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Invitation Homes Inc. (NYSE:INVH)
Q2 2020 Earnings Call
Aug 4, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings, and welcome to the Invitation Homes Second Quarter 2020 Earnings Conference Call. [Operator Instructions]

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.

Greg Van Winkle -- Vice President, Investor Relations

Thank you. Good morning, and thank you for joining us for our second quarter 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 second quarter 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 at www.invh.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-K, 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 and 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 in 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 Executive Officer, Dallas Tanner.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Thank you, Greg. I hope everyone today is doing well and staying safe, which continues to be our top priority at Invitation Homes. Residents are choosing the Invitation Homes' leasing lifestyle now more than ever and 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 second quarter. Blended rent growth accelerated sequentially each month of the quarter. Turnover rate and days to reresident continue to be materially lower than prior year contributing to a record high occupancy of 97.5% while at the same time, helping to drive controllable costs and recurring capex lower year-over-year.

Rent collections also improved over the course of the quarter with June and July collections near historical averages. These positive trends in our business, supported by the essential nature of our product, 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 to perform resident move-in orientations and pre-move out visits virtually. While we remain paused on ProCare, proactive home visits.

We continue to address emergency work orders as we have since the beginning of the pandemic and in June, we resume 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 three-month supply of mask, gloves and hand sanitizers.

Finally, we continue to focus on ensuring that associates who are able to work from home are well equipped to do so. And we continue to provide additional COVID-specific benefits to associates designed to promote their health and well being. In being thoughtful about these measures we've been able to run our business 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 toward single-family rental over the next decade with over 65 million Americans aged 20 to 34 years old and we believe, single-family housing supply is unlikely to be sufficient to meet the demands that these demographics create in our markets.

The ripple effects of COVID-19 seem to be intensifying a shift in preferences toward single-family space over denser housing options today. In fact, we've begun surveying residents upon move-ins to learn more about how the pandemic may be influencing things their housing decisions. Approximately 30% of the over 500 survey respondents who moved into our homes in April and May, moved from denser urban areas to our homes and approximately 30% said COVID-19 increased their desire to live in a single-family home versus an apartment or a town home.

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 three key differentiators that we think contribute to our advantage.

The first is the location of our homes in the areas we are currently invest, in-fill neighborhoods and high growth markets where supply demand fundamentals are most in our favor. The second is our scale and market density with almost 5,000 homes per market. Net scale is nearly impossible to replicate and is a key driver of our efficiency in the real-time market intel we derive from our portfolio. Third is our focus on being local and leveraging on-the-ground teams in our markets in collaboration with centralized support. This enhances our control over asset quality and the resident experience and is only 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 leading 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.

Charles D. Young -- Executive Vice President and 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 have 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 have never wavered in their commitment to genuine resident care.

That commitment was evident in our second quarter operating results, which I'll cover now. Same store average occupancy in the second quarter was 97.5%, up 80 basis points sequentially, and up a 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-19. The first was an increase in bad debt from 0.4% of gross rental income in the second quarter of 2019% to 1.9% in the second quarter of 2020, which was 150[Phonetic] 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 the quarter. 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 second quarter increased 4.8% primarily due to higher property taxes. 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 become even stronger each month. With a differentiated real estate product driving uniquely healthy demand, we have not run any wide scale concessions since the beginning of April. A new lease rate growth has picked up considerably during peak leasing season. In June and July, new lease rate growth was 4.6% and 4.9% respectively. At the same time, days to reresident continues to compare favorably to prior year, improving five days year-over-year in the second quarter.

With respect to renewal activity, our turnover rate continues to decline. Same store turnover rate fell 16% year-over-year in the second quarter of 2020, bringing our same store turnover rate to approximately 28% on a trailing 12-month basis. Renewal rents increased 3.5% in the second quarter and 3% in July. This resulted in same store blended rent growth of 3.3% in the second quarter and 3.7% in July. The combination of lower turnover and lower days to reresident continues to result in record high occupancy.

In a typical year, we see occupancy decline seasonally in the summer months but this summer, we have seen occupancy rise. In July of 2020, same store occupancy averaged 97.8% of 470 basis points higher in the previous July record set in 2019. Furthermore, 14 of our 16 markets had average occupancy above 97% in July and eight of our markets had average occupancy above 98%. 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 pass-through 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 and July. This compares to a historical average of 99%. I'll close with a few remarks about how we are planning for the road ahead.

We do not know what the future holds with respect to the spread of COVID-19 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 Freedman, our Chief Financial Officer.

Ernest M. Freedman -- Executive Vice President and 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 second quarter and thoughts concerning the second half of 2020.

With respect to the balance sheet, we improved our already strong liquidity position from last quarter. As of June 30th, we had almost $1.6 billion in available liquidity. No debt maturing before 2022 in over half of our assets unencumbered. The second quarter of 2020 we issued and sold 16.7 million shares of common stock for net proceeds of $448 million. We used $150 million of the proceeds to repay the full balance outstanding on our revolving credit facility. We expect to use the remaining proceeds primarily to acquire homes.

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 million per quarter. Our acquisition volume in the second quarter was $46 million as we temporarily paused the sourcing of new acquisitions in mid-March to monitor the impact of the pandemic. We've been very pleased with the resilience of our business since then.

Significant liquidity, no near-term refinancing needs, continued cash flow growth and strong demand for our product Invitation Homes is on solid footing. As a result we resume 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 AcquisitionIQ 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 second quarter, we sold 416 homes that did not fit within our long-term strategy for gross proceeds of $114 million. Next I'll cover our financial results for the second quarter.

Core FFO and AFFO per share for the second quarter 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 are reflected net of bad debt. We reserve residents accounts receivables balances aged greater than 30 days as bad debt as a resident's security deposit should cover the first 30 days of receivables. For 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&L, regardless of whether a payment plan has been negotiated with a resident. Those rents are later collected and it'll 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 business 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 but it remains difficult to provide guidance for the second half of 2020 due to uncertainty concerning local, state and federal regulatory environments 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 2020 comparing to our just completed second quarter. First, let me discuss items impacting revenue. In the first quarter we recognized 40 basis points of bad debt. The second quarter that grew 190 basis points. If we continue to collect at approximately 97% of our billings per month, we would expect bad debt to remain elevated the second half of the year.

Another source of uncertainty is around other income and more specifically, late fees. In the second quarter, late fee income fell by a little over $3 million compared to last year. At this point, we continue to experience similar declines and it remains to be seen how various regulations and restrictions may evolve are going to potentially offset these unfavorable variances are the possibility for continued lower turnover in days to reresident, which were the two key drivers of our record high occupancy in the first half of 2020.

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 2020. 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 third quarter to have higher repairs and maintenance and turnover expenses compared to second quarter.

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 first resident to move in. Below the NOI line we expect property management in G&A combined to be about $0.005 higher in each of the third and fourth quarters compared to the second quarter.

Finally, with respect to financing costs, we expect interest expense to be about $0.01 higher in each of the third and fourth quarters compared to the second quarter due to contractual increases in our step-up swaps. Average share count will also be higher in the third and fourth quarters compared to the second quarter when you take into account our June issuance of 16.7 million shares. Supplemental Schedule 2(a) includes share count information as 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. We 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&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question will come from Sam Cho with Credit Suisse.

Unidentified Participant

Hi guys. I'm on for Doug today. 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?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Yeah, 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 tried to see how it all played out. So come May and in June, we started to slowly reintroduce but really with 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 lenders.

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 for they -- 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 position on that. 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 I could say, we're still working with our residents if they reach out to us. Our main goal is to make sure that we are keeping our residents in our homes and trying to work with those who need help.

Unidentified Participant

Got it, OK. That's really helpful. And we've seen collections normalized from April to July. I'm just wondering if there is any delay in that second stimulus package by Congress. Do you have a sense of how much of your resident population might be effected?

Charles D. Young -- Executive Vice President and Chief Operating Officer

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 to -- 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.

Unidentified Participant

Okay, thank you so much.

Operator

Our next question comes from Rich Hill with Morgan Stanley.

Richard Hill -- Morgan Stanley -- Analyst

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 of COVID-19 than prior to COVID-19? So how are you going to do it and what markets do you like best?

Dallas B. Tanner -- President and Chief Executive Officer, Director

Yeah. 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 is limited supply but even on that basis, we'll still see somewhere between 5.5 million and 6 million 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 or 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, putting in offers on properties on a one-by-one basis. We've had a little bit more success in the last couple of months of doing some smaller opportunities with builders where we're buying 5, 10, 15 homes at a time. And so, while you're right in that, there -- 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 eight 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.

Richard Hill -- Morgan Stanley -- Analyst

Okay. So any thoughts on specific markets or you're just going to let it come as it may?

Dallas B. Tanner -- President and Chief Executive Officer, Director

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 majorities 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 Sun Belt markets, the west part of -- the Western coastal parts of our markets are all parts of the portfolio that we 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 is not -- hasn't really been anything, Rich, that would say that we should shift our strategy.

I mean, the demographics in the household formation in our Sun Belt and coastal markets are still two times the asset -- national average in terms of the household formation. All the fundamentals are saying the 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.

Richard Hill -- Morgan Stanley -- Analyst

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 will get a little bit of a bad debt back as you collect unpaid rent?

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Yeah. Rich, I hope that's the case. And there is always seasonality in the business but seasonality is probably going to be a little skewed this year just because of what's been happening around the pandemic. As you saw, we saw accelerating fundamentals on the lease side and it's rare for us to have increasing -- excuse me, occupancy through the summer months because typically you have higher turnover there. So that's all pointing favorably to us.

And with our bad debt policy, we give a lot of consideration around what to do with folks who are on payment plans. About a third of our receivable balances are on payment plans and most of those restaurants are paying and because the way our policy's set up today we are reserving for future, hopefully, payments from those folks. If we have another three or six months worth of history, which we will as the year rounds out and we see people continue to do well in those payment plans will certainly give us pause and reason to consider revisiting our policy with around bad debts, if we see those people paying.

We want to be a 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 four 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.

Richard Hill -- Morgan Stanley -- Analyst

Yeah. Thank you, guys. Congrats on weathering a really tough environment.

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Thank you, Rich.

Operator

Our next question comes from Haendel St. Juste with Mizuho.

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

Hey guys, good morning down there.

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Hi, Haendel.

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

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 or you'll kind of continue to push rates more aggressively and perhaps later into the year than you typically would, as you stated here 98% occupied and can we see further new and renewal pricing accelerations beyond July and into the fall?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Hey, Haendel, Charles here. Thanks for your 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 -- rent concessions early got our occupancy up and then we saw that demand is here for our product and so we continue to probably 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 and July 4.6%, 4.9%, 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 flexibility in working with them. So you see our renewal rate's 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 and we're getting toward of the end of the peak season, so we'll continue to monitor. We have our field teams and our revenue management teams are great at keeping an eye on what the dynamics are in each sub-market. And right now, we're always trying to find our proper balance and take into account what's going on with the pandemic as well. But our portfolio is in a strong position.

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

That's great, Charles. The clarification on that last point you said, you're asking 5%, what are you generally getting with that spread then just curious on how that's translating into what you are receiving or expect to receive?

Charles D. Young -- Executive Vice President and Chief Operating Officer

It's hard to predict in this market. Usually, we get 50 basis points to 100 basis points 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 so we're going to be higher than the 3%, 3.5%, we've been the last several months. As we're coming out at a higher ask, so we'll have to see. The spread is hard to predict during this period but typically it's within 50 basis points to 100 basis points.

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

Got it. My second question is on the days to reresident. Can you break that down into two pieces, the turn times and then the time to lease. And then, I guess I'm curious, if you hit here at 98% activity how much higher can it get from a turn time perspective? Are you getting close to that optimal number where 98% just structurally has less upside or how should we think about the potential upside from here on the turn times, etc.?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Yeah. So taking your first question -- your second question first. We always thought that this business could be a 97% occupancy business as we've looked at trending our turn times. Our turnover down into the 25% to 30%, we've been trending down to that way over the last kind of several quarters, which has been really positive and as we get days to reresident to the 30s, you just do the math and that's going to have you at a number that's where we are today. Now it's happening a little faster given the pandemic, so that's a good thing and we're going to continue to pay attention to that.

Days to reresidents 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 are -- quarter-over-quarter we're down five days and we continue to have that benefit in July. We are down closer to 10 days in July and if you break down the components, we've been turning homes we've made really good improvement this year at about 10 days and the reminder 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.

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

Thank you. That's fantastic and best of luck.

Operator

Our next question comes from Nick Joseph with Citi.

Nick Joseph -- Citi Research -- Analyst

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?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Yeah, we haven't really seen any material difference 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 are 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 will continue to monitor but it's still early in the process.

Nick Joseph -- Citi Research -- Analyst

You wouldn't expect any kind of turnover differential as those leases expire that it may be more of a temporary rental versus what you traditionally see?

Charles D. Young -- Executive Vice President and Chief Operating Officer

I don't think so but we're going to watch that. Our -- at our current turnover rates, our residents are staying on average three years and it seems to be expending -- 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 with good school districts. So all that is why residents want to be 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.

Nick Joseph -- Citi Research -- Analyst

Thanks. And Dallas, you talked about the transaction market. Maybe just the flip side of that potentially asset sales, you've obviously announced you're exiting Nashville, you're almost out of there. Are there any other markets you may potentially exit. You look at the Midwest market, Chicago and Minneapolis, fewer homes that you're doing most of your other markets.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Sure. We're really comfortable with what we own today. We like the footprint 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 is centered 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. Like the footprint that we've got and we'll obviously do some culling of nonperforming assets, maybe some geographic dislocation that we're always working on. But by and large we're pretty comfortable with where we're at. I wouldn't expect us to do anything wholesale at least the way we're thinking about things right now.

Nick Joseph -- Citi Research -- Analyst

Thank you.

Operator

Our next question comes from Jade Rahmani with KBW.

Jade J. Rahmani -- Keefe, Bruyette & Woods, Inc. -- Analyst

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, add scale and accelerate growth.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Good question, Jade. 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 increase in bounds 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 that's 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 of markets that we think lend themselves to really solid risk-adjusted returns, so we're in a good position.

Jade J. Rahmani -- Keefe, Bruyette & Woods, Inc. -- Analyst

Thanks very much. I wanted to find out if you could also provide any update as to the company's property management platform. Is it at this point transitioned to a fully proprietary platform or would you describe it as a combination of services from multiple vendors?

Dallas B. Tanner -- President and Chief Executive Officer, Director

Well, we've been internal from day one. So we put an emphasis, as we built the business, around making sure that we were 100% internally managed in 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 in 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.

Jade J. Rahmani -- Keefe, Bruyette & Woods, Inc. -- Analyst

Thanks very much.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Thanks, Jade.

Operator

Our next question comes from Wes Golladay with RBC.

Wes Golladay -- RBC Capital Markets -- Analyst

Hey, good morning, everyone. 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 if any regions stood out here and it -- did you see a lot of out-of-state migration?

Charles D. Young -- Executive Vice President and Chief Operating Officer

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 is a -- there has been a strong interest and you can see it from our overall demand that's in the market right now. And so we'll stay there.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay and then just want to go back to the bad debt reserve. Was that heavily skewed toward 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?

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Well, I guess, Wes, when 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 bucket. So it's hard to say it skewed toward June but certainly, as you get to June your May receivables that have now -- are now -- that are still outstanding are eligible for bad debt adds on your April. So we saw kind of earn in throughout the period, so it's hard to say it's skewed one way or the other. But if we continue to collect at about 97%, it certainly feels like we're going to have bad debt come in that range that you saw in the second quarter and hopefully we can do better than that. But with four months of data that's how we can look at the world today.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay, thank you.

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Thanks, Wes.

Operator

Our next question comes from Alex Kalmus with Zelman & Associates.

Alexander Kalmus -- Zelman & Associates -- Analyst

Hi. Thank you for taking my question. Given as far as outperformance 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 mid-sized players?

Dallas B. Tanner -- President and Chief Executive Officer, Director

Yeah, the industry continues to evolve and I think we're still in this moment of new capital coming into the space. We agree with everything that you're saying. They are 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 are a good thing for residents, generally across the country. I think this will be a good value-added added in industry and there's a lot of LP demand out there that wants to take advantage of that.

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 better than anyone out there today and we think we can offer a customer experiences second to none because of our scale. So I think all this new capital coming into the space over time and business will largely be viewed as a good thing and it's beneficial to our company as well.

Alexander Kalmus -- Zelman & Associates -- Analyst

Thank you for the color. And I know you guys are channel agnostic but right now, what would you say is the most abundant channel for your acquisition pipeline?

Dallas B. Tanner -- President and Chief Executive Officer, Director

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 is opportunity to do more with builders along the way and find ways to see redevelopment of infill locations that, which fit our portfolio needs as well. So the most active being the traditional one-off sales right now.

Alexander Kalmus -- Zelman & Associates -- Analyst

Got it. Thank you very much.

Operator

Our next question comes from John Pawlowski with Green Street Advisors.

John Pawlowski -- Green Street Advisors -- Analyst

Hey, thanks a lot. Charles, as some of your local economies have had to walk back reopening plans in recent weeks, in 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 concern as sending out heading into the summer?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Yeah, this 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're seeing an increase in the number of COVID cases, which is Arizona, Texas, Florida, a little bit of California. As I dug in their 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 were at 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 they were dealing with some more of the regulatory challenges but it's not far off, it was like really flat kind of over a 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.

John Pawlowski -- Green Street Advisors -- Analyst

Okay, that makes sense. And then, just curious your longer-term outlook -- three, five year outlook on South Florida, it has 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?

Dallas B. Tanner -- President and Chief Executive Officer, Director

Yeah, I'll take this one. Well, first of all, South Florida is an interesting market to your point. I mean, it tends the kind of flow in cycles, as you well know. We actually really enjoy the portfolio -- 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 is some challenges in a couple of municipal areas. We have been culling 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 where 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 submarket 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 cull 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've seen 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 about earlier, get better and better in that market. So I like our chances, we probably want to run that portfolio for a bit longer before making any kind of definitive thoughts around what we would or wouldn't do there.

John Pawlowski -- Green Street Advisors -- Analyst

Okay, great. Thanks for the time.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Thanks.

Operator

Our next question comes from Alua Askarbek with Bank of America.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Hey, everyone. Thank you for taking my questions today. I just have like, two few -- two 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 multi-family guys?

Charles D. Young -- Executive Vice President and Chief Operating Officer

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 that works 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.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Got it, OK. 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 home ownership specifically during the quarter? With mortgage rates really low, is there any more interest in that?

Charles D. Young -- Executive Vice President and Chief Operating Officer

Yeah. 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.

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Got it, OK. Thank you.

Operator

Our next question comes from Rick Skidmore with Goldman Sachs.

Richard Skidmore -- Goldman Sachs -- Analyst

Good morning. Dallas, just a quick question just with regards to how to think about the capital recycling, 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 financial impact of the divestitures versus the purchases? Thank you.

Dallas B. Tanner -- President and Chief Executive Officer, Director

Yeah, great question. So on your first point I would say, it's important to understand that we ranked 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 two buckets. We rank our assets based on where they're located, which is, as you might imagine, pretty hard to change wherever a 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. One, you might sell a home because quite frankly it becomes too valuable. 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 and reinvest in parts of the market where it can make more sense.

The second reason might be, 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 management team -- 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 are 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.

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

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 are 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 few quarters, plus or minus $75 million to $100 million worth of homes.

But with the equity raise and having $600 million of cash on our balance sheet as of June 30th, as we talk down the fairway, it gives us a chance to ramp back up our acquisition pipeline to where it was pre-COVID, which is about a couple of hundred million dollars 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 where in the first of the half of the year is a little bit more of a net seller.

Richard Skidmore -- Goldman Sachs -- Analyst

And if you were to maintain kind of, the net seller sort of perspective that you've been running at 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?

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

The good news for us, Rich, is where we're selling our assets and typically an asset we're selling into an end-user who will sit banking on our books for anywhere between two to four 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 a house might be worth more to an end-user than as a rental property. Whereas when we got to buy homes, we're typically buying today kind of in the mid-5 cap rate and that's in a market where there is distress and that's what we've been buying for the last period of time. 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 accretive activity for us from an earnings perspective because we have the opportunity to sell assets in two ways, to end-users who may value them differently than an institution that runs as a rental property.

John Pawlowski -- Green Street Advisors -- Analyst

Thank you.

Operator

Our next question comes from Todd Stender with Wells Fargo.

Todd Stender -- Wells Fargo Securities -- Analyst

Hi, thanks. Just to get a finer point on cap rates, you guys have been buying in that 5.4% range the last couple of quarters. Do you see that edging lower maybe due to higher price points over the coming months or maybe rents are rising enough to keep that cap rate at that level?

Dallas B. Tanner -- President and Chief Executive Officer, Director

It -- to Ernie's earlier point, it's been pretty consistent in the kind of that mid-5s generally for us over the past couple of years and we 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 but I would expect it to kind of stay in that mid-5s. I wouldn't expect that we see any real wholesaler dramatic shifts given the type of home that we buy and the tenant's portfolio that we manage. It all feels pretty good kind of in that strikes.

And to Ernie's earliest point, on one of the question he 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 and home buying and selling season later in the year. But we'll see, we'll manage, we'll watch how the next six months progress and -- but generally speaking mid-5s is something that we feel pretty comfortable with.

Todd Stender -- Wells Fargo Securities -- Analyst

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 low 7 times range. How much more movement should we see your leverage metrics move?

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Yeah, I think they're going to more or less hold steady. We're 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 that, debt trend and other. It's good that we are seeing 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 seen over the last period of time and stay focused on that we have. And if it makes sense opportunistically to be able to try to do something with leverage, we'll certainly consider that. But our main focus is going to be to continue to delever through external growth in terms of buying assets unlevered, which is what we've been doing for a period of time here and it takes a while for that to earn in, that's going to be the main focus. Then the second focus will be hopefully we continue to see positive NOI contribution in EBITDA growth as we move forward.

Todd Stender -- Wells Fargo Securities -- Analyst

Thank you.

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Thank you.

Operator

This concludes our question-and-answer session. And I would like to hand the call back over to Dallas Tanner for any closing remarks.

Dallas B. Tanner -- President and Chief Executive Officer, Director

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.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Greg Van Winkle -- Vice President, Investor Relations

Dallas B. Tanner -- President and Chief Executive Officer, Director

Charles D. Young -- Executive Vice President and Chief Operating Officer

Ernest M. Freedman -- Executive Vice President and Chief Financial Officer

Unidentified Participant

Richard Hill -- Morgan Stanley -- Analyst

Haendel Emmanuel St. Juste -- Mizuho Securities -- Analyst

Nick Joseph -- Citi Research -- Analyst

Jade J. Rahmani -- Keefe, Bruyette & Woods, Inc. -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Alexander Kalmus -- Zelman & Associates -- Analyst

John Pawlowski -- Green Street Advisors -- Analyst

Alua Askarbek -- Bank of America Merrill Lynch -- Analyst

Richard Skidmore -- Goldman Sachs -- Analyst

Todd Stender -- Wells Fargo Securities -- Analyst

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