Article | Intelligent Investment
Investing in Single-Family Housing (SFH): Opportunities and Operational Insights
June 3, 2025 5 Minute Read
Understanding the Single Family Housing investment opportunity
Part one of our three-article series where we explore how Single Family Housing can help the housing crisis.
Read Part 1 HereIn our first article of this series, we explored the emerging opportunities for investing in Single-Family Housing (SFH) at a time when the Government has made housing investment a top priority. Part two delves into the intricacies of operating SFH portfolios, drawing on our conversations with key industry players.
Key Operating Factors
SFH offers significant benefits from an operational perspective, including minimal construction risks and high tenant retention rates. Investors generally trust housebuilders to know the customer from a design and build perspective, allowing investors to focus on enhancing interior specifications like fully tiled walls in bathrooms and fitted wardrobes, post-acquisition. However, some investors prefer larger masterplan schemes with an emphasis on energy efficiency, community design, placemaking, and landscaping, in addition to the physical homes.
Leasing Up
The lower rates of tenant churn in SFH are largely due to the mature and settled demographic attracted to renting it, helping to reduce some of the OpEx. The associated stability of this demographic can also mean slower lease-up rates compared with other rental products, particularly when developments are delivered in phases, with neighbouring homes, amenities, or new schools still under construction. However, the expectation is that tenancies in SFH developments are likely to be longer-term than other urban BTR products.
Professional Management
The SFH demographic is less inclined to move if there are good schools, fast transport links to employment centres, and amenities nearby. In addition to these elements, professional management is crucial for tenant retention.
Most investors have adopted a hybrid management model, utilising outsourced property management whilst focusing on adequate geographical coverage across their portfolios to deliver quality service for tenants.
‘The key to operating SFH is having property managers that are used to working to a high level of customer care.’
Some investors are interested in increasing the level of amenity across their portfolios, featuring American-style clubhouses and crèches, for example, an offering that will require enhanced on-site property management.
Air Source Heat Pumps and Energy Efficiency
Balancing CapEx and OpEx is crucial for investors. A primary operational concern is the high cost of transitioning homes to fully electric systems across portfolios. The adoption of Air Source Heat Pumps (ASHPs), particularly in the mid-market and affordable rental sectors, raises questions about whether tenants will pay the associated premium.
Many investors are committed to acquiring properties with a minimum EPC rating of B, as achieving an A rating often necessitates replacing traditional boilers with ASHPs – a costly exercise.
Zero-bill homes have proven popular amongst tenants, although remain relatively limited in numbers, and investors are cautious about upgrading their portfolios in entirety due to a range of factors including roof type, building orientation, existing energy supplier arrangements, local grid capacity, and long timelines. However, where this has been deployed, landlords have been able to charge higher rents, which mitigates the associated costs. The ability to protect tenants from the risk of future rises in energy costs is also likely to be a positive differentiator for competing investors as the market matures.
Navigating Regulatory Risks
The Renters’ Rights Bill has generated varying levels of concern amongst investors. Whilst some believe they may feel a limited impact, others are concerned about increased court cases as tenants challenge rental increases and Section 13 notices are restricted, even in cases of antisocial behaviour.
‘There is the risk that continued legislation aimed at protecting good tenants from bad landlords has the opposite effect of protecting bad tenants from good landlords.’
To address these issues, some investors may prefer to engage with tenants proactively ahead of the Bill’s mandated two-month notice period to mitigate operational risks.
Conclusion
Operating SFH presents a range of challenges and opportunities, as investors are balancing competing operational needs to successfully manage their growing portfolios. Whilst energy efficiency is important, ultimately SFH provides homes for a renter demographic prone to seek consistency and stability in their living situation. As such, elements like amenities and high-quality property management will be key to ensuring SFH portfolios are as successful for renters as they are for investors.
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