A view of the first lines of the white-heated SFR market


Single-family rental (SFR) is a market segment that was gaining ground until 2020 and which has taken off during the past year. The millennial’s growing demand for single-family homes, coupled with an extremely competitive buying market, means that renting a home is the only viable option for many. With this interest, investors who were already in the space are rapidly expanding their portfolios and new institutional players are buying or building entire neighborhoods to turn into rental housing. For brokers and initiators, this space is more and more attractive as a way to fill their pipeline with the volume lost to refinancing.

As attractive as it is, principals must know that they are entering a tight market when they embark on SFR credit. Institutional players are rudimentary in some markets and housing stocks are still tight. Many homeowners are concerned about moratoriums on evictions and speed is key. To find out how mortgage professionals can advance in this difficult market, MPA spoke with Darel Daik (pictured), CEO of Noble Mortgage & Investments in Texas. His company, which specializes in hard money lending for investors, has been in the Texas LICO market for nearly two decades. He believes that opportunities abound in the SFR space, for those who can beat the big guys.

“There has certainly been a greater influx of competition on the investment side, whether it’s hard money or these no-income lenders that are set up by hedge funds,” Daik said. “They’re trying to take market share, but they just can’t compete when it comes to customer service and the speed at which that takes a lot of these deals.

Daik explained that the housing shortage in Houston and Dallas, his two key markets, allows a private lender like himself to outperform the competition. With only 1.6 months of housing stock in Houston, let alone in Dallas, sellers want a deal that can be done very quickly. As a hard money lender, Daik explained that he could close loans in less than a week, much faster than these hedge funds could.

In addition, Daik’s model does not require large down payments from the borrower which, unlike some more institutional players, allows it to act more quickly. Its market experience also allows it to reassure its worried customers.

the extension of moratoriums on evictions initially announced at the start of the pandemic, for example, worried some investors and owners. For Daik, there is very little reason to exist. His SFR clients have seen minimal issues with unable to pay tenants, and while he believes there may be market specific causes behind this, he notes that there is no shortage of good capable tenants. to pay solid rent for the time being.

For originators and brokers who want to start working in the SFR market, Daik explained that a somewhat different skill set is needed. The details of qualification, for example, become more complicated as an investor adds to their portfolio. The subscription also requires an element of complexity linked to the nature and the commercial prospects of the portfolio. As competition abounds in the space, Daik believes a savvy designer can follow suit and move more nimbly than big players.

Ultimately, one of the main points that buyers have in common with working in the SFR space is one endemic problem: supply.

“The market is really good, but there isn’t enough inventory,” Daik said. “We are dealing with less than two months [of inventory] in Houston and less than a month in Dallas. So many investors have turned to new construction to compete with this. The biggest issue we hear complaints from borrowers about is that they are struggling to find a viable property and prices have gone up astronomically over the past year.

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