To earn the best rents from single-family homes, property managers are investing in the properties upfront.
“You don’t have a second chance to make a first impression—that impression needs to be perfect,” says Jeff Pintar, president and founder of Pintar Investment Co., based in San Juan Capistrano, Calif.
Managing single-family rental homes requires a lot of attention. Managers like Pintar know from experience that residents will reward careful renovations and attentive property management with long stays and higher rents.
Pintar now manages a portfolio of 2,500 single-family homes—including houses that Pintar owns as well as houses that Pintar fee manages for other owners. When Pintar takes over the management of a single-family home, the company typically spends about $27,000, or 10 percent of the purchase price, to renovate the home and get it ready to rent. “I can’t place enough emphasis on the quality of the home when bringing it to market,” says Pintar.
However, earlier in the recovery, Pintar managed thousands of rental homes for institutional investors that were sometimes less willing to invest in renovations. Pintar found that when it spends more to renovate a rental home, residents stay longer, treat the properties better and are more willing to tolerate rent increases.
“At the end of the day, the tenant is king,” says Pintar. Average rents increased 8 percent in Pintar’s portfolio last year, similar to the increase in 2013.
Waypoint Homes, based in Oakland, Calif., spends more than $20,000, or 15 percent of the purchase price of a home to get the house in a condition to rent. “It’s really important to get that right to earn the highest possible rent,” says Doug Brien, co-CEO for Waypoint. The firm manages a portfolio of 15,000 single-family homes. It has an ownership stake in all of these homes.
When Waypoint buys a new home, its managers use a checklist to make sure all of the features of the home function smoothly and to replace systems like roofs or plumbing, if necessary. For example, can the home provide hot water to a washing machine and two bathrooms at the same time? Waypoint also checks back with residents to make sure they are satisfied within 30 to 60 days after the resident moves in or submits a work order.
“Residents that have a better experience want to stay longer,” says Waypoint’s Brien.
The average resident of a single-family rental home stays for three years. Stays of five or six years are not uncommon. That’s much longer than the length of time an average resident stays in an apartment building before moving out.
Managing single-family rental homes also requires a different software solution than running apartment buildings. Waypoint has created their own proprietary system that helps maintenance workers and managers chart a route to the homes that need attention, provides checklists of what to do once they arrive and records the necessary information. Single-family homes have a long list of features that need attention, including roofs, landscaping and HVAC systems. “You need a system of record,” says Brien.
Residents reward the personal touch
Residents also want property managers who responsive to their concerns and are connected to their community. “It is a local business—you have to be part of the community,” says Pintar, whose managers often live near the homes they manage and are likely to coach school soccer teams or join the local Parent Teacher Association.
“In all of our markets, we have local property management people,” says Waypoint’s Brien. Waypoint has limited itself to 14 markets so far, to make sure it has a property management office near enough to all of its residents so that residents can visit with their concerns. “The personal relationship is really powerful.”