Meanwhile, they are aggressively ramping up property purchases in an "arms race" fashion, hoping to build a large portfolio of homes before prices rise even higher. But it takes time to refurbish homes and rent them out, which means occupancy levels in the initial years will be lower. That means lower cash flows and it means that investors buying these REITs will have to wait a couple of years before yields start firming up. In some cities, the conversion of single-family homes into rentals has created more supply than there is demand for rental homes. KBW analysts factor in a 4% annual inflation in rent but it is not clear that all areas can pull off such significant rent increases. A report from online company Trulia in April suggests single-family rents are already flattening in many markets. "Nearly 4 million more single-family homes have been added to the rental market since 2005. This new supply has fully caught up with the increased rental demand during the housing crisis - causing single-family home rents to flatten nationwide," the report noted.