Single-family rental (SFR) overview and market size

Takeaways

  • Single-family rentals are rental units in single-family homes. They are usually detached structures in suburban neighborhoods with a yard and garage.
  • Single-family rental companies make most of their money from rental income. But they also will sell their rental properties for a profit.
  • Most estimates show that SFRs account for 15-16 million units. This represents close to 15% of all occupied housing in the United States. SFRs generate roughly $250B annually in rental income.
  • SFRs are not new. But they were traditionally owned and operated by small mom-and-pop investors. Many SFR units purchased in the past 15 years are owned by large institutional investors.
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What is a single-family rental?

Single-family rentals are rental units in single-family homes. They are usually detached structures in suburban neighborhoods with a yard and garage. Put another way, these are traditional homes that are rented out instead of sold. Single-family rentals do not include apartment building where there are multiple units.

What is an SFR?

SFR is the commonly used acronym for single-family rental.

How do single-family rental companies make money?

Single-family rental companies make most of their money from rental income. But they also will sell their rental properties for a profit. SFR owners will try to buy properties at a low cost. They then make necessary improvements to ensure the property can be rented at a good rate. Then they secure a tenant. Often SFR owners improve margins by using technology and scale to reduce maintenance and marketing expenses.

What is the average purchase price of an SFR?

The average purchase price of an SFR by an institutional buyer is between $100K and $200K. These are cheaper than the traditional agent-represented homes.

How many SFRs are there?

Most estimates show that SFRs account for 15-16 million units. This represents close to 15% of all occupied housing in the United States.

What is the SFR market size?

SFRs generate roughly $250B annually in rental income. That said, SFRs also generate additional income from sales which is harder to account for.

What are some criticisms of SFR companies?

SFRs are not new. But they were traditionally owned and operated by small mom-and-pop investors. Many SFR units purchased in the past 15 years are owned by large institutional investors. One key criticism is these large institutions reduce the supply of homes for sale. This means remaining homes are more competitive and expensive. Another criticism is these institutional buyers are predatory relative to traditional mom-and-pop investors. Critics claim institutional landlords cut corners more and are faster to evict. In addition, these owners might try to generate revenue from late fees and other tactics rather than rent. Critics claim this is because of a laser-focus on generating returns for shareholders. 


All that said, institutional ownership of SFRs is still low.  They have purchased a large number of homes in recent years. But they still own well under 500K units out of the 15-16M on market.

Who are the top SFR companies?

The largest owners of SFRs are Blackstone (Invitation Homes), American Homes 4 Rent, Colony Starwood Homes, and Progress Residential. However, these top players still represent under 200K units out of the 15-16M on the market.

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