Burns enumerated the tailwinds and headwinds for SFR/BFR. In its favor are economic growth and housing demand; mitigating against it are the economic outlook and financing feasibility.
Burns said that although we’re not in a recession yet, it’s coming. He noted that CRE has a great deal of both fixed-rate and floating-rate debt, and we’re starting to see defaults. Looking back over the 12 past recessions, 11 of them–the short but steep COVID-induced recession being the exception—were caused by excessive debt, he pointed out.
Nonetheless, development is continuing, often undertaken by some of the leading developers in the for sale single-family market. Burns said he has been trying to get homebuilders interested in BFR for the past decade. About four years ago, he recalled, a few became interested. “Now, all of them are interested.”
Also showing an increasing interest in SFR/BFR have been institutional investors. However, despite the fact that a handful of larger-scale players have been active in this space for the past decade, fewer of them are involved in the sector than you might think.
Burns said there are only 12 companies that own 5,000 or more units, and another 18 that own 500 or more. The number of households that rent homes isn’t much less than those who rent apartments, but the industry is still very much in its infancy, he said.
Mark Forrester, Phoenix-based senior managing director with Berkadia and a veteran of numerous SFR/BFR sale transactions, delivered questions from webinar attendees. First up was a question on whether Burns believes there will be an acceleration or deceleration of demand as multifamily renters move into SFR/BFR.
Burns predicted that although newly built BFR properties will take some demand from apartments, he thinks demand mostly will come from people who have rented older SFRs or perhaps even owned their own homes previously. Forrester concurred, “As build-for-rent becomes available in more markets, it’s definitely going to become an attractive option.”.
When asked about the most overlooked risk in underwriting SFR/BFR properties, Burns replied, “Future supply.” That includes homes that are currently occupied by homeowners and homebuilders’ product that you think will hit the for-sale market but turns out to be rentals.
Burns noted that in his firm’s recent resale agent survey, they found that in about 10 percent of cases, people buying new homes are keeping their previous residences and renting them out to help meet their mortgage payments.
Another webinar attendee wanted to know how turmoil in the financial markets has affected the sector. “When there’s turmoil in the financial markets, people just hit pause,” Burns acknowledged. However, he advised waiting and seeing how the spring leasing season looks; so far, it’s been steady.
That being said, although he shared it may be early to make such a call, with the Silicon Valley Bank collapse having happened last month, lending will only get tighter. “Banks don’t get aggressive and competitive with each other when there’s a financial crisis going on,” Burns said.
When asked how feasible it is to add mixed-use and affordable product to BFR, Burns replied, “The more you can segment your rentals, the better. The more variety of product types you have in the community, the faster you’re going to lease up.”
Another interesting consideration is what kind of amenities to put in, especially since not all consumers will want the same. However, Burns said, when looking at BFR amenities, “The main amenities that tenants will want are a garage and a yard.” It’s not a question of having to put in the same types of amenities an apartment renter expects.
Pictured: Boomerang Ranch, a BFR development in Greeley, CO.
Berkadia Webinar: Jeff Coles and Mark Forrester of Berkadia Sit Down with John Burns, Who Remains “Crazy Bullish” on SFR/BFR
Berkadia Webinar: Jeff Coles and Mark Forrester of Berkadia Sit Down with John Burns, Who Remains “Crazy Bullish” on SFR/BFR
“I’m still crazy bullish on this industry.” That’s John Burns, CEO of John Burns Real Estate Consulting, on Berkadia’s April 5 webinar covering the single-family rental/build-for-rent (SFR/BFR) sector, “Why Investor Interest in Single-Family Rental & Built-for-Rent Continues.” Burns, who has advocated SFR/BFR for years, maintains that bullishness notwithstanding the current economic challenges facing commercial real estate.
Burns enumerated the tailwinds and headwinds for SFR/BFR. In its favor are economic growth and housing demand; mitigating against it are the economic outlook and financing feasibility.
Burns said that although we’re not in a recession yet, it’s coming. He noted that CRE has a great deal of both fixed-rate and floating-rate debt, and we’re starting to see defaults. Looking back over the 12 past recessions, 11 of them–the short but steep COVID-induced recession being the exception—were caused by excessive debt, he pointed out.
Nonetheless, development is continuing, often undertaken by some of the leading developers in the for sale single-family market. Burns said he has been trying to get homebuilders interested in BFR for the past decade. About four years ago, he recalled, a few became interested. “Now, all of them are interested.”
Also showing an increasing interest in SFR/BFR have been institutional investors. However, despite the fact that a handful of larger-scale players have been active in this space for the past decade, fewer of them are involved in the sector than you might think.
Burns said there are only 12 companies that own 5,000 or more units, and another 18 that own 500 or more. The number of households that rent homes isn’t much less than those who rent apartments, but the industry is still very much in its infancy, he said.
Mark Forrester, Phoenix-based senior managing director with Berkadia and a veteran of numerous SFR/BFR sale transactions, delivered questions from webinar attendees. First up was a question on whether Burns believes there will be an acceleration or deceleration of demand as multifamily renters move into SFR/BFR.
Burns predicted that although newly built BFR properties will take some demand from apartments, he thinks demand mostly will come from people who have rented older SFRs or perhaps even owned their own homes previously. Forrester concurred, “As build-for-rent becomes available in more markets, it’s definitely going to become an attractive option.”.
When asked about the most overlooked risk in underwriting SFR/BFR properties, Burns replied, “Future supply.” That includes homes that are currently occupied by homeowners and homebuilders’ product that you think will hit the for-sale market but turns out to be rentals.
Burns noted that in his firm’s recent resale agent survey, they found that in about 10 percent of cases, people buying new homes are keeping their previous residences and renting them out to help meet their mortgage payments.
Another webinar attendee wanted to know how turmoil in the financial markets has affected the sector. “When there’s turmoil in the financial markets, people just hit pause,” Burns acknowledged. However, he advised waiting and seeing how the spring leasing season looks; so far, it’s been steady.
That being said, although he shared it may be early to make such a call, with the Silicon Valley Bank collapse having happened last month, lending will only get tighter. “Banks don’t get aggressive and competitive with each other when there’s a financial crisis going on,” Burns said.
When asked how feasible it is to add mixed-use and affordable product to BFR, Burns replied, “The more you can segment your rentals, the better. The more variety of product types you have in the community, the faster you’re going to lease up.”
Another interesting consideration is what kind of amenities to put in, especially since not all consumers will want the same. However, Burns said, when looking at BFR amenities, “The main amenities that tenants will want are a garage and a yard.” It’s not a question of having to put in the same types of amenities an apartment renter expects.
Pictured: Boomerang Ranch, a BFR development in Greeley, CO.
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