An unsung sector
Since the pandemic began, single-family home rentals have seen unprecedented demand
When you think of residential property management, multifamily units might be the first properties that come to mind. But the single-family home sector has been a steady segment and a major area of demand since the beginning of 2020.
A quick history
Single-family home rentals were traditionally managed by landlords until a few decades ago, when tax laws and interest rates made buying and renting these properties an attractive option.
“In the 1980s and ’90s, we started to see professional management emerge as mom-and-pop and do-it-yourself investors began owning the rental properties but didn’t have a clue how to manage a house,” says Michael McCreary, CPM Emeritus, MPM, RMP, GRI, president of Marietta, Georgia-based McCreary Realty Management, AMO, a company started by his grandfather in the mid-1950s.
Then came the housing crisis and the subsequent rise in renting. According to U.S. Census Bureau data, from 2007 to 2017, the U.S. added fewer than 1 million households in owner-occupied homes but added 6.5 million in renter-occupied homes. Property managers like Jeff Kushner, director of acquisition and real estate product development at Amherst Residential in Atlanta, got an on-the-job crash course in managing single-family homes. In 2008 and 2009, the company where he then worked, First Service Realty NYC, handled Fannie Mae’s onslaught of foreclosures. “We were the recipients of hundreds of properties a week, eventually resulting in 35,000 real estate-owned (REO) properties nationally,” he says.
Property managers like McCreary, whose company manages 200 residential rental units, as well as 42 single-family home community associations representing about 2,800 individual units, also saw a boom. “The recession didn’t stop people from needing to relocate for a job or some other reason, and people couldn’t sell without taking a bath,” he says. “We saw every management company I know of explode with accidental investors.”
Like the industrial sector, single-family home rentals have seen a surge since the COVID-19 pandemic began. Jennie Miller, PLLC, owner and designated broker of Phoenix-based Market Edge Realty LLC, a firm that manages single-family homes and small apartment complexes comprising 500 units, says the rental demand is at an unprecedented level.
“I have never seen anything like it in my life,” Miller says. “Applicants will call four or five times a day to check on the status of their application.” In addition, she says that all of her clients have been able to increase rent amounts enough to offset the management fees.
In Georgia, McCreary is seeing the same demand. “We’re renting them in 24 to 48 hours. And we’re getting not one, but multiple applications.”
The property managers interviewed also state that COVID-19 has not hurt many of their tenants’ abilities to pay rent. Although he has had to develop a few payment plans with tenants, McCreary says that all but one have paid rent in the month that it was due.
A unique opportunity
Single-family homes have many characteristics that set them apart from multifamily residences, and each one is unique.
“The locations, building styles, construction methods, quality, and appliances can all be very different,” says McCreary, who is also an IREM instructor. “If you’re managing a 200-unit complex, you’ll have 200 units with a stove that is probably the exact same model, and you can buy parts in bulk. But I have 200 different kinds of cooking units, all with different parts.”
Kushner says annual inspections, pest services, or simply making sure tenants are honoring their leases, are just some of the differing needs to be managed with each property.
With all the idiosyncrasies to juggle, a manager must be highly detail oriented. McCreary says standardizing policies is key. “We have rents due at the same time, and we have renewals, policies, and procedures all scaled to fit single-family [rentals].”
Another distinct characteristic that sets these rentals apart from multifamily buildings is the properties’ proximity to one another. Unlike an apartment complex on a couple acres, single-family homes may be spread out over many miles, and visiting the properties can require a lot of travel time, Miller says.
“Our company is valleywide in Phoenix, and we may have to go 50 miles to get from one property to the next,” Miller says. “At an apartment complex, I can walk out the office door and deal with 10 situations right there.”
For McCreary, his 200 locations are spread over a 20-mile radius. “If I visit five units, I have to visit five different places.”
Along with the unique property types come different property owners.
“From a reporting standpoint, if I have 130 property owners, I’ll have to prepare 130 owner documents,” McCreary says. Fortunately, McCreary notes the updates in property management software have made tasks like this much less tedious.
The variety of people involved make people skills imperative for managing this property type, especially because not all owners are well-versed in rentals. “A lot of my clients are accidental investors—maybe they couldn’t afford to sell, had to move, inherited a house, or two homeowners got married and then had the extra house. Or they may be on-purpose investors diversifying their portfolios with real estate or buying with the intention of retiring there.”
Miller says educating the client is a big part of the job. “We keep the landlord in compliance with landlord-tenant laws, decrease liability, and help cut expenses,” she says. “There are so many examples of landlords who paid a contractor $50,000 unnecessarily to renovate a house—we’re able to help prevent this.”
For Kushner, knowing the goals of the institutional investors is paramount—do they want to improve and sell? Do they want to rent-to-sell to the tenant? There are many considerations at play.
Miller, Kushner, and McCreary agree that single-family tenants generally seem to take more pride in living in their properties than apartment dwellers, and they also tend to stay in the homes longer.
Single-family units typically have the same tenants in longer leases or for multiple-lease terms. “My average tenancy is three to four years, as opposed to multifamily, which is nine to 18 months,” McCreary says.
Some tenants maintain the landscaping or mow the lawn because the lease requires it, but for other tenants, the extra effort is just because they love where they live. Miller says it isn’t unusual for her tenants to hang up new blinds or to try repairing a garbage disposal themselves.
And tenant pride in the property is not just a benefit to property managers, it’s also one of the more rewarding aspects of the job.
“I think of the old saying, ‘Your home is your castle,’ and I think that rings true even for people who rent single-family homes,” Kushner says. “Sure, we are working to get our investors the numbers they want, but at the end of the day, we’re putting someone in a house. We are, in a way, giving them the American Dream.”