What Next for Single Family Rental Market?

Multifamily Executive has an interesting, in-depth article about the single family rental market and where it might be headed:

The next challenge for these firms is achieving some economy of scale. “If you have enough concentration in a market, then you can do it,” says Rick Graf, president of Pinnacle Management, which oversees more than 135,000 multifamily units and has considered entering the single-family management business, as well. “But if you have a scattered-site concept, then from a maintenance and leasing standpoint, you have got to have a solid network, otherwise it is going to be very operationally challenging.”

Single-family firms agree and say their acquisition and management strategy takes that reality into account. “We didn’t want to buy a portfolio of 3,000 homes scattered around the country,” says Peterson. “We are highly concentrated in 14 markets. We don’t have any markets with less than 1,000 homes, and in 12 of the 14, we have at least 2,000 homes.”…

At Waypoint, the threshold for a minimum number of homes in a market is lower—just 250 homes—but the company relies on technology to make it work. “This business could not be run without heavy use of mobile and cloud technology, which allows us to minimize ‘windshield time,’?” says Beasley, referring to the time that maintenance workers and other employees might otherwise have to spend driving between the office and various properties.

The comment illustrates how these firms, as young as they are, have quickly embraced the power of technology to create an efficient operating platform. Invitation Homes, for example, encourages residents to apply online, view photos of available homes, pay their rent, schedule maintenance requests, and renew their lease. What doesn’t Blackstone have? Revenue management software for its 44,000-unit portfolio—but they’re working on it. Waypoint already has its own proprietary revman system, basing it on the firm’s own rent data and third-party sources…

Of course if things don’t work out they can always sell:

If none of those work, these firms could just sell the properties. “The great thing about this business is that if a multifamily property loses tenants, it loses a lot of its value,” says Peterson. “The benefit of investing in a single-family home is that it doesn’t trade on a cap-rate basis. Even if it doesn’t have a tenant, it still has resale value.”