Managing Single Family Rentals
Economic and demographic changes have really juiced up demand for single family rental housing (SFR) and it’s spawning excellent business opportunities for investors and property management firms.
Back in 2014, many investors and managers were wondering about the wisdom of adding single family houses to their property mix. Today, they’re reaping the rewards of acting on those real estate trends and being proactive. SFR remains one of the most reliable investments for most participants in the real estate housing market of 2023.
“SFR make up roughly 16 million units – nearly 13.0% of all housing stock and 36% of all rental households” — Pintar Investment Company. from report by Walker & Dunlap entitled MARKET INSIGHTS ON SINGLE-FAMILY RENTAL (SFR) BUILD-FOR-RENT(BFR) ACTIVITY IN THE U.S.
Definition: SFR encompasses a cluster of single family detached homes, townhomes and duplex properties.
The way the pandemic has played out for residential lifestyles (people moving from high density urban housing to low density suburban and rural housing), the demand for more living space, and how single family units are in short supply, the result is higher rent yields in SFR.
Demand for SFR Not Easing
Interest in SFR keeps growing and it will become a key topic in property management conferences in 2023. Yes, multifamily and apartment rentals are enjoying a recovery too, yet their rate of asset appreciation may not compare to the top SFR rental yields you can read about below.
For sometime, the market has been about higher priced products whether luxury houses, vacation rentals, vehicles, house renovation, and even appliances. The lower end of the market including apartments isn’t being served given real lower income earner wages are stagnant, stimulus has ended, and manufacturing/construction costs are too high.
The single family market is beginning to grow with the housing market downturn and prices are dropping. This fall may be the right time to build their single family portfolios.
For property managers and new property management startups single family offers more opportunity for additional service revenue. This hasn’t been explored fully yet, however the growing built to rent segment is in a position to charge these add on service features.
Good Reasons to Invest in and Manage Single Family Rentals
SFR properties are enjoying lower vacancies and longer lease periods. And these types of properties perform much better when managed using a property management software for this market.
Some property management firms prefer to specialize in SFR properties, a few of which will buy their own properties.
And more good news is that wages in single family neighborhoods are rising faster than rents in 379 of 495 counties studied in a SFR report by Attom Data. Of course, inflation will eat into everyone’s investment returns. The SFR market might suffer less than others in 2022, given house renters will be willing to spend more.
Zumper reports that apartment rents were up 14% year over year (still up high now in September 2022), so there is no mercy for anyone who continues to live in an apartment.
There is potential for house rental price hikes as the economy recovers.
As more young families, families with children, and retirees look to rent single family homes with yards and upscale amenities on a long-term basis, more investors are looking to the SFR and BFR markets to expand their portfolios and grow their capital. — rebusinessonline.com
Best US Markets for SFR
Which US city markets offer the best rent yields this year? According to a report from AttomData, the US counties with the highest potential annual gross rental yields for 2021 are:
- Schuylkill County, PA, in the Pottsville metro area (26.1%)
- Bibb County, GA, in the Macon metro area (18.1%)
- Baltimore City/County, MD (16.2%)
- La Salle County, IL, in the Ottawa metro area (14.1%)
- Chautauqua County, NY, in the Jamestown metro area (13.7%)
For counties with a least one million population, they found the highest potential annual gross rental yields are in:
- Cuyahoga County (Cleveland), OH (9.9 percent)
- Dallas County, TX (8 percent)
- Tarrant County (Fort Worth), TX, (8 percent)
- Franklin County (Columbus), OH (7.9 percent)
- Bexar County (San Antonio), TX (7.9 percent)
Solving the Challenges of Single Family Property Management
The challenge for small business single family property managers is how to grow profitability. Single family home renters are a different group than apartment and multifamily renters.
They may be more demanding in logistics and support and the daily management/maintenance challenges are different too.
However, SFR property managers might want to look at the multifamily sector to gain insight on efficiencies and important tenant demand trends. It should be noted that tenants expectations have changed, and keeping tenants happy is a priority today.
“Residents who have a better rental experience want to stay longer”
Single family renters can and are willing to pay more and they expect more responsive services and good asset condition. They are in a financial position to reward you more for improvements and good service.
Turnover for single family managers is very costly even with zero vacancy rates. There are always costs when managers see turnover. SFH managers and startup entrepreneurs should look to optimize how they manage single family homes.
ManageCasa is focused on the SFH market and is the perfect platform to help you succeed in 2022/23. Ensure you see all the value ManageCasa can deliver on the features page.
Your challenges are made easier with a next platform designed for simplicity and to leverage the cost efficiencies of the cloud.
Building a Better SFH Management Business
So how do you build a better single family property management business?
- target new types of properties that require unusual service requirements
- focus on SFR properties in demand
- target short term townhouse condos in vacation regions (e.g., beach, mountain biking or ski resorts). Post-Covid, cash rich Americans, Australians and UK residents will be eager for an active, adventure
- investigate built to rent SFR– these growing developments need HOA managers and property managers
- consider high end executive homes as corporate employees begin to travel and temporarily relocated again
- investigate opportunity zone regions for tax reduction
- weigh value of light rehabs on low end real estate regions where work from home workers seek escape from the city
- look into expensive upgrades including roofs, landscaping and HVAC systems
- offer digital communications and payment systems to appeal to modern tenants
For SFR property managers, building skills and adopting automation to provide more services is important. Keeping up on state laws, fair housing regulations, real estate law, tax codes, demographic trends. New services for your firm would include professional marketing services, tenant communications, reno services, etc.
Keep in mind that its not always just what you do for tenants, but rather how you do it.
Smart Tools for SFR Managers
SFH management is more difficult logistically and for staying within your operating budget. Using the right property management software allows you to maintain the property well, and cut your maintenance fees, costs, and keep contractors sharp.
Efficiency is essential and that’s where your choice of property management software is so important. A software designed for SHF managers means you’re focused. For property management firms, looking to attract new clients, corporate investors will be looking at how you manage houses and the quality of property management software you use. They’re impressed with modern management practices.
If you should choose one platform to help you do it all, ManageCasa is that solution.
A FREE Trial of ManageCasa is the best way to experience the platform firsthand.
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