Rental Flow Securities?

Forget mortgage backed securities,  the WSJ reports that a new product is bundles of rental streams from real estate and in particular real estate that was owner occupied single family housing but now is a rental unit.  This article interests me because I've been thinking about buying some real estate as an investment.  If my wife and I buy a small home and then rent that out, that's one source of income.  Perhaps a more diversified source of real estate income would be to buy shares of a bundle of rentals and that is what this new security is meant to be.  The problem that the WSJ discusses is what "bond rating" should this investment receive? Is it a "safe investment"?   Fitchs says that it is having trouble finding a statistical model for predicting the likelihood that renters don't pay their rent.  If renters don't pay their rent then a security whose asset is "total rent collected" will be of less value.  So, just as we need statistical models of mortgage default we also need statisical models of the probability that a renter doesn't make a payment.  The only people who would have access to such data are owners of large apartment buildings but this raises an "apples and oranges" issue.   You could use data on rental payments and household demographics to quantify what % of white women over the age of 55 who are renters of an apartment in a multi-family housing complex pay their monthly rent but would this estimate be informative about the probability that a woman with similar demographics would pay the rent for a single family house?   So, I'm puzzled about whether I would prefer to invest in this new asset or be "conventional" and purchase another house and rent it out.

 

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