Core Insights - The small and midsize players dominate the investor purchases in the real estate market, particularly through DSCR loans, despite concerns over larger Wall Street-backed firms [1][3] - The DSCR loan market has seen significant growth, with over $44 billion in loans issued in 2022, up from $5.6 billion in 2019, driven by increased demand from landlords and institutional investors [6][12] - Serious delinquencies on DSCR loans have nearly quadrupled in the past three years, indicating financial strain among landlords amid a rental market slowdown [2][8] DSCR Loans Overview - DSCR loans allow landlords to purchase rental properties based on the expected rental income rather than personal creditworthiness, making them attractive for small investors [3][4] - The loans focus on the ratio of expected rental income to mortgage payments and basic expenses, with a preferred coverage ratio above 1 [5][10] - The popularity of DSCR loans surged during the pandemic as borrowing rates dropped, enabling many to capitalize on rising home prices [6][7] Market Dynamics - The Federal Reserve's interest rate hikes and slowing rent growth have created challenges for landlords who took on higher-rate loans expecting continued rent increases [7][14] - The percentage of DSCR loans in serious delinquency has increased, with nearly 2% of securitized DSCR loans facing significant payment issues as of August 2023 [8][11] - Despite the rise in delinquencies, DSCR loans continue to be issued, with over $32.8 billion in loans tied to nearly 89,000 rental homes in 2023 [12][14] Future Outlook - The rental market is experiencing a shift, with a growing preference for renting over buying, which could benefit landlords if rent growth stabilizes [14][15] - However, stagnant rent growth poses risks for landlords, as single-family rents were up only 1.4% year over year in August 2023, marking a 15-year low [14] - The overall health of the DSCR loan market is viewed as a natural adjustment phase, with some experts suggesting that the increase in delinquencies is part of the industry's growing pains [13][14]

Group 1 - Nexus Industrial REIT offers an 8.2% distribution yield, making it attractive for investors [1] - The REIT has an appealing valuation and benefits from the ability to renew expiring leases at higher rates [1] - These qualities position Nexus Industrial REIT as a compelling buy for investors [1]