The American Dream Is For Rent - Dealbreaker

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One of the country's largest landlords is house hunting on an epic scale.

Invitation Homes announced a joint venture with property investor Rockpoint Group on Wednesday. The partnership will net Invitation $1 billion to support its insatiable appetite for more property.

Own-To-Rent
Founded in the depths of the financial crisis to scoop up foreclosed properties, Invitation Homes is the largest rental-home owner in the U.S.

The company operates in 16 markets, primarily in the Southeast and Western U.S., and focuses on "attractive" neighborhoods with good school systems and homes priced at an average of $300k.

They've been busy: Since the beginning of the pandemic, Invitation has been on pace to acquire $200 million of property per quarter. In June, the company raised $448 million of equity to accelerate new purchases.

According to CEO Dallas Tanner, the Rockpoint partnership will give Invitation enough cash to buy 3,500 more houses to add to its current portfolio of ~80,000.

American Dream For Rent
Since the lows of the pandemic in March, Invitation shares have outpaced the S&P, rising over 80%.

The investment thesis is clear: For many people, a lawn and space to comfortably socially distance is the amenity of choice in 2020.

But at the same time, millions of younger Americans are grappling with large student debt balances and cannot afford a full down-payment. Invitation is betting that single-home rentals, which still comprise a tiny fraction of the overall home market, will help fill that gap.

And other big money is following suit:

  • J.P. Morgan Asset Management is working with American Homes 4 Rent to build $625 million of for-lease houses.
  • Investment manager Nuveen said last week it would provide up to $400 million to buy rental properties in Arizona, Florida and Texas.

The Takeaway: According to the WSJ, Invitation's ideal home renters are "parents with pets and six-figure incomes." 

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