. This is especially important to millennials who have different priorities than other generations. According to Business Insider, millennials are willing to spend $5,000 or more on a trip — making them the highest travel spenders. Millennials also travel more than any other generation, taking a whopping 35 days a year to get out of town. Generation X, baby boomers, and Generation Z all take less than a month with 26 days, 27 days, and 29 days devoted to travel, respectively. The Future of Single-Family Rental Real Estate Even before COVID, the single-family rental real estate market was faring well, and predictions show it is only going to grow. From 2019 to 2020, there was a 30% increase in build-to-rent single-family homes. These types of property management owned communities make up about 6% of the homes being constructed in the U.S. — a figure that is expected to double over the next decade. It is also unlikely that renters will move on to buy a home anytime soon. Due to the high inflation rate — peaking at 7.11% last year — everyone is feeling a bit pinched for cash. In an effort to get a handle on the rising rate of inflation, the Federal Reserve has raised the federal funds rate seven times in the last year. Even though the inflation rate has started to come back down, the Fed is not planning to slow down the interest rate hikes. Hence, those invested in the residential real estate market may see an opportunity. With soaring interest rates, potential homebuyers are attempting to save money by renewing their leases instead of purchasing a property. This gives landlords at least another year of steady cash flow before having to worry about finding another tenant. Final Thoughts It is important to note that you do not have to be a major property management company to generate wealth through single-family rental real estate. Anyone could be a real estate investor in the SFR market. The strategy is straightforward: you buy a home when property costs are low, make any updates or renovations to the property, and rent it. Over time, you can take advantage of increased rent costs and appreciation. When you are ready to sell the home, ideally, you will be selling when asking prices are high. At the end of the day, your ability to properly maintain the home will be a big determining factor in its overall value. While there are other components to consider, such as location, type of home, amenities nearby, etc., fresh coats of paint and updated appliances can go a long way when it comes to deciding a rent or asking price. Residential real estate

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For SFR, Adversity Is in Our DNA

It’s Far Too Early to Write Eulogies for the Late, Great SFR Market By Greg Godderidge From humble beginnings, the Single-Family Rental (SFR) market has grown into an asset class worth trillions of dollars. Today, institutional investors own approximately 500,000 properties of the 16 million single family rental homes nationally, representing a fraction of all rental units in the United States. But their importance to the national housing industry is unquestionable, as they provide consumer choice, professionally managed properties, and an attractive alternative to the traditional multifamily or apartment rental options. With the housing market going through a period of correction caused by the Fed’s mandate to tame inflation, the industry is enduring its first stress test since the Great Recession. Acquisitions have slowed while warehouse financing and securitization deals have been put on ice after the Fed’s unprecedented interest rate hikes beginning in March of 2022. Will the SFR Asset Class survive the challenge? For those questioning the ability to weather the storm, let’s remind them that the SFR business was born out of adversity and is built to withstand imperfect market conditions. A Look Back at History Let’s take a quick look back at the origins of the SFR industry. The Great Recession and the collapse of the mortgage market led to a surge in foreclosures, which peaked in Sept. 2010, when approximately 120,000 homes were repossessed in a single month. With the sudden inversion of supply and demand, home prices plummeted. In those years, real estate was considered an undesirable investment. Some bold investors were not intimidated by the grim market conditions and began acquiring foreclosed properties to rent out while they waited for the market to recover. We owe thanks to those trailblazers who took a chance on a “risky” investment that many others were shying away from as property repossessions were sweeping the country. Brave investors brought activity back to an otherwise lifeless housing market and ultimately helped stabilize home values and propel the housing market’s recovery. They also provided affordable housing solutions for families recovering from the financial crisis. These investors realized the cash flow, low interest rates, and steady price appreciation were a profitable recipe. The business model’s early success attracted the attention of more capital markets participants and large institutional investors who could aggregate a significant number of rental properties. Thus, from the ashes of the foreclosure crisis, the Single-Family Rental asset class emerged in 2012. For the next ten years, the SFR market enjoyed steady growth, with an entire cottage industry of vendors, management companies and outsourcers sprouting up to support it. Big operators such as Invitation Homes, American Homes 4 Rent (now AMH), Tricon and others established a new standard of living for suburban renters with professionally managed properties and amenities. The COVID-19 pandemic accelerated all the positive housing trends and drove even more demand for maintenance-free single-family living, igniting a boom in the SFR space. The market conditions through the pandemic solidified the SFR industry’s position as the “darling” of the real estate asset classes. The SFR industry continued to outperform expectations with a record number of securitizations, new market entrants, and expanding warehouse banking lines. The picture became a little less rosy in 2022 when the Federal Reserve cranked up interest rates to tame runaway inflation. The Current Market Now that we have entered a slower period for the housing market, the explosive growth of SFRs has slowed with it. Investor activity is down due to the run-up in borrowing costs and cap rate constriction. Rent growth has also softened in recent months. Despite these pressures, the underlying fundamentals of the SFR market remain strong: Cash flow remains steady and valuations have normalized. The major players continue to report strong financial results. AMH’s same-home average realized rent rose by 8% in 2022. At Tricon, same-home rent grew by 7.3% in January of this year with solid growth in new leases and renewals, and same-home occupancy holding steady at 97%. They are proving the SFR asset class is well designed to perform in adverse conditions. There is still plenty of appetite from investors who are waiting patiently on the sidelines for conditions to stabilize. Once the market settles into a clear pattern, we can expect the growth of SFRs to resume. Analysts are currently debating what that sweet spot will be for homebuyers and investors to jump back into the market. A report by John Burns Research & Consulting found that 5.5% is the magic rate to reinvigorate the mortgage market. Even if we never see rates drop down to 3% again, if mortgage rates stabilize in the 5.5% range the market can adapt and begin to build a foundation for future growth. While waiting for the market to establish a new trend, investors should take the opportunity to review their inventory, assess their risk, and make any necessary adjustments. That could mean reviewing and streamlining current in-house capabilities or talking with an experienced outsourcer. Partners who can deliver asset management technology, scalable full-service support, and access to a network of vendors will be valuable in this time to help investors manage their portfolios and potentially mitigate losses. An outsourcer with a nationwide footprint like the homegenius family of companies, and its affiliate Radian Real Estate Management LLC can help investors finetune and execute their SFR strategies in different markets across the country. Overall, this is a moment to be cautiously optimistic. As inflation moderates, interest rates should also decline toward the 5.5% sweet spot. Home prices have fallen from their peak, which means there are new opportunities for investors to grow their portfolios. With affordability still an obstacle for many would-be homebuyers, the rental market will likely remain strong. And behind it are secular trends such as suburban migration and work-from-home arrangements that are relentlessly driving demand for SFR properties across the country. It is far too early to write eulogies for the late great SFR market. The fundamentals of the market are too strong and vigorous.

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Distressed Housing

A Winning Strategy for Main Street and Wall Street By Stuart Denyer It is no secret that the single-family housing market faces a severely constricted supply of inventory. Reports suggest that the country has experienced an “underbuilding gap” of 5.5 to 6.8 million units since 2001 with only a 1.7-month supply of homes currently for sale. The perfect storm of low supply and high demand has created record prices and fierce bidding wars. And now, investors and buyers face new fears of inflation, higher costs for labor and materials and skyrocketing rates—currently 4.8% for a 30-year mortgage. But there is a category of housing that has weathered the volatility of the Great Recession and is poised to continue to be a gamechanger for investors large and small: distressed housing. According to a White House brief, “approximately 40% of U.S. housing stock is at least 50 years old and more than 15 million properties are vacant even as families struggle to find affordable housing.” While builders are struggling to dig out of the hole and fill the gap, investors can fix-and-flip, or buy-and-rent, an older property much faster than a new build. From Wall Street to Main Street The opportunity with distressed housing is not new but was born out of the chaos of the 2008 foreclosure crisis. Companies like New Western served as an exit for institutions and banks to offload foreclosure properties and get out from under large pools of nonperforming assets. Many of these distressed properties made their way directly from Wall Street into the hands of Main Street investors who were only just beginning their journey as SFR investors. Not only did this provide opportunities for mom-and-pop investors, it also benefited communities across the country as these homes were given new life and neighborhoods were improved one property at a time. Prior to the Great Recession, small investors used conventional means to find and buy properties. But 2008 changed everything. It was time for disruption and data was the answer. In 2012, big institutions like Invitation Homes, a subsidiary of Blackstone, and American Homes 4 Rent began buying properties at the courthouse steps at or above market value. Their data projections allowed them to project future profit that local investors just did not anticipate.  New Western saw an opportunity to help bridge the gap. We aggregated foreclosure data and applied core algorithms to identify opportunities, allowing investors to identify and purchase their next property within days. Fast forward to today, and Wall Street’s investment in data and technology has made it to small investors on Main Street who can now tap into tools that they did not have access to before—from real estate platforms and apps to workflows and exit strategies. One example of how a small investor can capitalize on data is to identify properties with two lots on them. While a large institution is unable to work in such a fragmented space, a smaller investor can isolate available properties like this online and acquire them with a plan to resell the unit on one lot and retain the second lot for investment purposes. Bringing Wall Street technology to Main Street has also allowed for the online integration of property management, home viewing, and maintenance, all of which had historically been a time-consuming and inefficient process. These platforms, intuitive websites, and user-friendly apps have enabled small investors to easily expand and scale their business. On the flip side, big institutions may have big money and Big Data, but today’s market requires hyper-local intelligence. The Street has realized that technology cannot replace human insight. Pricing is happening at the neighborhood, block, and even individual house levels. Localized networks are a must. As a result, mom-and-pop investors are now offering inventory, local market information and understanding back to Wall Street institutions. The big institutions require large amounts of scale and swaths of land to build and rent. They are leaning heavily on local investors who aggregate inventory. Main Street plays an important role in helping Wall Street learn and scale. The Power of Small Being small allows tremendous flexibility and creativity to improve ROI—often in ways that are just not feasible for big buyers. In high-density areas, the small investor is able to capture benefits that are more difficult to attain for an institutional investor, such as renting garages or driveways to create cash flow. Savvy investors have gone into subsections of Seattle and have been very fast and innovative to create value—from getting a zoning exception for a pre-built nanny pad to building a free-standing apartment unit in the back. Investors are able to buy a property that looks like it is complete, but realize a significant profit—profit that would have been left on the table without an insider’s understanding of the local market. In expensive markets like Los Angeles, small investors have popped the top on detached garages to maximize limited lot size. Adding a room and renting a unit or simply reselling the property with an additional bed and bath creates huge value as the cost to build out the additional square footage is far surpassed by the potential return.  The Rental Reality “Investors are chasing rising prices because rental payments are also skyrocketing, incentivizinginvestors who plan to rent out the homes they buy,” notes Redfin economist Sheharyar Bokhari. However, large institutions often do what is in the best interest of share-holders, not middle-class Americans.  To put some numbers to it, institutional investors own approximately 450,000 homes in the U.S., more than half the total number of homes for sale right now. “Investors are buying everything from finished homes to entitled land and anything you can imagine to get scale,” commented Margaret Whelan, chief executive officer of Whelan Advisory Capital Markets. In some California markets, “neighborhoods that were formerly ownership neighborhoods…are being slowly, or not so slowly, turned into renter communities, and not renter communities owned by mom-and-pop landlords but by some of the biggest private-equity firms in the world,” commented Peter Kuhns, formerly director of

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SFR Emerges from Pandemic

Will Other Factors Impact the Industry in 2022? By Tim Reilly This time last year, I compared the Single-Family Rental (SFR) market to the great Gold Rush of 1849. Supply constriction, low interest rates, rising home and rental prices and strong returns created a highly attractive environment for a growing population of professional investors searching for the same hidden treasure. The “Goldilocks” market conditions triggered in part by the COVID-19 pandemic have turned SFRs into a highly valued and resilient asset class that has proven, once again, it is here to stay. The SFR industry has continued to outperform expectations with unprecedented activity stemming from record number securitizations, new market entrants, and expanding warehouse banking lines. SFR Real Estate Investment Trusts (REITs) have been one of the top-performing real estate sectors throughout the pandemic. But how will continuing lack of supply, increasing rates, and other evolving market dynamics in 2022 impact the industry? And what does the future of the single-family rental look like? Before we get to these questions, let’s start with a high-level overview of the asset class and a deeper dive into its performance in 2021. The SFR Market Grows Up In the wake of the Great Recession, the housing environment was nearly the opposite of how it looks today. Excess supply and nonexistent demand which followed the mortgage market collapse led to plummeting home prices. Some daring and intrepid investors stepped into the breach to purchase foreclosed properties with the intention of rehabbing and renting them before reselling the homes when the market recovered. The unintended consequence caused by these investors’ actions resulted in the stabilization of home prices in an otherwise rapidly depreciating housing market. They were buyers when everyone else had soured on the national housing market. As home prices began to rebound, many of these investors continued to lease the properties to consumers who were looking for long term, stable suburban rental opportunities managed by professional property owners. The new owners found that the cash flow, historically low interest rates, and steady price appreciation were a profitable recipe. The business model’s early success attracted the attention of more capital markets participants and more large institutional investors who could aggregate large numbers of rental properties. The win-win recipe for consumers, owners and capital market participants ignited the new single-family rental asset class. At the onset of the COVID-19 pandemic, there was widespread concern that the SFR market would suffer as unemployment could lead to rental delinquencies. Yet, in reality, the SFR market experienced an unprecedented boom. The pandemic created a heightened demand for more square footage, less urban density, and privacy for the new “work-from-home” environment. The new combination of factors drove more renters to less dense, more spacious single-family homes outside of cities. And as commercial real estate and hospitality investments looked uncertain, institutional investors looked to more stable investments in residential real estate. The Wall Street Journal reported there was more than $150 billion of private-equity real estate cash looking for a stable investment haven in 2020—and many fund managers turned to SFRs. Even record-low housing supply challenges that escalated throughout the pandemic did not slow the momentum in the SFR market. The SFR industry continued to creatively adapt to the low housing supply by offering new Build-to-Rent (BTR) communities. In fact, BTR housing became the fastest growing sector of the housing market, with more than 44,000 rental homes built in 2020 and 51,000 built in 2021, according to the National Association of Home Builders. According to the Single-Family Rental Survey conducted by JBREC/NRHC, 26% of portfolio growth for SFR operators came from BTR homes, rising from 11% in 2020 and up sharply from just 3% in 2019. Professionally managed BTR communities with amenities like pools, fitness centers, playgrounds and walking trails provide a lifestyle that appeals to a wide variety of renters from Baby Boomers to Gen-Z. Without a doubt, 2021 was the best year ever for SFR capital markets and its participants. A record number 29 SFR securitizations closed in 2021, far outpacing the 14 securitizations closed in 2020. Smart money was on the SFR industry as the JBREC/NRHC Single-Family Rental Survey reported that single-family rents rose 9% year-over year in the fourth quarter 2021. Single-family homes built to rent are delivering strong returns to investors as well—in November 2021 The Wall Street Journal reported the average risk-adjusted annual return for built-to-rent investments reached 8%. The SFR industry continued its evolution as the asset class offered many more varieties on the home rental concept for both consumers and investors alike. Not only is BTR a new twist on the rental space, but rent-to-buy has also reemerged as another investment vehicle in 2021. The year was not short on new mergers and acquisition activity, joint ventures, and entrants into the vibrant market. At this point SFRs have proven to be a resilient investment, run by forward-thinking creative minds and emerging from the pandemic as the number one asset class. Following the “Best Year Ever” While the growth seen in 2021 will be hard to top, the SFR market is poised for healthy growth in 2022 and beyond. According to PwC and the Urban Land Institute’s Emerging Trends in Real Estate 2022 report, single-family homes rank number one in both investment and development prospects. There is still untapped potential and room for the industry to grow. While there has been concentrated growth in certain metros, especially within the Sunbelt states, the share of SFRs owned by institutional investors is only about 1% of the national housing supply. Investors have begun to open up professionally managed rental opportunities in secondary and tertiary markets outside of the original and primary “Sand States” purchase footprint. Both economic factors and shifting consumer preferences are converging to drive and sustain demand for professionally managed SFR homes. Those economic factors include record high housing prices and increasing mortgage rates that make renting more affordable compared to buying. According to the Radian Home Price Index, provided by Radian’s

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