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SFR Investors Dispute Resident Lawsuits That Claim Bad Management Practices

Both American Homes 4 Rent and Invitation Homes have faced tenant lawsuits recently.

Managers of single-family rental (SFR) homes are starting to face a new challenge: lawsuits from residents.

Residents have filed more than a dozen lawsuits against several giant SFR companies, including American Homes 4 Rent and Invitation Homes, along with several other firms that have since merged with the two giants. The lawsuits allege, among other problems, that many rental homes have been badly maintained by unresponsive property managers.

SFR owners contest the lawsuits. “At Invitation Homes, our associates work hard every day to make sure our residents have a great experience in our homes,” says a spokesperson for the company.

Experts in the business also point out that good property managers should be very motivated to keep residents from getting frustrated enough to move out because they to delay the cost of turning the unit for as long as possible. “Keeping people in the property and keeping them happy is by far the best financial decision,” says Alex Sifakis, president of JWB Real Estate Capital, which manages 2,500 single-family rental houses around its headquarters in Jacksonville, Fla.

Lawsuits filed against rental house companies

The lawsuits have been documented in local and national news stories. Most recently, The Atlantic ran a 5,000-word piece “When Wall Street Is Your Landlord.” “Many of the families I spoke with feel stuck in homes they don’t own, while pleading with faraway companies to complete much-needed repairs,” says Alana Semuels, writer for the Atlantic Monthly. She spoke with people from 24 households that had lived in homes owned by single-family rental companies who reiterated many of the claims made in the lawsuits.

Executives for Invitation Homes deny the allegations. “While we cannot comment on pending litigation, we believe the allegations are without merit,” the spokesperson says.

Yelp reviews of Invitation Homes are mixed. For example, the Sacramento office of the company has 144 reviews, averaging 2.5 out of 5 stars. Many of these reviews had received a response from Invitation Homes promising to address the expressed concerns. Invitation’s Phoenix office has 131 reviews, also averaging 2.5 stars, ranging from "great experience over the last two years" to "by far the worst rental company."

Invitation Homes’ own surveys of its residents show more positive results. “Our satisfaction scores for maintenance services averaged 4.4 out of 5 stars in the fourth quarter and continue to climb into 2019,” the company spokesperson says. “We are working to make sure those scores remain on that trend.” She adds that Invitation Homes’ residents are staying in their units longer, resulting in the company’s portfolio having the lowest turnover level ever.

Managers of rental houses benefit from keeping turnover low. “It is worth spending money to get people to stay and not have them leave,” says Sifakis.

That’s because the average cost to prepare a property for a new renter ranges from $2,200 to $2,800—not including the typical month and a half of lost rental income, according to Sifakis. SFR landlords who keep their tenants happy enough to stay can put off that expense. Renters at JWB’s SFR properties stay for an average of four years. That’s much longer than apartment renters.

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