Rapid Shifts in SFR Management Processes
It could be argued that the “American Dream” is seeing a massive shift, right before our eyes. The current millennial and Gen X populations responsible for many of the newer household formed, have grown up in an age where housing prices have skyrocketed across many parts of the country, and especially here in Colorado. In tandem, they have also joined and grown in a workforce where remote work and relocation flexibility have run rampant, and in an era where instability in economic, political and health arenas have created a reasonable fear of long-term planning. The many social justice movements and societal shifts toward personal fulfillment and independent have further contributed to the situation
All of this seems to have amounted to a unique period where homeownership interest is declining, just as interest rates are increasing – a perfect storm for the escalating opportunity now found in the rental housing industry. Further, this rise in demand for rental housing also has seen its own shift in the wake of the pandemic.
A strong pivot away from dense urban areas, an increased need for well-suited home offices, and here in Colorado, a deep love of dog ownership, are creating a compelling case for single-family home rentals, especially in our state. This increased demand for rental homes is now, undoubtedly, forcing the industry’s rapid advancement.
What the SFR market’s 3.0 iteration brings with it.
The SFR sector is rapidly shifting as large and midsize institutional investors enter the market, and with them, property management partners with deep experience in the multifamily management industry. In addition, with many SFR renters entering the sector with prior experience living in larger, multifamily apartment communities, they are coming with high renter expectations driven by their former experience with on-site management, community engagement and rich lifestyle amenities. The SFR sector is quickly learning how to translate the multifamily management approach to suit these scattered housing units.
While master planned build-to-rent communities can build amenities and shared community spaces into their plans, institutional investors purchasing existing, scattered housing are getting creative about bringing familiar resident experiences to their tenants as well. For instance, smart technologies such as keyless entry, remote-activated lighting and integrated sound systems are now becoming more common in institutional SFR properties. Sophisticated renter portal platforms are also providing more efficient communication and 24/7 tenant support along the lines seen in large, multifamily developments.
More recently, large management companies like ours are beginning to bring off-grid energy solutions to SFR rental owners as a means to reduce costs for SFR property owners. This move not only improves the financial performance for the investor, but it also appeals to both tenants and landlords who tend to be more value-based and sustainably-oriented than ever before. “By providing their own, off-grid energy resources, SFR owners can reduce inefficiencies created by the utility providers in the tenant turnover process,” said Vince Deorio, vice president of growth for Atlas Real Estate.
As SFR residents stay longer, their decision-making filters are shifting. Renters today are not only demanding more sophisticated tools, quick turnaround times and more for their money, but they are also becoming a bit more particular. The average SFR renter stays in a rental home for multiple years, typically upward of three years. That means that these residents are much more careful and keep a long view in their home selection process as well. Flexibility for life-style evolution within the home, long-term growth potential for the neighborhood, and issues like maintenance and repair processes are now critical in the marketing of the single-family rental home.
Opportunities for small portfolio investors and managers to stand out with SFR renters.
As institutional investors continue to grow their presence in the SFR sector, many small portfolio investors or owners of one rental property are growing more concerned about competing for renters. Concern amongst small portfolio investors can be squelched with a little focus on distinguishing themselves from the larger, more standardized competition. Some approaches for going head-to-head with these larger investor groups could include:
- Installing smart home technologies. These are becoming more affordable and easier to install, even as a DIY project.
- Velcro your communication pathways. While small companies or investors might not be able to afford sophisticated portal tools, you can ensure that your renters will always have access to you or other decision-makers for your property. Be prolific with your communication so that they do not feel worried about being abandoned with home issues.
- Get creative with your design features. Many larger institutional investors will have to standardize their material choices for things like paint colors, tiles or other finishes. While we would not recommend going too wild with your color palette or designs, you do have more potential to highlight the unique features of your rental home through smart, stylish design enhancements.
- Consider offering your SFR property furnished. Many institutional-scale investors will not be able to provide furnished residences due to larger-scale liability challenges or procurement inefficiencies, etc. That means that people looking for furnished homes will need to look elsewhere. With well-curated furnishings you can make your home standout against the competition visually, and you can also attract groups like traveling physicians, academics, or even digital nomads looking to explore the country on six-month, one-year or even longer leases
Undoubtedly, we are all quickly pivoting to keep up with the shifting real estate market today. One thing is clear though: Our nation continues to face a serious housing shortage, and we are flush with tenants in search of the right housing solution. With that opportunity, we must optimize the home rental experience to serve today’s renters with kindness, innovation, and effectiveness, and for our investment partners, smart strategy. This vision for SFR 3.0 is one that excites our team and one that will bring continued improvement in the transitional years ahead.