Over the last few years, investing in Single-Family Rentals has been a great opportunity for many institutional investors, but at the same time, the nature of the SFRs and characteristics of its residents provide unique challenges, especially from the property maintenance perspective. Here are the top three facilities maintenance challenges for an SFR portfolio to consider this year:
Challenge #1: Real-time Visibility of Total Operational Costs
CFOs and controllers review numerous systems to manage costs and margins. They need real-time visibility on an SFR’s operational costs to identify potential savings and preventive measures. The sheer size of an SFR requires a full view of performance metrics. They have a challenge to manage numerous houses across a region versus a centralized location to service, which translates into more intense management and higher property management expenses. There is simply more to maintain. SFRs provide a standalone home, which means more square footage per resident, their own roofs and garages, plus private yards. SFR overall property care requires additional support for landscaping, driveway and fence repair for each resident. If a property portfolio spans across 20 states, a more expansive team of contractors needs to be sourced and managed in a larger area. Each regional manager can have his own processes and databases, but aggregated data from every region is not available for the finance team. Having a complete look at this data helps CFOs determine efficiencies such as if an SFR should insource or outsource their contractor network.
For more information on quantifying your property management costs, check out our whitepaper, How to Calculate the True Cost of Facilities Maintenance.
Challenge #2: Manual Administrative Processes
SFR properties usually have a set group of contractors who maintain their properties. Managing all of these technicians and the complete asset inventory is commonly a manual process. These records are usually managed in a spreadsheet, by one person, with limited checks and balances. On an SFR scale, this could mean thousands of work orders, invoices, and contractors that have to be managed fast. Manual processes cost 20 times more than companies with automated processes.1. As experienced as a facilities manager may be, there is always the element of human error at risk. The more times an invoice is touched, the greater the chances of making a mistake or it getting lost. Studies show that the cost of a lost document could reach $120, and the cost to replace it – up to $220.2. Institutionalized SFRs have the greatest potential for increased efficiencies through technology.3.
Challenge #3: Managing a Full Spectrum of Contractors
SFRs with properties across multiple climate regions require a full spectrum of contractors – from snow removal, landscaping, HVAC repair, roofing, and more. For a 20-state SFR with thousands of properties, sourcing and vetting your maintenance team is a monumental effort. Not only do you need a multitude of tradesman available and nearby, but you need to manage all of the paperwork for each technician such as current certificate of insurance, specialties, rate cards, vendor scores and history. A contractor armed with the right information, type of equipment, and in the right proximity to a property yields a cost-efficient work order. 4.
Explore these three special areas in your SFR portfolio to identify property management opportunities for streamlining, consolidation or automation of your operations.
SOURCE:
- https://www.aiim.org/pdfdocuments/pitfalls.pdf
- AIIM’s (Association for Information and Image Management) 8 Reasons You Need a Strategy for Managing Information -- Before It’s Too Late
- http://www.rentalhomecouncil.org/media/Green-Street-Advisors-Single-Family-Rental-Primer.pdf
- https://www.amherstcapital.com/documents/18028/0/US+SFR+Emerging+Asset+Class+-+November+18+2016/79fc7162-71b4-4f3d-9d96-8895a45c9261