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Buy-to-Rent Investors and the Market for Single Family Homes

Author

Listed:
  • Walter D’Lima

    (Old Dominion University)

  • Paul Schultz

    (University of Notre Dame)

Abstract

We examine the impact of house purchases by large buy-to-rent investors on local real estate markets. First, we present micro-level evidence of positive externalities from institutional entry. We show that returns on repeat sales of properties near purchases by buy-to-rent investors are significantly greater if the repeat sale concluded after the buy-to-rent purchase rather than before. Secondly, we highlight the potential channel underlying such an externality as a supply side effect. Specifically, we show that properties outside the price range normally paid by buy-to-rent investors experienced smaller gains after nearby buy-to-rent purchases. Thus, buy-to-rent investors appear to increase the value of properties in an area by reducing the local supply. Lastly, we document mortgage market effects due to institutional purchases and related supply effects. We show that mortgage use increased after the buy-to-rent purchases of nearby properties and that the increase arises from existing lenders that operate in the market rather than new lenders entering the market.

Suggested Citation

  • Walter D’Lima & Paul Schultz, 2022. "Buy-to-Rent Investors and the Market for Single Family Homes," The Journal of Real Estate Finance and Economics, Springer, vol. 64(1), pages 116-152, January.
    • Handle: RePEc:kap:jrefec:v:64:y:2022:i:1:d:10.1007_s11146-020-09790-5
    DOI: 10.1007/s11146-020-09790-5
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    References listed on IDEAS

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    More about this item

    Keywords

    Institutional investor; Residential market; Housing supply; Mortgage market externalities;
    All these keywords.

    JEL classification:

    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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