Single-Family Rentals May Be Reaching an Inflection Point
November 17, 2021 | Mack Burke
Mike McKinney started buying single-family homes in Memphis, Tenn., in 1994, just a few years after the savings and loan crisis.
He — with a friend — began with about five homes that year and then gradually bought “one here and there until around 1998 or 2000,” he said.
McKinney, who has worked a full-time gig over the years while doubling as a private landlord and single-family rental (SFR) investor, mostly slowed down his buying until the subprime mortgage crisis hit and crashed the U.S. economy in 2007.
Starting that year, McKinney would go on to buy about 10 homes annually for the next five or six years as the global financial crisis of 2007-2009 unwound itself and lenders began dumping heaps of foreclosed homes off at auction at county courthouse steps.
“I borrowed up to the hilt and bought everything I could buy while the market was down,” McKinney told Commercial Observer. “I had eight to 10 rentals at the time, and, down the block from a house I had [previously] paid $120,000 for, I was seeing them go for $80,000 — and rents weren’t going any lower. I knew they were way below value, I just didn’t know when it’d come back.”
McKinney’s game plan, though, was just a drop in the bucket at that time. While he said he was making “cash offers on the courthouse steps” on foreclosed homes in Memphis, large investment firms — such as Starwood Capital, Colony Capital and Blackstone Group — were essentially doing the same thing, except they were armed with institutional money.
