2021 could be the ideal year for investing in SFR properties. Here’s where to find the support you need to grow your residential property portfolio. “More U.S. households are renting than in any point in 50 years.” When Pew Research Center made headlines with its analysis of Census Bureau Housing Data on renting versus homeownership in 2017, the broader public was clued in to the trend SFR investors had been leveraging for some time. The growth comparison was stark: While the number of renters increased by 23 million from 2006 to 2016, the number of homeowners increased by fewer than 700,000.
Market momentum continues to support a single-family rental investment strategy, as families increasingly seek more space without the long-term commitment of homeownership. In fact, the Urban Land Institute (ULI)/PricewaterhouseCoopers (PwC) report Emerging Trends in Real Estate® 2021 suggests that single-family homes marketed to moderate-income renters may hold the strongest investment and development potential among residential property types in 2021.
Many SFR investors agree that 2021 may be an opportune moment to grow residential real estate portfolios. “It is a great time to scale,” says Stacy Marshall, assistant vice president, Business Development & Strategy at ServiceLink. “Although inventory has recently been low due to increased demand during the pandemic, SFR properties have become more profitable than they were a couple of years ago.”
Inventories are also expected to grow as the foreclosure moratorium is lifted. “We are beginning to see an increase in distressed housing, which opens up new opportunities for investors,” Marshall says. “Where in the past these investors might have purchased, fixed and flipped these properties, now they’re doing the fix but then renting instead of flipping to take advantage of the growing demand.”
How to Scale Your Residential Property Portfolio
Scaling an SFR portfolio requires a variety of capabilities. “It’s important for investors to perform market analytics to gain an understanding of which MSAs they want to expand into,” says Terri Hunter, vice president, national sales executive at ServiceLink. “Then they need to act quickly to get those areas up and running. Having a partnership with a national organization with capabilities in valuation, title, property preservation and auction services can help them accelerate the process of scaling their residential property portfolio.”
Hunter identifies several actions investors can take to position themselves to successfully scale their residential real estate portfolios:
Seek specialized valuation expertise
SFR appraisals are not typical appraisals; they require seasoned appraisers with experience in this type of transaction's special requirements. “SFR appraisers need to provide both as-is and as-repaired values, which means taking into account budgets, surveys and other factors related to repairing or upgrading properties; they also need to understand the urgency of each transaction,” Marshall says. “At ServiceLink, we handpick appraisers with SFR experience in markets across the country to be part of our dedicated panel. The investors we work with benefit from this experience when they request either a Desktop Appraisal with Inspection (DVI) or traditional appraisal product.”
Quality control is, of course, vital to the valuation process. An ideal valuation partner will not only comply with GSE, and USPAP requirements, but also be able to incorporate custom lender requirements into their quality control checklist and processes.
Be prepared to close quickly
A partner with centralized title and close capabilities can speed your decisioning, title clearance and closing. Since many SFR properties come onto the market as a result of foreclosure, you need to be able to trust your partner to make business-based title underwriting decisions and identify and clear any title issues as quickly as possible, and then close the transaction smoothly. ServiceLink has in-house access to underwriters for accelerated decisions and a centralized team with no down-lining that doesn’t have to hand off to another title office. This greatly expedites closing, along with the cutting-edge technology used in the process.
This technology is supported by teams of title curative specialists and other experts experienced in the nuances of SFR properties. Investors who leverage ServiceLink Title and Close, backed by this team, often find they can close about 10 days sooner than they would have going the more traditional route.
Consider outsourcing inspections and day-to-day maintenance
As you grow your residential real estate portfolio in various geographic markets, having a reliable resource to conduct condition, move-out, work-in-progress and disaster inspections, as well as providing day-to-day property maintenance, is important. A reliable, responsive property preservation partner offers you the assurance that your properties are protected and kept up to municipal, county and state code.
“Outsourcing inspections and day-to-day maintenance lifts a heavy burden from investors,” says Hunter. “For those who don’t have full staff coverage, ServiceLink provides a national solution. We cover thousands of investors nationwide, so if we get a request for an inspection, or repair or maintenance services on a particular property, we can respond right away. We have the capability to customize inspection reports, too, so that they include all of the information and photos the client requests.”
Have a source for properties
Zeroing in on the right properties can be a challenge when you’re approaching a new market. You need an insider — someone who knows neighborhoods, market values, median incomes and more. The auction arm of ServiceLink provides all of this to its investor partners through ServiceLink Auction, an easy-to-use digital platform that enables investors to find a property, make an offer and close the deal.
Choose a partner with national scope
Working with a national partner offers important advantages: accelerating your entry into new markets by leveraging that national presence and eliminating the need for you to contact providers in each state, for starters. If you choose your partner carefully, you will also have access to specialized expertise and services to take you all the way from sourcing properties to closing transactions and maintaining your properties.
As for scalability, because national companies process thousands of transactions each month, they are prepared to take on additional volume at a moment’s notice. Your partner should support your portfolio growth at every turn, by streamlining processes, simplifying workflows, and communicating clearly and consistently. With the right national partner, you can close deals faster and scale your residential real estate portfolio more quickly.
