Greetings, and welcome to the Invitation Homes Second Quarter 2020 Earnings Conference Call. All participants are in listen only mode at this time. As a reminder, this conference is being recorded. At this time, I would like to turn the call over to Greg Van Winkle, Vice President of Corporate Strategy, Capital Markets and Investor Relations. Please go ahead.
Thank you. Good morning and thank you for joining us for our Q2 2020 earnings conference call. On today's call from Invitation Homes are Dallas Tanner, President and Chief Executive Officer Ernie Freedman, Chief Financial Officer and Charles Young, Chief Operating Officer. I'd like to point everyone to our Q2 2020 earnings press release and supplemental information, which we may reference on today's call. This document can be found on the Investor Relations section of our website atwww.indh.com.
I'd also like to inform you that certain statements made during this call may include forward looking Statements relating to the future performance of our business, financial results, liquidity and capital resources and other non historical statements, which are subject to risks and uncertainties that could cause actual outcomes or results to differ materially from those indicated in any such statements. We describe some of these risks and uncertainties in our 2019 annual report on Form 10 ks, our quarterly report on Form 10 Q for the period ended March 31, 2020, and other filings we make with the SEC from time to time. Invitation Homes does not update forward looking statements expressly disclaims any obligation to do so. During this call, we may also discuss certain non GAAP financial measures. Find additional information regarding these non GAAP measures, including reconciliations of these measures to the most comparable GAAP measures, and our earnings release and supplemental information, which are available on the Investor Relations section of our website.
I'll now turn the call over to our President and Chief Officer, Dallas Tanner.
Thank you, Greg. I hope everyone today is doing well and staying safe, which continues to be our top priority at Invitation Homes. Presidents are choosing the Invitation Homes leasing lifestyle now more than ever, We believe we are safely delivering what customers are asking for with exceptional execution. I'm proud of what we've led with Genuine Care through the pandemic And it's showing up favorably in both our resident satisfaction scores and our financial results. AFFO per share increased over 9% year over year in the Q2.
Blended rent growth accelerated sequentially each month of the quarter. Of 97.5%, while at the same time helping to drive controllable costs and reoccurring CapEx lower year over year. Rent collections also improved over the course of the quarter with June July collections neared historical averages. These positive trends in our business supported by the essential nature of our product, the location of our homes and the stability of our resident base Also gave us the validation we were looking for to resume acquisitions in June. I'm very proud that our teams have been able to accomplish all of these things Over the last several months, while prioritizing the safety of our residents, associates and communities above all else, And while being there to help some residents through difficult financial circumstances with payment programs, let me expand on what we're doing from a safety perspective for the well-being of all of our stakeholders.
First, we continue to leverage self show technology for leasing tours. As a reminder, this technology is not something new we had to implement. We have been successfully offering self showing as an option for years. Today, our self show capability is not only helping to keep agents and prospective residents safe, It's also serving as a competitive advantage in the leasing market. With respect to occupied homes, we have implemented optionality We continue to address emergency work orders as we have since the beginning of the pandemic.
And in June, we resumed providing non emergency service to residents As appropriate on a case by case basis, in providing service to residents, our teams and partners follow a strict set of safety protocols on which associates have been trained. Our procurement team has also worked hard to secure PPE and we are maintaining a 3 months supply of masks, gloves and hand sanitizers. Finally, we continue to focus on ensuring that associates who are able to work to associates designed to promote their health and well-being. In being thoughtful about these measures, we've been able to run our Nearly as efficiently in the current environment as we did with our offices fully open. As we move forward from here, We will continue to stay nimble in the present to safely provide high quality homes and genuine care to our residents, while at the same time pursuing growth toward a bright future.
We remain bullish about the long term. We see a significant pipeline of demand moving towards single family rental over the next decade with over 65,000,000 Americans aged 20 to 34 years old and we believe single family housing supply is unlikely to be sufficient to meet the demand that these demographics create in our markets. The ripple effects of COVID-nineteen seem to be intensifying a shift in preferences towards single family space Approximately 30% of the over 500 survey respondents who moved into our homes in April May moved from denser urban areas to our home and approximately 30% said COVID-nineteen increased their desire to live in a single family home versus an apartment or a townhome. On top of organic growth and accretive acquisition, we are also pursuing initiatives like value enhancing CapEx investment and ancillary service expansion to further enhance our resident experience, portfolio and returns. As we pursue this long term growth opportunity and as we navigate the near term COVID environment, there are 3 key differentiators that we think contribute to our advantage.
The first is the location of our homes and the areas we are currently investing, infill neighborhoods and high growth markets The second is our scale and market density with almost 5,000 homes per market. That scale is nearly impossible to replicate and is a key driver of our efficiency and the real time market intel we derive from our portfolio. 3rd is our focus on being local and leveraging on the ground teams in our market in collaboration with centralized support. This enhances our control over asset quality and the resident experience and is fully possible with the scale and the people we have in place. Thank you all for supporting us as we continue to put these competitive advantages to work for the benefit of our residents, Associates, communities and investors, our mission statement is together with you, we make a house a home.
Demand for our product is as strong as it has ever been and we will continue to meet that demand by leaning on our core values of genuine care and standout citizenship to make a house a home regardless of what may come our way. With that, I'll turn it over to Charles Young, our Chief Operating Officer.
Thank you, Dallas. First, I want to say thank you to our field and the team. I knew we had a great team before the pandemic, But what I've witnessed over the last several months has proven just how remarkable our associates really are. They've seen a lot of change come their way, But I've never wavered in their commitment to Generim resident care. That commitment was evident in our 2nd quarter operating results, which I'll cover now.
Same store average occupancy in the 2nd quarter was 97.5%, up 80 basis sequentially and up 100 basis points year over year. Average rental rate increased 3.7% year over year in the second quarter. As a result, gross rental revenues increased 4.7% year over year. Partially offsetting this were two factors related to COVID-nineteen. The first was an increase in bad debt from 0.4 percent of gross rental income in the Q2 of 2019 to 1.9% in the Q2 of 2020, which was 150 basis point impact on same store core revenue growth in the quarter.
The second was a significant decrease in our other property income, which was 107 basis point impact on same store core revenue growth in the quarter, primarily attributable to our non enforcement of late fees. As a result, overall same store core revenues grew 2% year over year in Same store core expenses increased 1.3% year over year. Net of resident recovery same store controllable expenses decreased 4.2%. The majority of the year over year decrease in controllable expenses was due to improvements in turnover costs, largely attributable to lower resident turnover rates. Fixed expenses in the 2nd quarter increased 4.8%, primarily due to higher property tax.
This resulted in a 2.3% year over year increase in same store NOI. I'd now like to expand on leasing trends and revenue collections. Starting with leasing activity, the strong trends we saw at the start of the quarter have The beginning of April and new lease rent growth has picked up considerably during peak leasing season. In June July, new lease rate growth was 4.6% and 4.9%, respectively. At the same time, days to be resident early 12 month basis.
Renewal rents increased 3.5% in the 2nd quarter and 3% in July. This resulted in same store blended rent growth of 3.3% in the 2nd quarter and 3.7% in July. The combination of lower turnover and lower days to be resident continues to result in record high occupancy. In a typical year, we see occupancy decline seasonally in the But this summer, we have seen occupancy rise. In July of 2020, same store occupancy averaged 97.8 Furthermore, 14 of our 16 markets had average occupancy above 97% in July, and 8 of our markets had average occupancy above Next, I'll cover revenue collections, which have held up well since the beginning of the pandemic and improved further over the course of the second quarter.
For context, pre COVID, our total collections in a month represented 99% of billed revenue on average, With 96% representing payments of current month's rent and 3% representing payments from past due rents from prior months. In each month from April through July, we have seen payment of current month's rents amount to approximately 92% of billings compared to 96% historical average. As the pandemic has gone on, we have seen greater number of residents catch up on delayed payments from prior months. As a result, our overall collections as a percentage of monthly billings increased from 94% in April to 96% in May And 97% in each of June July. This compares to a historical average of 99%.
I'll close with a few remarks about how we're planning for the road ahead. We do not know what the future holds with respect to the spread of COVID-nineteen, But we do know that it is our job to safely provide an outstanding experience for our residents and ensure that they feel our genuine care regardless of the obstacles. We've done so in the past during natural disasters and we're doing so now during this pandemic. The key is to stay nimble and we're focused on leveraging the power of our people and our platform to adapt to future changes that are sure to come our way. With that, I'll turn it over to Ernie Freeman, our Chief Financial Officer.
Thank you, Charles. Today, I will discuss the following topics: balance sheet and capital markets activity investment activity Financial results for the Q2 and thoughts concerning the second half of twenty twenty. With respect to the balance sheet, We improved our already strong liquidity position from last quarter. As of June 30, we had almost $1,600,000,000 in available liquidity, No debt maturing before 2022 and over half of our assets unencumbered. In the Q2 of 2020, issued and sold 16,700,000 shares of common stock for net proceeds of $448,000,000 We used $150,000,000 of the proceeds to repay the full balance outstanding on our revolving credit facility.
We expect to use the remaining proceeds primarily to acquire Holmes. By funding acquisitions with proceeds from our equity raise, As well as cash flow from operations and dispositions, we have the opportunity to achieve accretive external growth at the same time that we reduce leverage on our balance sheet. As a reminder, we entered 2020 buying homes at a pace of approximately $200,000,000 per quarter. Our acquisition volume in the Q2 was $46,000,000 as we temporarily paused the sourcing of new acquisitions in mid March to monitor the impact of the pandemic. We have been very pleased with the resilience of our business since then.
Significant liquidity, no near term refinancing needs, As a result, we resumed sourcing new acquisitions in June. While for sale inventory levels remain tight, we have been successful in finding compelling acquisition opportunities by leveraging the advantages of our in house local investment teams and proprietary Acquisition IQ technology. Doing so, we've been able to ramp up our buying to a pace similar to pre COVID levels. We also continue to sell homes in accordance with our 2020 disposition plan. In the Q2, we sold 416 homes that did not fit within our long term strategy for gross proceeds of $114,000,000 Next, I'll cover our financial results for the Q2.
Core FFO and AFFO per share for the Q2 increased 4.4% and 9.4% year over year to $0.32 and $0.27 respectively. These results were driven primarily by higher same store NOI and lower recurring CapEx. The impact of bad debt is included in both our core FFO and AFFO results. I'd like to take a moment to explain our policy for recognizing bad debt on past due amounts. All rental revenues and other property income For both our same store and total portfolio, our reflected net of bad debt.
We reserve residence accounts receivables balances aged For all receivables balances aged greater than 30 days, we reserve as bad debt 100% of outstanding receivables from the resident, less the amount of their security deposit. For the purpose of receivables aging, charges are considered due based on the terms of the original lease, not based on any payment plan created. In other words, any past due rents that have not been paid that do not have a security deposit Balance on hand to offset them are not recognized as revenue in our P and L, regardless of whether a payment plan has been negotiated with a resident. Those rents are later collected and will show up in revenue as a good guy in the period collected. We view our financial performance to date as a testament to the resilience of our model that is well positioned compared to many other real estate types for the world we are living in.
We are pleased with the prospects for our business going forward, as well as how the pandemic may continue to evolve. That said, we did want to share some thoughts about how we are thinking about the second half of twenty twenty comparing to our just First, let me discuss items impacting revenue. In the Q1, we recognized 40 basis points of bad debt. In the 2nd quarter that grew to 190 basis points. If we continue to collect at approximately 97% of our billings per month, In the Q2, late fee income fell by a little over $3,000,000 compared to last year.
At this point, we continue to experience similar declines lower turnover and days to re resident, which were the 2 key drivers of our record high occupancy in the first half of twenty twenty. As Charles mentioned, Average occupancy was 170 basis points higher in July of this year versus last year, an excellent start for the second half of twenty twenty. In addition, with more clarity in the near term, we continue to see solid growth in both our renewal and new lease rates over expiring leases. Regarding expenses, I'll remind you that our controllable expenses usually have some seasonality associated with them. We would expect our Q3 to have higher repairs and maintenance and turnover As we previously discussed, we are back in the market making offers on home acquisitions.
Typically, acquisitions in the second half of the year have minimal financial impact to the current year's results due to the time it takes to complete our initial renovation of an acquired home and for the 1st resident to move in. Below the NOI line, we expect property management and G and A combined to be about 0.0 $0.005 higher in each of the 3rd and 4th quarters compared to the 2nd quarter. Finally, with respect to financing costs, we expect interest expense to be about $0.01 higher in each as compared to the Q2 when you take into account our June issuance of 16,700,000 shares. Supplemental Schedule 2A includes share count information of June 30th. I'll close by reiterating how proud we are of the way our corporate and field teams have executed thus far in 2020 And how great it is to see the positive impact we are having in our communities.
We have a resilient business and a first rate team of associates. Are pleased with our strong liquidity position, the quality of our real estate and the strength of our resident base. We are staying nimble to position our residents, Associates, communities and investors for success in both the near term and long term. With that, let's open up the line for Q and A.
We will now begin the question and answer session. Our first question will come from Sam Cho with Credit Suisse.
Hi, guys. I'm on for Doug I mean, Ernie talked about the non enforcement of late fees. I think Charles did too. But I'm just Kind of wondering at this point how you're thinking about those resident friendly initiatives now versus when we started the pandemic? And then going back to that late fee, does 2Q kind of offer that good run rate throughout the pandemic?
Yes, this is Charles. Thanks for your question. So just going back to where this thing started with the pandemic in March, We waived all of the late fees for April, just trying to be thoughtful with our residents. And then from there, we kind of took it on a month by month basis And try to see how it all played out. So come May June, we started to slowly re But really it was only with residents who we hadn't had a chance to interact with and even when they did call us many times, we would Waive those late fees that would take them off the ledgers.
The whole goal really was to try to get The communication going with our residents and make sure that we were interacting with them and working with them so they can stay in their homes. When you look at to your point, when you look at landscape, about a third of our homes fall into some form of restriction in regards to running late fees, and we're taking a very conservative As you know, it's a changing landscape and things are being extended. And so we're taking more of a conservative stance and We're keeping an eye on it. And like we said, we're still working with our residents if they reach out to us. Our main goal is to make sure that we're keeping our residents in our homes and trying to work with those who
Got it. Okay. That's really helpful. And we've seen collections normalize from April to July. I'm just wondering if there's any delays in that second stimulus package by Congress.
Do you have a Sense of how much of your resident population might be
affected? It's hard to see, have full visibility into that. We've liked our process that we've been able to stabilize, but it's really hard to see what it's going The vast majority of our residents have been paying on time and continue to. So we'll keep an eye on it, but we like how we've been trending so far.
Okay. Thank you so much.
Our next question comes from Rich Hill with Morgan Stanley.
Hey, good morning guys. Dallas, maybe this is just a strategy question for you. Look, it sounds like you're ramping up Acquisitions, you like the markets that you're in. It looks like most of your markets did really well. Houston was a little bit weaker.
But could you maybe just Talk us through how you're going to acquire homes, given you already have a lot of density in your markets and there seems to be even more competition for single family homes on the other side COVID-nineteen and prior to COVID-nineteen. So how are you going to do it and what markets do you like best?
Yes. Hi, Rich. A couple of points I'd like to make in response. First would be, you're right that the market is relatively tight. There's limited supply, but even on that basis, we'll still see somewhere between 5,500,000 and 6,000,000 transactions over the next year.
So in that environment, we're pretty good at being nimble and being local and on the ground and being able to stay flexible. We're also, as you know, pretty agnostic in terms of which channel they come through so long as they fit the profile of the property type That we want in the portfolio long term. We've actually had quite a bit of success in the one off space, being able to stay active locally in the markets, Builders where we're buying 5, 10, 15 homes at a time. And so while you're right in that, it's a very competitive environment Given the lack of supply, the fact that we've been as active as we have been for the past 8 years and been able to run our offense, so to speak, In the same fashion, we picked up right where we left off in terms of just slowing down our pace and getting right back into it. Ernie talked about Our pace being in line with pre COVID levels and I would expect that we can certainly deploy capital in a meaningful way in that pace in today's environment.
Okay. So any thoughts on specific markets or you're just going to Let it come as it may.
Well, we've said this before and I should have said this in response to your first question, so my apologies, but we manage 12,500 Homes in Atlanta as efficiently as we manage 3,500 Homes in Seattle. And so for us, we still feel like In the majority of our footprints, we have the additional capacity to expand our scale and maybe even get better density. With that comes better services, Better understanding of how the portfolio is behaving and ultimately driving decision making toward what the customer wants. So the Sunbelt markets, the west part of the western coastal parts of our markets are all parts of the portfolio that we'd like to see some expansion in. We love what we have in Atlanta, could even have more in a market like that if it made sense.
But there's not it hasn't really been anything, Rich, I would say that we should shift our strategy. I mean, the demographics in the household formation in our Sunbelt and coastal markets Are still 2 times the national average in terms of the household formation. All the fundamentals are saying that growth is going to continue to happen in those parts of the country. So we're bullish On continuing to build out our footprint in these markets.
Got it. Thank you, Dallas. And Ernie, just a quick question for you. I appreciate the thoughts on 2H. What I heard was that fundamentals remain very solid, maybe not accelerating from what we saw In 2Q, but very solid.
But I also look at your bad debt policy and it strikes me as quite conservative. So is it fair to say fundamentals are going to maintain from where they are, but maybe you'll get a little bit of bad debt back As you collect unpaid rent?
Yes, Rich, I hope that's the case. There's always seasonality in the business, but seasonality is probably going to be a little skewed this year just because What's been happening around the pandemic, as you saw, we saw accelerating fundamentals on the new lease side. And it's rare for us to have increasing occupancy through the summer months because We have higher turnover there. So that's all pointing favorably to us. And with our bad debt policy, we gave a lot of consideration around what to do with folks who are on payment About a third of our receivable balances are on payment plans and most of those residents are paying.
And because the way our policy Today, we are reserving for future hopefully payments from those folks. If we have another 3 or 6 months worth of history, which we will as you're around that and we People continue to do well on those payment plans. It will certainly give us pause and reason to consider revisiting our policy with around bad debts as we see those people We wanted to be a little more conservative at this point in time because we only have a couple of months of history at this point. The pandemic is only about 4 months old. But we'd like to think we took A conservative view on it and that maybe we'll do a little bit better if people continue to make good on their payment plans like we're seeing the vast majority of folks do.
Our next question comes from Haendel St. Juste with Mizuho.
So my first question is with occupancy and retention at all time highs, new all time highs And favorable demand and pricing power clearly at hand. You guys are in a very advantageous position. What's the operating strategy from here? Are you inclined to Continue to push rates more aggressively and perhaps later into the year than you typically would. As you said, we have 98% -ish occupied
Hey, Hendo. Charles here. Thanks for the question. We early on in the pandemic, we knew we were solving for occupancy. We wanted to make sure not knowing what the future had, we ran concessions early, got our occupancy up and then we saw that demand is here For our product and so we continue to slowly move those away.
So by May, we were fully Free of concessions and we began to see new lease rate growth. So when you look at the results for June July, 4.6%, 4 We're seeing good acceleration on the new rate growth and our high occupancy allows us to have that position. Now on the renewal side, we've been a bit more balanced knowing that residents are some of our residents are in challenging positions and we showed some flexibility in working with them. So you see our renewal rate is positive, but not as high as they've been historically. But we're starting to push that a bit now.
And so our ask Going into August is close to 5%, September over 5%. So we're finding that balance. Again, it is a seasonal business and we're watching this We're getting towards the end of the peak season. So we'll continue to monitor. We have our field teams and our revenue management teams are great, Keeping our eye on what the dynamics are in each submarket.
And right now, we're always trying to find that proper balance and taking into account what's going on with the pandemic as well. Our portfolio is in strong position.
That's great, Charles. And a clarification on that last point. You said you're asking 5%. What are you generally getting or what's that spread been? Just curious on how that's translating into what you're receiving or expect to receive?
It's hard to predict in this market. Usually, we get 50 basis points To 100, but in the pandemic, we're still working with families, so it's hard to put a specific number on it. September, our ask was closer to 5.5. And We're going to be higher than the 3%, 3.5% we've been in the last several months, as we're coming out at a higher half. So We'll have to see.
The spread is hard to predict during this period, but typically it's within 50 to 100 basis points.
Got it. My second question is on The days to re residence, can you break that down into 2 pieces, the turn times and then the time to lease? And then I guess I'm curious, if you sit here at 98% How much higher can it get from a turn time perspective? Are you getting close to that The more number where 98% just structurally has less upside or how should we think about the potential upside from here on the turn times, etcetera?
Yes. So taking your first question your second question first, we always thought that this business could be a 97% occupancy business as we looked at Trending our turn times, our turnover down into the 25% to 30%. We've been trending Down that way over the last kind of several quarters, which has been really positive. And as we get days of re resident into the 30s, Just do the math and that's going to have you at a number that's where we are today. Now it's happened a little faster given the pandemic.
So that's a good thing, and we're going to continue to pay attention to that. Daisy Maeveres has been a real bright spot for us. It was a focus for us Since the beginning of the year, we knew we had an opportunity there. And as I said, we're quarter over quarter, we're down 5 days and we continue to have that benefit in July. We're down closer to 10 days in July.
In July, we're down closer to 10 days in July. And you break down the components. We've been turning how homes We've made really good improvement this year at about 10 days and the remainder has been the move in period. So it's been healthy. The teams are doing all the right things.
Can't thank them enough. Really impressed by Their ability to work through this, and as they look at it, it's been a combination of pre leasing and getting rid of aged inventory and really pricing things appropriately. So I thank them for all the hard work and we'll continue to push.
Our next question comes from Nick Joseph with Citi.
Thanks. I appreciate the color at the beginning of the call about the new Residents moving from more dense urban areas. When you look at those residents, is there anything different in terms of either their age or if they have children Relative to your typical residents?
Yes. We haven't really seen any material In regards to the demographics, nothing has really stood out there. We did this survey, as Dallas mentioned in his remarks, To figure out where people were trying to come from. And anecdotally, there is a demand to have more space. And that's been our long term demographic, has been over half of our residents are families, they have Pets, and so they're appreciating the extra space.
And I think during the pandemic, the social distancing is a benefit as well. And about just shy of 30% were coming from the cities and many of them are just looking to try to have that space. So But in terms of the demographic change, we haven't seen it. We'll continue to monitor, but it's still early in the process.
You wouldn't expect any kind of turnover differential as those leases expire that it may be more of a temporary renter versus what you traditionally see?
Don't think so, but we're going to watch that. At our current turnover rates, our residents are staying on average 3 years It seems to be expanding. And if we continue to do what we do and give them a great resident experience with Genuine Care And we know that we have homes in great neighborhoods and we're good school districts. All that is why residents Wannabe in our homes and they're staying for a long period of time. So we'll continue to monitor and as we said demand has been strong.
So we'll watch that as we go.
And Dallas, you talked about the transaction market. Maybe just the flip side of that potentially asset sales, you've obviously announced Exiting Nashville, you're almost out of there. Are there any other markets that you may potentially exit? I mean, you look at the Midwest market, Chicago and Minneapolis, you have Your homes that you do in most of your other markets?
Sure. We're really comfortable with what we own today. We like the footprints that we have. You're right in the Midwest over the last couple of years. We have cooled down the size of our portfolio, specifically in Chicago.
Some of that comes with some of the local expertise that we have that center around the difficulties in operating properties in certain parts of that market. But by and far, largely, Nick, we're pretty comfortable with what we have. I like the footprint that we've got and we'll obviously do some Calling of non performing assets, maybe some geographic dislocation that we're always working on. But Now, by and large, we're pretty comfortable with Laurent. I wouldn't expect us to do anything wholesale, at least the way we're thinking about things right now.
Our next question comes from Jade Rahmani with KBW.
Thanks very much. I was wondering if You're actively exploring any joint venture opportunities in adjacent home types or markets in order to expand the platform at scale And accelerate growth.
Good question, Jay. It's one that we get from time to time. I think we talked a little bit about this Over some of our meetings at NAREIT. I think ultimately, we are very happy with the smaller equity offering we did Earlier in the quarter, it's given us some additional flexibility to go out and grow our portfolio. JV opportunities, we get inbounds on some of those from time to time and certainly something that we think about in terms of having an added resource or an added tool To maybe go out and acquire more properties or be maybe more active in parts of markets where we feel we have sufficient exposure on our balance sheet.
So Something that we'll continue to consider and think through. But as of right now, we're in a really good position. We've got plenty of dry powder, continue to grow our portfolio in parts and markets That we think lend themselves to really solid risk adjusted returns. So we're in a good position.
Thanks very much. Wondering to find out if you could also provide any update as to the company's property management platform. Is it at this point transition to a fully proprietary platform or would you describe it as a combination of services for multiple vendors?
Well, we've been internal from day 1. So we put an emphasis as we built the business around making sure that we were 100% internally managed and all of our folks that center in and around the management and the tenant relations were all internal. Now we certainly use vendors And we use vendor networks to do about half of our service orders in today's environment, Jade. So, the short answer would be, we are an internally managed Platform, but we definitely do use vendors on the outside, particularly around roofs and HVAC and some of those things In terms of heavy or less, but most of our small maintenance work orders and everything that we do through ProCare are all handled internally as well.
Thanks very much.
Thanks, Jade.
Our next question comes from Wes Golladay with RBC.
Hey, good morning, everyone. I just want to go back to that resident move in survey. It looks like people are moving in from urban environments, but I was just wondering Any regions stood out to you? And did you see a lot of out of state migration? There wasn't really any Standout per market, it was we were surveying recently moved in residents and so it's a Kind of a short burst of a survey.
And so no real standout in regards to certain markets showing More of a propensity than others. But overall, I think there's been strong interest and you can see it from our all demand that's in the market right now. And so we'll stay there. Okay. And then just want to go back to the bad debt reserve.
Was that heavily skewed towards June? Because it seems like residents are just a little bit slower, but kind of near normal levels. Is that the correct way to look at it?
Well, I guess, Wes, we look at
it on a quarterly basis. And so you can see our collection activity improved throughout the quarter. And we're generally running about the same amount in the current bucket, 0 to 30 buckets. It's hard to say it's Towards June, but certainly as you get to June, your May receivables are now that are still outstanding or eligible for bad debt as are your April. So we saw kind of earn in throughout the period.
So it's hard to say skewed one way or the other. If we continue to collect at about 97%, it certainly feels like we're going to have bad debt kind of in that range that you saw in the And hopefully we can do better than that. But with 4 months of data that's how we can look at the world today.
Okay. Thank you.
Thanks, Wes.
Our next question comes from Alex Talmas with Zelman and Associates.
Given SFR's outperformance during the pandemic, there appears to be renewed interest from During the pandemic, there appears to be renewed interest from traditional real estate funds in the space. What is your impression of increased competition from private equity and potential consolidation of some of the more midsized players?
Yes, the industry continues to evolve and I think we're still in this moment of new capital coming into the space. We grew with everything that you're saying. They're trying to build portfolios and trying to replicate what companies like Invitation Homes have already done. We welcome it at the end of the day because we think having quality of choice and more companies offering professional services Our good thing for residents generally across the country. I think this will be a good value added industry and there's a lot of Healthy demand out there that wants to take advantage of it.
Selfishly, the way we think about the business, we also think that over time and distance, It may lend itself to some consolidation opportunities. We believe we can run a portfolio as well or better than anyone out there And we think we can offer a customer experience that's second to none because of our scale. So I think all this new capital coming into the space over
And I know you guys are channel agnostic, but right now what would you say is the most abundant channel for your Acquisition pipeline?
We're very active in the one off space, working with iBuyers, working with People that are selling their home, I think those markets continue to get more and more efficient. So it doesn't feel right. First of all, let's be clear, there's not a lot of distress in the marketplace, Which is a healthy sign for housing so far. So it is the traditional transaction side of things. And then I think there's opportunities to do more with builders along the way and find ways redevelopment of infill locations that would fit our portfolio needs as well.
So, the most active being the traditional one off sales right now.
Got it. Thank you very much.
Our next question comes from John Pawlowski with Green Street Advisors.
Hey, thanks a lot. Charles,
as some of your local economies have had a walk back reopening plans in recent weeks and recent months, Just curious if any specific markets are starting to show some fatigue either in renewal negotiations on rate or Collection trends, obviously, very strong across the portfolio, but just any markets you're concerned that's standing out heading into the summer?
Yes. This is Charles. Really, we haven't seen anything that gives us any major concern. Like you said, across the board, we're doing really well. And What I did do is take a minute to look at some of the states where we've seen an increase in the number of COVID cases, which is Arizona, Texas, Florida, a little bit of California.
As I dug in there, occupancy blended rent growth are all accelerating from June to July, which is positive. The renewal rates to your question have continued to look good year over year in Q2. All of them were up. Phoenix is at an all time high. July seems to be holding up really well.
New lease growth in Phoenix is Over 9%, NorCal 8%, SoCal 6%, even in Florida, we're 5.6% for July new lease growth. And then the other piece I looked at is on the collection side. And all of those markets, Arizona, Texas, Florida specifically Collected more revenue in July versus June. California is the exception, but we know that we're dealing with some more of the regulatory challenges, but it's not far off. It was like really flat kind of year over year, 99% of what it was in June versus July.
So really haven't seen much. We're Still seeing overall good demand and but we're going to continue to monitor as we watch this thing play out.
Okay. That makes sense. And then just curious for your longer term outlook, 3, 5 year outlook on South Florida. It's been a market that's lagged The rest of your portfolio, even pre COVID. So if you could prune your South Florida portfolio today, Overnight, what percentage of the homes would you sell?
Eric, I'll take this one. Well, first of all, South Florida is an interesting market to your point. I mean, it tends to kind of flow in cycles as you well know. We actually really enjoy the size of the portfolio we have. It makes it very efficient.
It's been a little lackluster in terms of rate growth and There's some challenges in a couple of municipal areas. We have been calling that portfolio over the past couple of years, kind of fine tuning it to some degree, similar to what we've done in Chicago. We love the growth profile, we love the inbound when things are good. I don't know what the exact right size might be John over time and distance. We're certainly still recycling capital and occasionally buying in South Florida.
We love the parts of North Dade and South Broward County. We've had a lot of success In and around Jupiter and some of those submarkets as well. So I believe it's a market we're going to be active in for a long time. And you might see us over time maybe Slowly call parts of that market just to make it a bit more efficient, but nothing worries us about the scale, getting that we're also a little bit Underwhelmed by some of the growth that we see on the rate side, but it feels like our teams are doing a really good job there. We've actually seen all the efficiency metrics that Charles talked Earlier, it gets better and better in that market.
So I like our chance. We probably want to run that portfolio for a bit longer before making any Kind of definitive thoughts around what would or wouldn't do there.
Our next question comes from Oluya Azkaban with Bank of America.
Hey, everyone. Thank you for taking the questions today. I just have 2 quick questions. So just following up on the renewal rate. So you're saying that You guys don't really have any markets right now where you're limited on renewal rent increases like the multifamily guys?
Yes. We do have certain markets and we're following all of those rules where it does stand out, Washington being one of them. California has some limitations as well, but that there and that is reflected in some of our numbers. But Generally, we are going out at our ask and then allowing our local teams to work directly with the residents to try to get to a Resolution networks for both of us, but we're going to follow every time that there is any type of restriction that's either put in locally or by the state.
Got it. Okay. And then just a quick question on move outs. I know turnover is really low and occupancy is really high, but Have you seen an increase in move outs for homeownership specifically during the quarter? With mortgage rates really low, is there any more interest in that?
Yes.
Historically, we've been trending in the mid-20s and we saw this quarter Q2 a slight uptick, it's 27%, so it's not a huge jump. And obviously with interest rates, as you mentioned, at historic rates, we'll continue to monitor that, but it's been in our benefit.
Got it. Okay. Thank you. Our next question comes from Rick Skidmore with Goldman Sachs.
Good morning. Dallas, just a quick question just with regards to how to think about the capital Cycling, selling more homes than purchasing, how you think about A, how that might trend as you go forward and B,
how we should think about
Yes, great question. So on your first point, I would say it's important to understand that we rank every one of our homes in the portfolio on an ongoing basis. And there's a number of factors, but they all basically fall into 2 buckets. We rank our assets based on where they're located, which is, As you might imagine, pretty hard to chain wherever home is and it currently sits today. And then we also rank our homes on an asset score that basically ties into the fit and finish and the property characteristics that are associated with that property.
Our asset management team does a really nice job Of going deep at the market and also at the submarket level, we've built our portfolio into about 220 submarkets, Geographic clusters that we measure performance in and around. And so as part of our ordinary course, we'll go through those properties And basically hold ourselves accountable to their performance, both from an operating perspective and also from a return Perspective, how do we think about the growth profile for those assets? Now there's a lot of reasons why you would sell a home. 1, you might sell a home because quite And to your second question, on a financial basis, it may make sense to sell that home back into the end user market, recycle capital Reinvest in parts of the market where it can make more sense. The second reason might be that geographically we feel like we either have too much concentration and We'd like to spread that risk as well for a variety of reasons.
So our asset management teams as part of our capital allocation plan every year will go through that process. And we have kind of a general property watch list of things that we're looking at for potential reasons as to why we might sell. And then they're also coming up with recommendations around Where we think we need a bit more scale and that's all part of that recycling process to answer your question.
So, hey Richard, this is Ernie. So, I think With the equity raise we did in June, it gives us the opportunity in the second half of the year to pivot to net external growth. As Dallas talked about, we're always going to be a seller. We're always
going to look to try to
take those ask those homes that just don't make sense for us long term. And we've been selling at a pretty steady pace here for the last few quarters, plus or minus $75,000,000 to $100,000,000 worth of homes. But with the equity raise and having $600,000,000 of cash on our balance sheet as of June 30, Yes. As we talked about in the prepared remarks, it gives us a chance to ramp back up our acquisition pipeline to where it was pre COVID, which about a couple of $100,000,000 per quarter. So that hopefully puts us in a position in the second half of the year to be a net acquirer of homes versus or in the first half of the year as a little bit more of
And if you were to maintain kind of the net seller sort of Perspective that you've been running out over the last couple of quarters, is that how dilutive to the near term earnings or how do you think about dilution accretion in that trade off of the capital recycling?
Yes. The good news for us, Rich, where we're selling our assets and typically an asset, when we're selling it to an end user, we'll sit bank it on our books for anywhere between 2 to 4 months just to go through the normal sale process. The cap rates we sell out to end users typically are well below 4%. It can be in the 3% to 4% range. A lot of things that Dallas talked about, the fact the house might be worth more to an end user than is a rental property.
Whereas when we go to buy homes, We're typically buying today kind of in the mid fives cap rate and that's in a market where there isn't distress. And that's where we've been buying for the last So our capital recycling, unlike in other real estate types, even though we're improving the quality of our portfolio and getting in better locations, tends to be a net activity for us from an earnings perspective, because we have the opportunity to sell assets in 2 ways to end users who may value them differently than an
Our next question comes from Todd Stender with Wells Fargo.
Hi, thanks. Just to get a finer point on Cap rates, you guys have been buying in that 5.4% range last couple of quarters. Do you see that edging lower Due to higher price points over the coming months or maybe rents are rising enough to keep that cap rate at that level?
To Ernie's earlier point, it's been pretty consistent in the kind of that mid fives generally for us over the past couple of years. And we've specifically been pretty picky about what we're willing to put in the portfolio. We're seeing rising rate, which does help to your point, I would expect it to kind of stay in that mid fives. I wouldn't expect that we see any real wholesale or dramatic shifts given the type of home that we buy In the types of portfolio that we manage, it all feels pretty good kind of in that strike zone. And to Ernie's earliest point, One of the questions you answered.
We tend to see some better buying opportunities typically in the back half of the year. Now this year has been anything but typical And housing cycles may extend further in home buying and selling season later into the year, but we'll see we'll manage and we'll watch how the next 6 months Progressing, but generally speaking, mid fives is something that we feel pretty comfortable with.
Okay. That's helpful. And just looking at leverage, you've been using equity lately to pay down the line that's helped your debt to EBITDA level drop into the How much more movement should we see your leverage metrics move?
Yes. I think they're going to more or less hold steady. Using the capital that we raised here in June and more of the capital is going to be used for acquiring assets and for deleveraging. So I think you'll see a steady out and
a lot of it's going
to depend on how EBITDA plays out in the second half of the year, how things like bad debt trend and other like this. Good news, we're good fundamentals and good strong growth otherwise in our portfolio when it comes to rental rate achievement, when it comes to occupancy. So I think we'll continue to see that modest moving down that you've Over the last period of time, and stay focused on that. And if we have if it makes sense opportunistically to be able to try to do something with leverage, we'll Our main focus is going to be to continue to delever through external growth, in terms of you're buying assets unlevered, which is what we've been doing for a period of time here. It takes So while for that to earn in, that's going to be the main focus.
And then the second focus will be hopefully we continue to see positive NOI contribution and EBITDA growth as we move forward.
This concludes our question and answer session. And I would like to hand the call back over to Dallas Tanner for any closing remarks.
We appreciate everybody's interest in Invitation Homes. We hope that everybody out there stays safe and we look forward to talking to you all next quarter. Thanks.