REIT for Single Family Home Rentals

Beazer Homes USA has formed a REIT that will buy and then rent single-family homes:

Beazer already had accumulated 192 single-family homes in the Phoenix and Las Vegas areas—more than 10% of them houses the company built and sold in the first place. Most were purchased at steep discounts from their original prices through foreclosure auctions, short-sales or other distressed home-buying strategies.

Those homes will go into the new company, dubbed Beazer Pre-Owned Rental Homes Inc., which hopes to expand beyond Phoenix and Las Vegas to at least one other, as-yet unidentified market. Within two years, Beazer said the number of rental homes under the new REIT’s control could number in the thousands.

“It’s not a short term, opportunistic thing,” said Allan Merrill, Beazer Homes’ chief executive, who is chairman of the new rental venture. “It’s not buy as many as you can, lever it up as far you can, and flip them as soon as you can. It’s building a durable rental stream.”…

REIT experts say that similar companies could follow, especially if the Beazer venture is successful. According to Census Bureau data analyzed by Green Street Advisors Inc., there are about 25.5 million single-family rental properties—defined by Green Street as houses with between one and four units—in the country, compared with just 18 million rental apartments in buildings with five or more units.

“Given the sheer size of the single-family rental inventory in this country and the capital now lining up to play in this space, I would be surprised if we don’t see multiple single-family REITs formed in the next several years,” said Andrew McCulloch, a managing director with Greet Street.