As a landlord of single-family rentals (SFRs), I often get requests for available properties. Since I'm in the mom-and-pop category (10 homes or fewer), I rarely have vacancies. What I usually tell people who inquire is to avoid the institutional landlords if possible because the rentals are often more expensive and living in one can be impersonal, particularly when there's a maintenance request.
Just the other day, I was asked if I had any rentals available. I didn't, but as I was helping this person locate one, all the available SFRs listed belonged to institutional investors.
This is just a snapshot in time, of course, but if the situation stays this way, the shift from mom-and-pops to institutional investors owning most SFRs is real. For institutional investors, seeing how well single-family homes are holding their value along with the strong rental market post-pandemic is all the proof they need to buy up as many of these homes as they can.
On that note, another institutional landlord, this one from the Midwest, is getting bigger and making its way to my area (the Southeast) and beyond. VineBrook Homes is the name. Let's see what's up.
VineBrook Homes recently spent $354 million to buy a portfolio of SFRs from The Prager Group, an Atlanta-based real estate investment management firm, and Ardent Companies, an Atlanta-based asset management firm that manages over 2,300 SFRs.
The acquisitions by VineBrook add 3,000 homes to its current portfolio of about 13,500 homes.
VineBrook, a private real estate investment trust (REIT), is managed by NexPoint Residential Trust (NYSE: NXRT), an alternative investment platform with extensive real estate experience.
VineBrook currently manages SFRs in the Midwest, mainly in Cincinnati, Columbus, and Dayton, Ohio. The new homes VineBrook will manage are located in Florida, Georgia, Mississippi, Missouri, New Mexico, North Carolina, South Carolina, and Tennessee. The average rent amount, as of last month, was just over $1,000 a month.
VineBrook's homes are in the affordable housing category, and they're mainly for workforce tenants. VineBrook notes on a fact sheet: "'Affordable Housing' is a high-growth market opportunity."
Yelp reviewers, on average, give VineBrook only two stars, with the main complaints being maintenance ones. This is similar to the largest U.S. institutional investor of all: Invitation Homes. That company also averages two stars, on Trustpilot.
It's those reviews that keep me in business. When I list a house for rent, about half the prospective tenants ask me if I'm the owner. Of those who ask, all say they're done renting from big companies.
Although not all renters have a bad experience, mega-landlords have a shaky reputation with tenants, and that isn't a good situation. When residents of Berlin got wind that the biggest German residential landlord was buying the second biggest landlord, the citizens voted to stop the sale and to socialize the homes owned by the second biggest landlord (250,000 apartments) instead by forcing a sale to the government. Something like that could happen here if enough people are dissatisfied with their living arrangements.
The real estate investor takeaway
NexPoint might be following in the footsteps of Invitation Homes, which went public in 2017 with a portfolio of almost 48,000 homes (which has doubled since then).
NexPoint is currently exploring the idea for an IPO amid the strong rental market we've been experiencing. In today's hot rental market, real estate investors might want to look into single-family home REITs -- but first they might want to review tenant retention.