Over the past decade, single-family rentals (SFRs) have emerged as a compelling asset class for investors of all sizes. What was once an overlooked housing market segment has transformed into an opportunity driven by fundamental shifts in investment yields, socioeconomics, and economic efficiencies. In this three-part series, Plotify Insights will dive deeper into the key factors driving the rise of SFRs as one of the most attractive asset classes - while offering an in-depth look at why SFRs have captured the attention of institutional and individual investors alike.
SFRs have demonstrated their potential for high yields early on, with single-family assets being one of Blackstone’s first real estate investments in the 1990s, showcasing the potential for high returns by yielding a staggering 62% annualized returns, over 3.5 times greater than projections.
Today, the potential for higher yields continues to be driven by the current supply and demand imbalance and a long-term homebuilding deficit. As detailed in the first systemic analysis of total returns to SFRs, total returns approximated 8.5% across US cities from 1986 to 2014. Data from John Burns Real Estate Consulting, a leading real estate data consultancy, reinforce the sector’s appeal, with current gross rental yield after property taxes averaging 7.6% nationally, with select markets closer to 10.4%.
Notably, when comparing various real estate asset classes using aggregate performance measures, such as real estate investment trusts (REITs), SFRs stand out as top performers. Compared to all REITs and apartment REITs, SFR has outperformed both by more than 45% since 2017.
SFRs have proven to be a reliable asset class with strong growth potential by delivering consistently high yields and strong price growth across market cycles. As the demand for resilient investments continues to rise, solid returns and rent growth position single-family rentals as a unique opportunity for those seeking to diversify their portfolios and secure steady income while benefiting from home price appreciation.
Plotify’s Takeaways:
- Research shows that total returns to single-family rentals have historically approximated 8.5%.
- Since 2017, single-family rental investments have performed the strongest against other REITs.
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