Single-family rental valuation
Use Single-Family Rental valuation methodology that meets investor standards
Single-family rentals (SFR) have matured into a preferred extended core asset class because of predictable cash flows, stable returns, and solid rent growth. These characteristics are attractive to a wide range of investors and lenders, and SFRs have quickly become a desirable addition to a well-rounded investment portfolio.
As capital from institutional investors has flowed into SFRs, the ability to incorporate valuations and performance metrics into a larger portfolio analysis was limited due to inconsistencies in valuation techniques. Altus Group developed a solution that standardized valuation and performance measurements and benchmarks. This allows investors to compare SFR returns to other asset types. We are the industry leader for calculating, presenting, and reporting investment returns.
- Property and fund-level modeling
- Valuation management
- Data analytics
- Portfolio benchmarking
- Valuation review
Comparing BPO and DCF
With the growth of SFR portfolio ownership by institutional investors, several challenges quickly arose with the legacy practice of Broker Price Opinions (BPO).
- A BPO estimates the probable selling price of a house for owner–occupancy. It often relies on algorithms from residential home brokerage platforms and doesn’t reflect the actions of institutional buyers and sellers. SFRs are income-producing assets, and they are purchased based on their ability to generate cash flow and returns to their owners. Because the industry standard for the valuation of income-producing real estate assets requires the application of an income approach, SFRs must be valued using an income approach.
- BPOs value properties individually. Institutional owners may own hundreds or even thousands of properties in several market areas and using a single property approach is not feasible.
- A BPO does not reflect the actions of institutional buyers who are typically making upfront capital improvements to the home to make it rent-ready at the highest achievable rate.
- Institutional owners use appraisals to report values to their investors periodically. By employing a DCF, they can measure and benchmark the performance of one SFR portfolio against a larger data set of portfolios or even different property types. This is impossible using BPOs.
Our white paper explores the benefits of adopting the Discounted Cash Flow (DCF) technique to determine the market value of SFR portfolios.
Broker price opinion
Discounted cash flow
|Executed by a real estate broker||Executed by a real estate appraiser|
|Results in the probable selling price to an owner-occupant||Results in the cash layout to achieve the desired ROI|
|Doesn’t reflect the income-producing nature of the asset||Mirrors the decision-making process for income-producing assets|
|Values one property at a time||Values a portfolio of properties together|
|Unique methodology to single-family rental homes||Allows for comparison between SFR investments and other asset types|
Leading with technology
Our dedicated SFR team provides valuation services for over 5,000 SFRs every quarter, utilizing a proprietary data platform that analyzes over 1,600 data points for every property. It can evaluate entire portfolios on national, MSA, state, county, city, and zip code levels.
This online platform can evaluate entire portfolios on national, MSA, state, county, city, and zip code levels.
- Portfolio Performance
- Geographic Allocation Comparison
- Key Performance Indicator (KPI) Comparison
- Summary of Valuation Assumptions
- Comparable Operation (Income and Expense) Metrics
- Regression Analysis
- Metrics Summary
- Property Price Index
- Rent Index
Contact a qualified professional
Our multi-disciplinary team of professionals brings a wealth of industry experience and unparalleled data-driven insights, providing the clarity you need to make informed decisions.
Exploring the growth in single-family rental
Mar 1, 2021
Future trends, land bubbles, and institutional capital.
The institutionalization of Single-Family Rentals
Nov 13, 2020
Single Family Rentals (SFRs) have quickly become a desirable addition to a well-rounded investment portfolio.
How the Great Financial Crisis accelerated the institutionalization of Single-Family Rental
Dec 7, 2020
We've seen a rise in investor purchases from 7% to 10%.