Multifamily History Repeating Itself in Single Family

Don’t have time to read? You can listen to this episode from The SFR Pulse podcast using the audio player below.

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history-repeats-itselfLet me begin with the conclusion: more than a trillion dollars in US real estate equity is going to be consolidated over the next decade. The Single Family Rental industry, which emerged as an institutional asset 10 years ago, is being reborn as a commercial real estate food group now. The apartment industry is adopting single family rental, and things are about to get really interesting.

To see where the path of Single Family Rental is likely to lead, look at the path of it’s more mature cousin, Multifamily Rental, more than 25 years ago.

In 1979, in an effort to reduce inflation, the Federal Reserve raised the discount rate it charged banks to a level that made many of them insolvent. Then, just two years later, Congress deregulated the same banks, allowing them to offer a wider spectrum of financial products, including variable rate commercial mortgages. The combined impact of these two government actions was to (a) render the business model of savings and loans unworkable, and (b) give them a license to gamble to make up the shortfall. Many gambled on risky loans to commercial real estate developers, a business they didn’t have experience in.

By the end of the decade, the music stopped, over 1,000 savings and loans went under, and $400 billion in distressed assets needed to be packaged and sold. The Resolution Trust Corporate was formed to resolve the crisis, and a fire sale ensued.

Commercial real estate operators and financial institutions stepped in to capitalize on the opportunity, and the modern era of institutional real estate investment was ushered in. To add fuel to the flame, the RTC offered very attractive seller financing to enable buyers to leverage their capital 3 to 1.

This chart illustrates how the total asset value of just one form of institutional real estate investment, REITs, rode the wave of this trend.


It’s uncanny how the experience of the last ten years in the housing market runs parallel. Clumsy government action set up the unintended consequence of risky real estate lending, just like in the 1980’s. A wave of distressed real estate hit the market, threatened the overall economy and spawned a government-sponsored bailout.

Smelling blood in the water, deep pockets converged for the historic opportunity. The early players were first attracted by the short term trade, but stayed and built long term businesses. The market liked what it saw. Just like last time.

The government liked what it saw too, and has begun offering fantastic financing options. Last time it was seller financing from the RTC. This time is Freddie Mac, and soon probably Fannie Mae and FHA, who are creating the lowest cost financing ever offered to SFR owners.

In the 20 years following the savings and loan crisis, over $1.8 trillion in multifamily asset value was consolidated by institutional investors. If the pattern holds, capital will flow into SFR over the next decade on a similar scale. Existing players will expand and new players will enter.

And then there’s this. Some of the new players in SFR are folks from the Multifamily industry. As evidence, take a look at the sponsor board for the upcoming IMN Single Family Rental conference. This is the event of record in SFR, and I don’t ever recall seeing a presence from the commercial real estate industry. But there they are. And we welcome them with open arms.

Top 5 Ways to Screw Up a Portfolio Listing

Don’t have time to read? You can listen to this episode from The SFR Pulse podcast using the audio player below.

Listen to more SFR Pulse episodes.

screw 2 When it comes to SFR portfolios, we’ve seen as much as anyone in the business. (Adam has the scars to prove it). Selling occupied portfolios is unlike anything else in real estate. The industry that sells houses, Realtors and the MLS, assumes houses will be vacant. Since these aren’t, none of the usual tricks work. There can be no open house. There will be no showings. You can’t put it in MLS and it absolutely can not show up on Zillow!

(One of our early clients actually said, “I want you to sell this for market price, but you can’t tell anyone it’s for sale.)

As a seller, you are understandably horrified with the prospect of disrupting your tenants and their rent payments, so you need a new way. That new way is being proven every day in the SFR business, and patterns are emerging. We will use this space to share what we learn, starting with the top 5 ways to screw up a portfolio listing.

1. Selling on cap rate and ignoring market value.

SFR is quirky is many ways. Pricing is certainly one of them. Buyers underwrite on net yield (cap rate) but won’t pay a nickel higher than comps-based market value. More often than not, popular AVMs provide the ceiling on what a buyer will pay, and they usually demand a slight discount.

How slight? Of the last $100,000,000 we closed, the average selling price/market value ratio was 94.5%. Not one house traded over market value, regardless of the net yield, but there weren’t any serious discounts either. In fact, 94.5% is within the range of friction costs to sell on the MLS market, so buyers and sellers both ended up ahead. Tenants too.

2. Relying on pikers as your distribution channel.

The Urban Dictionary defines a piker as;


This definition can easily be applied to “one who trades SFR portfolios”. I don’t blame the pikers themselves. The industries that market and move real estate have never lifted a finger to develop professional services for SFR investors, so almost anyone who finds themselves in possession of a portfolio tape has no idea what to do with it. So they sling it around.

Slinging your portfolio out to anyone who will take it and pass it along is the quickest way to blow a debut and turn a shiny new portfolio into a tired old nag. Like the old deodorant commercial says, you never get a second chance to make a first impression.

3. Pricing the whole portfolio but not the individual assets.

Every buyer wants to cherrypick, and as a seller, you want to let them. Buyers are willing to pay the most for the assets that really fit their box. Forcing them to buy things they don’t want will drag down your overall execution price. Pricing the portfolio with individual prices for each asset is critical to optimizing your outcome.

Here is how it goes, when it goes wrong.

Seller: “I want $5,000,000 for my 50 unit portfolio.”

Buyer: “I’ll take these 25 for $2,500,000.”

Seller: “You picked the best 25 houses. You can’t do that!”

Buyer: “Huh?”

When in doubt, take your $5m price and spread it out over the portfolio using a popular AVM to establish the percentage each unit contributes to the whole. We can help you with that.

4. Not being transparent on condition.

It is not a sin to be a bit foggy on the actual condition of your houses. You don’t live there, and the systems designed to keep you abreast of the wear and tear are spotty. If buyers are willing to underwrite and sign purchase contracts sight unseen, it’s in your best interest as a seller to give them accurate guidance on the condition.

We’ve adopted the C1-C6 condition rating system used by appraisers, and it works great for an underwriter who needs to estimate cap ex expenses. If things are turned up during due diligence that buyers don’t expect, you can expect a renegotiation. Incidentally, 37.5% of our last $100m in closings were re-traded before closing.

5. Moving the target.

Choose the assets you want to sell, set your asking price, package it up, go to market, and don’t change the property mix unless absolutely necessary. If assets sell locally, remove them from the portfolio right away. Nothing says “I don’t mind wasting your time” more that letting busy people underwrite properties that are no longer available.

Don’t underestimate this one. One of the driving forces in decision making by professional SFR buyers is what to spend their time on. An incomplete package, unrealistic gross yield (price) or a moving target can kill your chances of being underwritten.

This is all good news. A new market has been forming for this fantastic asset class. The days of kicking tenants out of a rental in order to sell it are coming to a close. Please comment and engage with us on this blog. The more we work together, the sooner we reach the promised land.

OwnAmerica CEO Greg Rand Says the National Association of Realtors is Hurting Renters when it Attacks Investors

Ever since the initial public offering for Blackstone’s Invitation Homes with Fannie Mae’s backing, opinions have been circulating regarding the Single-Family Rental market. One of particular interest is that of the National Association of Realtors.

To quote HousingWire, “NAR made its stance on investors clear on several occasions: Investors are creating more competition for first-time homebuyers, possibly even keeping them from homeownership.”

NAR President William Brown wrote a letter to Mel Watt, Director of the Federal Housing Finance Agency, making it clear he believes Fannie Mae’s involvement is only assisting large institutions to compete with homebuyers. He goes on his letter to state that, “investors drive up the price of rents and remove affordable inventory from the hands of American homeowners.”

However, Greg Rand, CEO and Founder of OwnAmerica, made it clear in his interview with HousingWire that he is thinks NAR forgot about a very important constituency in the housing market – tenants.

Home Renters are Important Too

Rand believes that in its efforts to champion homebuyers, the National Association of Realtors is drawing a line in the sand against investors, and their tenants.


Rand says, “If a first-time homebuyer loses a house to an investor, that means that a renter family is going to live in that house, and they deserve housing options in safe neighborhoods and good schools as much as first time buyers. I don’t think it’s right for NAR to draw a competitive line where investors and renters are on one side and homebuyers and NAR are on the other. I would say homebuyers are competing with renters, and that’s the way the market works.”

There are many people in the housing market who benefit from investors in the Single-Family Rental space, including existing owners who property values are supported by investor demand.

“The turnaround of the housing market in 2011 was driven by a 65% increase in investor activity in a year that owner occupant home buyer activity was down 15%,” said Rand. “Investors played the dominant role in healing the housing crisis.”

Rand believes that rather than drawing a line between homebuyers and investors, the NAR should be more attentive and inclusive to the needs of all homeowners, even the ones who are not owner occupants.

NAR Being Hypocritical

Rand points out the National Association of Realtors cheered as home prices reached unsustainable levels in 2006, and when the bubble burst, created distressed property training certifications to help its members capitalize on foreclosures and short sales.

“The moment those homeowners lost their home to the crisis, they became tenants and second class in the eyes of NAR,” states Rand.

Rand further makes the point that, according to NAR’s own statistics, more than 1,000,000 home sales every year are investor purchases. Those home sales generate an estimated $4 billion in fees to NAR’s dues paying members.

What Do You Think?

What do you think about NAR drawing a line in the sand between homeowners and investors? Leave us a note in the comments below!

Property Management Growth: More Deals, Less Renovation

Originally Posted by Adam Stern on Oct 21, 2016

OwnAmerica President, Adam Stern, hosts Flipnerd’s REI Classroom and covers property management growth and how more deals with less renovation can work in your favor.

Property Management Growth

Webcast Transcript

We’re going to talk about a turnkey provider that bought an SFR portfolio, set the buyers expectation in terms of what kind of yield in asset they should expect, and is now looking to exit the investment and sell their term equity that was in a portfolio, but now it’s being sold individually to a retail investor.

The real key thing about executing on this strategy is making enough money so that each individual transaction makes sense for you as a turnkey provider. But also, and if you’re like most turnkey providers, building your property management company and putting more doors under management to grow that section of your business as that’s going to be a driver for, you know, every person that owns a property is a potential buyer, and every person that owns a property in the future might be a potential seller.

So the idea of building property management, at the same time driving your individual sales to a point where, again, if you’re used to doing 10 transactions a month and making $10,000 to $15,000 plus per, doing 30 transactions a month and making $5,000 to $6,000 or $7,000 per doesn’t sound like that bad of a trade-off if, again, you’re happy with that results, and you’re happy with not doing the renovations, and you’re happy with not doing the tenanting and the aggregating of the actual portfolio acquisition. And the growth of your property management company is just going to benefit.

So this all kind of coalesces into a cohesive strategy where foreclosures are low. They’re back to historical norms. You’re out there looking for inventory.

We at OwnAmerica have discovered a massive amount of inventory that is just waiting to be tapped into. We’re going to be tapping into it via the OwnAmerica platform which has launched, or I should say relaunched as a portfolio management tool, allowing SFR owners to track and optimize their portfolio until it’s time to sell. And hopefully, if this all made sense to you, you’re going to be a buyer on our platform.

So I invite you to see it at, and if you’d like to reach out you can reach us.

Create Your Free Account on OwnAmerica

Is your interest piqued? Ready to create a free account on OwnAmerica? Find out what your SFR portfolio is worth and track your valuation over time. If you’re ready to sell your full portfolio or properties within your portfolio, list your properties. If you’re looking to buy and expand your portfolio, view our available inventory and make an offer.

Register for your free account today and see just how easy it is to join OwnAmerica’s network of SFR investors!

Search OwnAmerica SFR Inventory

The Marketplace for Single Family Rental Portfolios

Originally Posted by Adam Stern on Jul 26

OwnAmerica President, Adam Stern, hosts Flipnerd’s REI Classroom and shares a few tips on how to get buyers to take interest in your rental portfolio.

The Marketplace for Rental Portfolios

Webcast Transcript

I wanted to talk to you about something that has been a challenge for single-family rental property portfolio owners, try to say that three times fast, which is making a market or finding a market of buyers that will want to look at, and underwrite, and have interest in buying your single-family rental property portfolio.

The way OwnAmerica has done it, and we’ve developed this concept over a lot of years, through, we offer free analysis and valuation, which is free and cool for owners to use. They upload their portfolios, they get a free valuation, and they get free packaging which attracts a lot of inventory.

And the idea behind it is if you attract a lot of owners that own properties, an owner that owns 10 probably has aspirations to own 50. A guy that owns 50 probably has aspirations to own 200. So the way we make a market is by giving away free data, free valuation, and attracting owners to one single platform where they can track their value and congregate in one space.

That works out great because we get a lot of action and a lot of people looking at our platform to either look at their own portfolios or other people’s portfolios. But the challenge is also making a local market for these kinds of portfolios. And we’re of the opinion, as opposed to a lot of the investors that we talk to, that real estate agents are not useless. Some of the things we have done with real estate agents . . . and we were real estate agents in the past.

My partner, Greg Rand, ran a really large brokerage company in suburban New York called Rand Realty. I’ve been registered in the residential brokerage industry for a lot of my career. And there’s an old kind of disposition toward investors thinking agents really can’t do very much for them.

What we’ve been able to do is, through our platform, incorporate agents who are trained and certified through a company and an organization called the Five Star. They offer a certification called the Five Star Certification. They get trained in how to be an investment property expert, and they essentially get assigned to portfolios on our site, or they even self-upload portfolios to our site. We train them and we talk to them every single week about doing the following, which puts them in the realm of very useful realty professionals to investors.

They take a portfolio and they go around and they visit local investment clubs. They go to real estate investment meetings. They are part of the real estate investment associations locally. They talk to accountants and attorneys, and dentists and doctors, and anyone that wants to build their wealth through real estate. And they take what we have, which are stabilized single-family property portfolios, which don’t require much work, are cash flowing on day one, and you can buy and just kind of start receiving income just so long as you trust and know the property management company.

So they work from the ground up, we work from the top down, dealing with large caps and institutions and all the big guys that buy on our website. And together, together we create this market of owners and buyers and local people that, in a world like residential real estate portfolio sales, where there is no friction-free marketplace, this is the beginning of something really special.

And that’s how we’ve been able to create a situation where, if you have a portfolio, there’s a place to bring it, there’s a place to value it and track it, and there are people that are trained in this industry to actually create a market for it. So I appreciate you guys watching. You can check us out at

Create Your Free Account on OwnAmerica

Is your interest piqued? Ready to create a free account on OwnAmerica? Find out what your SFR portfolio is worth and track your valuation over time. If you’re ready to sell your full portfolio or properties within your portfolio, list your properties. If you’re looking to buy and expand your portfolio, view our available inventory and make an offer.

Register for your free account today and see just how easy it is to join OwnAmerica’s network of SFR investors!

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