THE RISING ‘BIG MIDDLE’ OF SINGLE FAMILY RENTALS
there need to be programs to offer good long-term financing for operators in this space — longer-term loan products that are priced much more reasonably.” Cisterna noted that long-term financing for an apartment building is readily available with a 4.0 to 4.25 percent interest rate and a 70 to 75 percent loan-to-value ratio while a long-term loan for a single family rental property will run closer to 5.5 percent interest with a maximum LTV of 70 percent.
largest owner of single family rentals with about 50,000 nationwide, disclosed the Fannie Mae financing arrangement on the heels of its initial public offering announcement in January. Freddie Mac entered the fray in July with its own announcement of $1 billion in financing for single family rental operators. Although full details of the Freddie Mac plan have yet to be disclosed, the announcement came couched in affordable housing-heavy messaging, possibly a response to criticism of the Fannie Mae financing deal as a boon for Wall Street at the expense of taxpayers. “Freddie Mac wants to provide tens of millions of dollars in financing to midsize landlords, not to giants like Invitation Homes, which operates nearly 50,000 rental homes in 13 markets,”
“There is just a disconnect between what the pricing of the debt is and what the actual risk of the asset class is,” Cisterna said. “Once Fannie and Freddie support this to a greater degree you’ll see more pricing compression overall in the industry.” Fannie Mae provided the first sign that the government is willing to support SFR financing with its backing of a 10-year $1 billion mortgage to Invitation Homes earlier this year. Invitation Homes, the
“There need to be programs to offer good long-term financing for operators in this space — longer-term loan products that are priced much more reasonably.”
DENNIS CISTERNA CEO, INVESTABILITY
NOVEMBER 2017 | ATTOM DATA SOLUTIONS
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