In the January issue of FreddieMac’s Insight & Outlook, they report that while the single-family rental market expended (35% of all rentals in 2013) during the recession, a new phenomenon is taking place with the emergence of Buy to Rent (B2R) firms. They conclude that “while the data is mixed, there are some signs that large-scale firms intend to manage their large portfolios of single-family rentals as an on-going business.”
In 2012, a new type of single-family rental business appeared. A few large investors, backed by private equity, started accumulating portfolios of single-family homes with the intention of renting and managing them.The business model of these large-scale B2R operations stands in contrast to that of the more-familiar, professionally-managed apartment complexes. Intuitively, it seems that large apartment complexes should be more cost-efficient to manage and maintain than a network of scattered single-family houses. Apartment units can be built with standardized infrastructure (appliances, plumbing, etc.) making maintenance and repairs more efficient. The costs of amenities – landscaping, common areas, gyms, etc. – can be spread across all the units in the complex. Management and maintenance staff can be located on site.None of these advantages are present for large-scale single-family rentals. Maintenance crews must travel between houses, adding to time and cost. No two houses are alike, making it difficult to stock parts for rapid repairs. Collecting rents and dealing with tenant requests also can be more difficult in a network of scattered houses than in apartments located in a single complex
