Understanding the Boom: Exploring the Surge in SFH Purchases in Columbus, OH

Executive Summary:

• Columbus saw more than 53k Single Family homes purchased between 2022 and 2023 a number that represents above 10 percent of all the inventory in the metro.
• Large portfolios are driving a lot of this activity both in absolute terms and relatively speaking. In 2022 and 2023, portfolios with more than 100 units accounted for 18 percent of all new acquisitions.
• To put things into perspective, the same type of portfolios only accounted for 4.7 percent of all SFR portfolio purchases in the same period in Indianapolis, IN, and 3 percent in Nashville, TN, metropolitan areas of similar size.
• In Columbus, this results in neighborhoods with a strong concentration of SFR-held properties. For example, in zip code 43168, one in seven single-family homes is owned by portfolios with more than 100 properties.

In a time of volatile economic environment for real estate it is imperative to understand when market conditions change. As part of our recent analysis on large portfolios of Single Family Homes (SFH) we noticed an uptick in purchases in mid-sized metropolitan areas, with Columbus, OH, taking center stage. We decided to dig further to better understand what is driving this pattern.

Between 2022 and 2023, Columbus witnessed a remarkable surge in real estate activity with more than 53,000 Single Family homes acquired. This represents over 10 percent of the entire housing inventory in the metropolitan area, a staggering number for a metro with 2.1 million inhabitants.

The activity was was largely driven by large Single Family Rental (SFRs) portfolios, defined as collections of more than 100 properties, as they accounted for 18 percent of all new SFH acquisitions. To put this into perspective, comparable portfolios only constituted 4.7 percent of purchases in Indianapolis, IN, and a mere 3 percent in Nashville, TN, both metropolitan areas of similar size during the same span.

Our data suggest that a crucial factor contributing to this surge in SFR portfolio purchases is the Gross Yield Margin in the Columbus market. In six specific zip codes within Columbus, the Gross Yield Margin surpasses double digits, a remarkable metric considering the industry standard hovers around 7 percent. This robust yield is undoubtedly an enticing prospect for investors seeking attractive returns.

The impact of this trend is palpable on the ground in Columbus, resulting in distinct neighborhoods characterized by a strong concentration of SFR-held properties. Take, for instance, zip code 43168, where one in every seven single-family homes is under the ownership of portfolios boasting more than 100 properties. This clustering effect raises questions about the potential implications for community dynamics and the overall housing market in these areas.

As concentration of large SFR portfolios seems to be already established in the central business district neighborhoods of Columbus, portfolios are finding more profitable areas for investment in the Northern and Eastern suburbs of the metro as shown in figure 1.

Will the raising interest rates and the general economic uncertainty slow down the pace of investment in Columbus?

Want to know more about Columbus and other markets, get in touch with us.