What’s in store in 2024 in SFR?
Over the past couple of weeks we have transitioned the newsletter from origin stories of the beginning of my SFR investment career and the founding of Auben to explanations of Auben’s intense local focus to last week’s announcement of two new companies that will enhance the Auben Ecosystem: Auben Capital Partners and Auben Development.
These two new Auben companies will work together, integrated in raising and deploying capital. Primarily, the capital we raise will be invested in 3 primary pursuits:
- Purchase of property management companies and investment brokerages
- Purchase of scatter-site SFR portfolios and small (sub 100 units) multi-family complexes
- Development and purchase of build-for-rent communities
If you are interested in learning more, please schedule a time to speak with me about any of our upcoming capital raises.
After the new year, in Q1, we also plan on launching some how-to instructional pieces that will highlight some of our team members as well as provide some tricks of the trade that we have learned and refined over the years. If there is anything you would like to see more of in these newsletters, please reach out to me at email@example.com
As we go into the final two weeks of the year, I wanted to take a moment and discuss some questions about SFR and respond with some specific trends we expect to see more of in 2024. Many of the topics below were hot topics for debate by SFR industry leaders at the recent IMN conference in Scottsdale Arizona.
Institutional SFR buyers are moving on to other asset classes.
Nope. We think some of the easy money has definitely already been made, and we spoke with many people who said they were pruning and optimizing their portfolios, while also reevaluating what they buy and where they buy. But we believe SFR has a long runway as a solid asset class for years to come.
BFR will replace scatter-site SFR as the preferred vehicle for owning SFR.
Yes. We are leaning heavily into this statement. Some of the same organizations currently disposing assets are looking at new BFR communities in various stages of development. The reasons are the same as what has always made multifamily so attractive: uniformity, density, etc.
Now is a bad time to develop/build?
Not true. Supply chain issues seem to have largely normalized. The labor market is still challenging (and not showing signs of improving based on the escalating average age of most contractors). But as one participant said, given the difficulties of getting new BFR online (particularly capital restraints), those who can get new BFR developments to lease-ready status in the next year or two should be handsomely rewarded by a lack of inventory.
Multifamily’s wave will crest causing the asset class to struggle
Many different thoughts on this. Most reports say, given affordability constraints and overall market volatility, renters are staying put for much longer periods of time, reducing turnover. However you also have huge amounts of multifamily inventory hitting the market simultaneously. All of the product is nearly identical in target market reach (Class A, high rent). We see the party slowing down but see a lot of upside in Class B and Class C product which have not been able to make it out of underwriting for the past couple of years (and really has not been built for several decades, at this point).
Institutional buyers will return in 2024?
There were many hopeful SFR industry people at IMN in Arizona, desirous of a better pace for acquisitions in 2024. It wouldn’t take much to beat 2023. But we remain cautious in our optimism as the capital stack requirements are still making it really difficult for large and small aggregator/operators to be able to craft the right deal structure. Unless rates lower it may be status quo. We hope to see some movement by end of Q2
Atlanta is losing its luster?
People still love the Southeast and its shining star, the ATL. But the market du jour is clearly Charlotte, with nearly every owner/aggregator we talked to interested in this market. It doesn’t hurt that the Charlotte MSA is now Statesville to Rock Hill, Hickory to Salisbury with coverage at all points in between. We also heard a lot of chatter and a lot of interest in some traditionally less sexy, midwestern markets like Kansas City, Columbus, etc.
Capital is coming in from the coast?
As acquisitions have slowed, there is much more focus on the day-to-day, including a lot of chatter about OpEx and the biggest issue for most fans of the Southeast: insurance. In addition to many insurance providers pulling out of the state of Florida, we heard of big insurance issues in coastal cities in South Carolina, Georgia, etc. That being said, many of these same markets are too strong to ignore but we heard a lot of people reconsidering what are the best coastal markets, with cities like Jacksonville replacing Tampa/St. Pete.
Check back next week for some final thoughts on SFR as we head into the new year.
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Founder, Auben Capital Partners