(Bloomberg)—Single-family landlords are going upscale because they bet that higher-earning homes will remain in the rental market.
Invitation Homes Inc., the largest US rental house owner, recently formed a $300 million joint venture targeting homes that will rent 30% to 60% more than properties they typically buy. .
The company’s 82,000 homes had an average rent of about $2,000 at the end of 2021, meaning it could offer homes for between $2,600 and $3,200 per month.
According to a March 4 statement, the partnership with Rockpoint Group will invest approximately $750 million, including loans to purchase and renovate single-family homes.
If high-end single-family rentals take hold, landlords could follow the path set by the multifamily industry a decade ago, when developers embraced luxury apartments for city-dwelling millennials.
Now, those same renters are looking for larger spaces, and many of them either can’t afford to buy a home—at least not in the neighborhood they want to live—or still prefer the flexibility of the lease. .
“There is clearly a huge demand for rental housing in high-income homes,” said Jay Parsons, chief economist at Realpages.
The single-family rental industry typically focuses on the starter house, offering the suburban dream for families who are short of cash for a down payment. The push upmarket comes because rents are rising in the US, in part because a lack of homes to buy has kept buyers in the rental market.
The invitation isn’t the only homeowner chasing the opportunity. Kinloch Partners has begun building luxury properties in Nashville, Tennessee, buying lots in desirable neighborhoods and finishing homes with high-end amenities like stacked-stone fireplaces, wine coolers and stained concrete floors .
The company expects the homes to be rented for about $4,000 a month, said Kinloch CEO Bruce McNeilage. The firm plans to build about 20 such homes in Nashville, and sees potential demand spread across major US metro areas.
“If they rent like wildfire, we’ll do more,” McNeilage said. “Corporate relocations are coming to every decent-sized city in America. They’re looking for a high-end rental and there’s nothing out there for them.”
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