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Are Securitizations of Single-Family Rentals Coming Next Year?

DEC 24, 2012 12:50pm ET
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The first single-family rental REIT went public a few weeks ago and the first securitization backed by single-family rents may emerge next year.

Wall Street banks are offering warehouse lines to fund investors that are gathering large portfolios of single-family rental properties to begin the process of a securitization, according to Mark Fleming, the chief economist at CoreLogic.

A rental-backed security could be based on just the rental income stream or the rental income and property value combined.

“There is buzz that those are coming next year. So there could be a private-label RBS market,” Fleming said in an interview.

He noted that investors are using real estate agents to find REO and short sales to purchase and find the tenants. And they are using local property firms to manage the properties.

Considering the price of the property and the rental income, the rental dividend yield is around 10% to 12% nationally, Fleming said, which could make a securitization very attractive.

Meanwhile, Silver Bay Realty Trust Corp. raised $245 million in an initial public offering a few weeks ago. The new real estate investment trust based in Minnetonka, Minn., acquires and manages single-family homes.

Bloomberg reported that the new REIT owns 2,540 single-family properties and Silver Bay plans to acquire more than 3,100 single-family properties with the proceeds of the IPO.

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