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Institutional Investors Ramp Up Acquisitions of iBuyer Loans

Institutional single-family rental investors are seizing opportunities to purchase iBuyer loans. These loans arm investors with a competitive edge to swiftly pursue and close opportunities, like large blocks of homes, which can help them gain market share.

“In a competitive residential real estate market, like we have today, it is very important for investors to be able to move quickly and nimbly to seize opportunities when they come up,” Sloan Sutta, managing director at Crayhill Capital Management, tells GlobeSt.com. “That means not only are prospective purchasers looking for well-priced, scaled lending partners, as all real estate investors are, but they are placing an added emphasis on capital partners that can quickly diligence specific opportunities and execute on bespoke financing solutions. This allows them quickly capitalize on what might be a fleeting opportunity, such as a large block of homes for sale from an iBuyer.”

The SFR market blossomed during the pandemic, and the return potential—many expect SFR to become as big as multifamily—has peaked lender interest. “Overall, the lending environment in the space remains robust, with both banks and non-bank financing partners serving as active lenders in this space, particularly as it relates to institutional SFR operators,” says Sutta. “The continued strength of the securitization market and investor appetite for bonds secured by SFR properties has resulted in a similarly robust lending market supporting the front-end of asset acquisition.”

Some investors, however, aren’t able to access traditional lending markets. “For firms that are still scaling up and are not able to access bank or securitization solutions, a thoughtful and experienced private lender can add a lot of value to their investment strategy,” says Sutta.

There is a natural symbiosis between institutional SFR operators and iBuying sales, which is helping to propel this market. “The application of commercial real estate valuation conventions for single-family rental homes allows SFR operators to be more aggressive in pricing, making them natural partners for iBuyers as sellers.

In a situation where large blocks of iBuying inventory become available, there is certainly going to be interest from institutional single family rental players seeking to gain scale in a competitive market,” says Sutta.

For that reason, iBuying activity should continue to gain momentum in the coming years. “With relatively short hold periods, a well-run iBuyer should be able to make money in both up and down markets leading to continued growth in the space,” says Sutta. “The growth and unique dynamics of this market mean there will also continue to be an important role for value additive financing partners attuned to the distinct needs of both iBuyers as well as their offtake counterparties.”

 

 

 
Reprinted with permission from the Mon, 29 Nov 2021 05:53:16 EST online edition of GlobeSt © 2022 ALM Media Properties, LLC. All rights reserved. Further duplication without permission is prohibited, contact 877-256-2472 or reprints@alm.com.