The 4th Annual Single Family Rental Property Management, Operations, and Tech Forum, hosted by IMN in Austin, Texas, was a great opportunity to learn and connect with some of the top property managers, institutional investors, and PropTech providers in the industry. Sunroom enjoyed the opportunity to participate as a sponsor, host an after party, and have our CEO, Ben Doherty, join a panel alongside other leading experts. Here are some of the top takeaways from the session.
The rental market has softened, but operating costs are up
Rent spikes were common with many priced out of the housing market over the past few years. However, even with the market starting to slow, many may not want to take on mortgages with higher interest rates. But that doesn’t mean rents will continue to rise, especially if household incomes are staying the same.
“Our data shows rents since the beginning of 2020 increased by over 30%, whereas household incomes only increased by about 18%. Rents may start to flatline simply because household income is not increasing at the same rate,” shared Ben Doherty, CEO at Sunroom. “In this scenario renewals become really important so you can retain your tenants at their current, locked in rate.”
If tenants don’t renew, Doherty cautioned, property managers may be having difficult conversations with their owner investors a year later about having to list at the same or even lower rates than you have currently. Unfortunately, with higher operating costs, this will have a negative impact on the net operating income (NOI) for investors.
“How can we make sure that in any event, that we’re actually starting to drive down the operational expenses of rentals?”asked Ray Hespen, CEO and co-founder of Property Meld. “It’s a good discipline no matter what, but I think it’s going to be especially in the limelight in the next 2 to 3 years as a focal point for investors.”
Leverage technology to mitigate the impact of macroeconomic concerns
Technology plays a huge role in resident expectations. Most of the traditional platforms used today are property-focused, and not centered around the needs of residents. Fortunately, there are leading PropTech companies that aim to solve this by providing a better experience for renters, which will ultimately help drive tenant retention and help you maintain a healthy NOI for your investors.
A consequence of the macroeconomic impact on the rental landscape is more application fraud. Improved technology helps property managers mitigate this, by catching fraud from the beginning. Tools with facial recognition and automated income verification are more accessible to property managers and will help lower eviction costs and vacancies.
Tech can also be leveraged not only to drive better customer outcomes but to also make your operations more efficient and your employees lives much easier. The hiring market is tough and it is more important than ever to retain your top employees. And it’s possible your leasing team is wearing a lot of hats compared to many years ago when each person specialized in something. Arming them with technology will help streamline your internal processes, reduce errors, and keep your team engaged.
"The ability to operate scattered site SFR at scale is valuable for the entire industry." -Brian Daughtery, RealFoundations
There is a convergence of the asset classes, with many investors taking on a combination of both single family and multi family rentals. There is a lot of knowledge to be gained on either side.
Single family operators are buying properties further away from city centers, which can be tough from an operational perspective because it is harder to manage these properties. Single family operators can lead the way for multifamily by learning how to adopt more mobile workforces to really distribute the boots on the ground in a more efficient way to bring down the costs.
The general consensus is that it is an exciting time, with a focus on generating more rental supply to meet demand.
“We’re starting to see across both our co-living inventory as well as our traditional, rents slowing and potentially coming down a little but I think that’s a pretty temporary dislocation,” shared Andrew Collins, CEO and co-founder of Bungalow. “It’s a very interesting time right now, but there are a lot of corollaries that are set up differently from 2008 - 2009, and there’s probably going to be a lot of opportunities come middle to back of next year.”
