Are Institutional Investors Looking to Dominate the Residential Rental Market?
Sometimes key industry trends can be seen in the intentions and actions of one single company. One such company is making news lately.
Up until recently, large institutional investors avoided the residential property rental markets. This $3 Trillion market has always been dominated by private, individual investors who had the time, energy, and dedication to manage individual rental houses and apartments.
Now, these big investment firms think they’ve solved the buying/selling and management logistics that prevented them from buying up the market for themselves.
Not only do they think the US rental housing market a good place to invest, they believe they’ve stumbled on a strategy with systems and technology to grow their property management business.
Yet, is what they’ve found easily accessible to small portfolio owners too? Is new technology forcing big and small property managers to adjust to renter’s preferences and needs? If SMB property owners/managers use the same tools and technology, can they still compete?
Institutional Investors Swooping in: Tricon Capital
Tricon Capital is one of those companies making inroads into the South and Southwest rental markets. Recently they sold a less profitable business and are now flush with cash for their new ventures. They’ll full of enthusiasm about their venture into the rental housing in the US which they named Tricon American homes.
Could this pressure private investors and property management companies to step it up a notch from paperwork, phone calls, accounting on spreadsheets and old school property management?
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Proptech and Other Solutions Optimising Performance
The big PM firms are developing new ways to buy and manage property using software technology. In fact, they say they couldn’t do what they’re doing without it. That’s how they’re growing their portfolios and profits so quickly.
Tricon Capital is interested in a specific niche renter: teachers, police, miltary etc. having higher income careers in recession proof industries, within high rental demand cities. A focused strategy on the best tenants and income properties.
What are they onto that you’ve ignored thus far?
Tricon Capital Now One of the Biggest Players in the Single Family Rental Market
Tricon is now the 3rd largest publicly listed landlord of U.S. single family rentals, behind Invitation Homes and American Homes 4 Rent. Small property investors and rental landlords are competing for assets in the growing US market. The US rental market has burgeoned as American home buyers can’t obtain financing for a home or condo.
Tricon Capital Group Inc. is a principal investor and asset manager focused on the residential real estate industry in North America. The firm owns and manages on behalf of third-party investors a portfolio of investments in land and homebuilding assets, single-family rental homes, manufactured housing communities, and multi-family development projects — Bloomberg Research
Tricon Capital is a Canadian real estate developer who have lost some interest in the small Canadian real estate market and have ventured into the US. They have offices in Toronto to serve the Canadian market and offices in San Francisco to serve the California and west coast market.
One of their most promising companies is Tricon American Homes.
According to a report in the Toronto Star, Tricon Capital Group Inc. used proprietary software to scrape 100,000 house listings in the U.S. Sunbelt states from Arizona to Florida. The company made offers on 1,500 properties while buying about 400 of them and they expect to 600 more. Yet, that’s a speck in the full market.
Big Investors Looking at Dominating Smaller Investor Competition
Tricon has become the third-largest owner of U.S. single-family rentals by snapping up homes from Arizona to Florida. It now ranks behind Invitation Homes Inc., backed by Blackstone Group LP, and American Homes 4 Rent in a market it says is valued at about $3 trillion (U.S.) and is still largely owned by individual investors.
Tricon is innovating, likely because they’ve stumbled upon proptech solutions that help them scrape and negotiate better deals. They might also sense that individual investor’s costs and old school management processes are a weakness they can exploit. Tricon has created their own repair and maintenance service to manage that aspect of property management.
Are small income property investors using technology to compete against the growing enterprise threat? Will you stop investing in property or buy and sell to the Lions?
Tell us your thoughts and predictions on the future of the residential rental market in the US. We’d like hear from you.
The boom in rental income property investing is also propelling demand for property management software and other proptech products. The belief in technology and automation is helping these big companies lower maintenance costs and streamlining daily management allowing them to eat into the SMB investor market. When they say they can’t do without it, we know it’s perhaps their key business asset.
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