The nation’s largest landlord is now trading on the New York Stock Exchange. Invitation Homes made its stock market debut on Jan. 31, 2017, as the largest IPO this year and a positive sign for the single-family rental market.
The company claims it has almost 50,000 single-family rentals in 13 markets across the country. It went public with the sale of more than 88 million shares at $20 a share. That includes an option given to underwriters to purchase additional shares. After underwriting discounts and offering expenses, the IPO raised $1.675 billion.
A milestone event
CNBC writes that it’s the largest IPO for a U.S. real estate investment trust since an IPO by the Paramount Group in 2014. It’s also a big milestone for the Invitation Homes owner, Blackstone Group, and its operator Jonathan Gray.
Blackstone founded Invitation Homes in 2012 in the midst of the housing crisis. Homes were foreclosing across the country, resulting in many families suddenly looking for places to rent. Invitation Homes started buying those foreclosed homes in bulk and turning them into rentals to meet that demand.
But foreclosures are not the only reason more people are now renting. Many would-be homebuyers are faced with a number of obstacles right now. That includes higher home prices, which are driving rents higher and making it tough to save for a down payment. Higher mortgage rates are also making loans more expensive. And homeowners who can’t afford to “trade up” are staying in their homes for a longer period of time. That keeps those homes off the market.
The current housing market is especially hard on Millennials. Many are just launching their careers and are feeling financial constraints. Some Millennials also prefer to rent instead of buy, to keep themselves mobile.
No rental market slowdown in sight
According to the Urban Institute, the rental market is not expected to slow down. It writes that it expects to see the number of U.S. renters rise from 40.7 million in 2010 to 54.1 million in 2030.
That’s helped many landlords, including Invitation Homes. Seeking Alpha says the company has seen good revenue growth. And with a rising demand for rentals, that revenue growth should continue.
But Seeking Alpha writes that people interested in investing in Invitation Homes should keep a close eye on real estate prices and home ownership rates. Both those factors could affect the company’s bottom line.
Higher home prices will increase the value of its current portfolio, but may also make it tough to purchase more homes and expand its business. And if there’s a sudden surge in new homeowners, that could impact the demand for rentals. But as I mentioned, Urban Institute doesn’t see that happening in the foreseeable future.
Seeking Alpha does write that based on the current scenario, Invitation Homes is a solid buy. It says the company’s success is: “A good barometer of the health of the real estate and IPO market.”
Where are these Invitation Homes located?
Two of the company’s top markets are Miami and Los Angeles. It also lists rentals in Orlando, Jacksonville and Tampa along with other sun-belt cities like Las Vegas, Phoenix and Atlanta. And, it also has rentals in Sacramento, California’s Central Valley, Seattle, Chicago and Minneapolis.
Forbes writes that Invitation Homes spends about $25,000 on improvements for each home and has invested a total of $1.2 billion on those home improvements. It also enjoys a 96 percent occupancy rate with rents averaging $1,623 a month. Forbes added that the IPO funding will be used to help pay down about $8 billion in debt.
Invitation Homes is now trading on the New York Stock Exchange under the ticker INVH.
What does this mean to real estate investors?
It means we’re in the right business. And we could be in the “right” business for a very long time. Find out which markets are have the highest yields for buy & hold investing today at www.RealWealthNetwork.com
About the Author
Kathy Fettke is the founder and co-CEO of Real Wealth Network, a passive real estate investing club with more than 24,000 members. She’s also the author of “Retire Rich with Rentals” and host of “The Real Wealth Show,” a featured podcast on iTunes with listeners in 27 different countries. Kathy is passionate about understanding real estate cycles so she and her members can invest in the best markets and best deals available today. She is frequently invited to share her expertise on CNN, CNBC, Fox News, NPR, CBS MarketWatch and in the Wall Street Journal. Kathy received her BA in Broadcast Communications from San Francisco State University and worked in the newsrooms of CNN, FOX, CTV and ABC-7. She’s past-president of American Women in Radio & Television. Kathy loves the freedom that real estate investing can bring. She lives in Malibu, California, with her husband and two daughters and enjoys traveling, hiking, rock climbing, skiing, figure skating and surfing. Contact her at firstname.lastname@example.org.