For multifamily real estate investors, learning about the strategies that shaped today’s investment landscape can be incredibly valuable; providing context behind current investment options as well as useful tips to help you make the most out of your real estate investment portfolio.
Our latest article discusses the strategy that pioneered the concept of aggregating properties; helping investors streamline operations while maximizing returns on their portfolios: Single-Family Roll-Ups.
This article dives into the history of Single-Family Roll-Ups, the most notable names in the space, the role of Prop Tech, and how it paved the way for SMF Aggregation investing!
What Are Single-Family Roll-Ups?
A Single-Family Roll-Up is a real estate investment strategy where individual single-family properties are acquired and consolidated into a single portfolio. This way, instead of owning and managing multiple single-family properties separately, investors combine them under one management structure to benefit from streamlined operations and higher profits.
Single-Family Roll-Up properties can be residential houses, townhouses, or condominiums that are typically rented out to tenants. Combining these properties diversifies your portfolio, reduces risk, and provides a more consistent cash flow as opposed to relying on returns from a single property.
While Single-Family Roll-Ups are a relatively new concept, they have already begun to evolve into the multifamily investing space that we see today. While the first examples of this strategy can be traced back to the early 2000s, the concept gained significant traction in the aftermath of the 2008 financial crisis.
The History of Single-Family Roll-Ups in the US
Prior to the 2008 financial crisis, the single-family rental market was heavily fragmented, and a majority of rental properties were owned by individual investors or small-scale landlords. The financial crisis, however, resulted in a wave of foreclosures and an oversupply of vacant properties.
In the aftermath of the crisis, institutional investors saw the opportunity to acquire these distressed single-family properties at discounted prices, building them into large portfolios. What followed was the creation of several real estate investment firms and private equity funds that specialized in acquiring and managing single-family properties.
As Single-Family Roll-Up operators nailed down their strategies and became experts, they expanded their portfolios into new markets. The market began to attract more institutional investors, and the demand for single-family rental properties became increasingly competitive.
The success and experience gained from Single-Family Roll-Up paved the way for real estate investors to use similar strategies for small multifamily properties such as duplexes, triplexes, and small apartment buildings. The practices developed during Single-Family Roll-Ups facilitated the expansion into multifamily portfolios.
Who’s Who In Single-Family Roll-Ups
There are several players that have made a notable name for themselves in the Single-Family Roll-Up space:
- Invitation Homes:Invitation Homes is one of the largest and most well-known players in the single-family rental market. Founded in 2012, Invitation Homes focuses on acquiring and managing single-family rental homes across various cities in the United States.
- American Homes 4 Rent: As one of the early pioneers in the industry, American Homes 4 Rent has built a substantial portfolio of single-family properties. Also founded in 2012, the company focuses on acquiring, renovating, and leasing homes across different markets in the United States.
- Tricon Residential: With a strategic focus on acquiring and managing single-family rental homes, this Canadian investment firm, founded in 1988, has successfully built a significant presence in the U.S. real estate market with over 31,000 properties in North America. The company operates in various American markets, catering to the growing demand for single-family and multifamily rental properties.
- Amherst Residential: This company focuses on acquiring distressed properties and transforming them into professionally managed rental homes. Founded in 2012, Amherst Residential’s expertise in Single-Family Roll-Ups has contributed to its growth and success in the industry.
A number of real estate investment firms popped up in 2012 to capitalize on the opportunities after the 2008 financial crisis. The market left many people preferring renting over home buying, especially single-family homes, making the market a great opportunity for real estate investors.
During this time technology was also undergoing a transformation, particularly in the realm of Prop Tech, providing new tools and platforms for real estate investment and management. These advancements made it easier for firms to enter the real estate market, as the new tech handled tasks such as property research, acquisition, management, and tenant screening.
The Role of Prop Tech
The rise of Prop Tech played a crucial role in the development of Single-Family Roll-Ups, just as it does today in multifamily investing.
Integrating technology platforms has enabled operators to easily acquire and manage their properties, track data analytics, screen tenants, and offer easy to use technologies for residents like online bill paying or maintenance requests.
Paving The Way For Multifamily Investing
Single-Family Roll-Ups have transformed the real estate investment landscape by revolutionizing the way single-family properties are managed and acquired. These innovative strategies have leveraged Prop Tech platforms to attract investors, simplify operations, and make acquiring and managing properties more efficient.
Single-Family Roll-Ups have paved the way for the success of multifamily roll ups, and as the real estate industry continues to grow and evolve, we should expect to see better advancements in property aggregation and an increased role in technology in real estate investing and property management.
