Lori Eshoo founded National Tax Search (NTS) in 1997 and serves as the company's President and CEO. She has 34 years' experience in commercial and residential property management, valuation, and tax compliance. During her first 15 years in the industry, Eshoo served as National Account Manager for Real Estate Tax Services and as Tax Manager with VMS Realty Partners. Eshoo has been recognized for her entrepreneurial excellence and innovative vision through the Ernst & Young Entrepreneur of the Year Award and has received ABA Stevies Awards for the International Women Entrepreneurs in Technology and Best Entrepreneur in Business under 100 Employees.
Eshoo recently spoke with MReport about the challenges occurring within the single-family rental space, how the industry is changing, and what investors should know before they enter this sector of the market.
What trends are you are seeing within the single-family rental space?
Risk continues to grow as it relates to the products that I manage for owners or lenders. The market is changing over on the government side. Within that, property tax—highest liability, highest expense for a real estate owner—changes.
Agencies are not as willing to negotiate with property owners, and taxes are moving very quickly, which they have not in the past. Markets are changing overnight every year. They're shortening their timeline in which they're taking delinquent taxes.
The typical foreclosure process for a lender takes 120 days. Within that timeline, however, if they're not aware of what's going on with their non-escrow loan and they don't act until closer to the end, they could have lost that asset to tax sale within that timeline. You must understand every area of the country and what elements you need to pay attention to so that you don't get into a risky situation and lose your asset.
How do you keep on top of that sheer volume of information?
We have an entire agency department that has been gathering data for over 21 years. We go through a thorough review of all the data elements for each new loan or asset that comes in. What do we need in order to manage and pay property taxes, down to penalties and interest? How do we get the information? Can we get it automated or not?
Depending on what state you're located in, you're either in a tax-sale state or a tax-lien state. There are two different processes. In tax-sale, they'll sell your taxes to a buyer and you normally have a redemption period. Even as an investor, if it is sold, you still have some time to redeem it back. In a tax-lien state, it may take longer, but by the time it's in that process, the asset is gone. You have no time to redeem. You really have to understand the timing and what state you're working with. That's what we do all day long.
We update 90 days before each first installment, throughout the year. We're asking specific questions for thousands of agencies, undertaking all of the detailed administrative work. For instance, who do we make the checks to? In addition to that, we ask questions about the tax-sale process—has it changed, is it changing? We gather extremely detailed data so our clients don’t have to.
What are some of the challenges that you see as far as continuing to evolve and adapt to working in this space?
The biggest area that we're focused on with our client base is the tightening and shortening of timelines in which your risk will occur. Managing property taxes, we're on top of that every year. We know things are moving. In Cook County, where we're located, your second installment is due in August. The tax sale of that second installment will go as quickly as December, whereas residential comes after commercial and that was always a year after first-quarter tax sale. It’s very quick.
We're seeing that across all areas, but the other area is HOA in super-lien states. Times are changing. Management companies are going to take more of a role and move through the foreclosure process quickly, which is going to cause more risk for investors.
The other challenge is PACE loans, which are an administrative nightmare. A lender may say, we don't want to insure any loans that have PACE involvement. Well, the problem with PACE loans is that you can search a property at the time you are underwriting and it may not have a PACE loan. But who's to say the owners can't take it out two months later? There's no notification to a lender that this property owner is taking out this loan, but it affects the overall property taxes because it will be assessed as a special assessment to your property tax. It can be a span of 5-25 years of paying back these loans. Then these loans transfer, property transfers, and the buyer is not aware of it. There's a lot of confusion around PACE loans and the overall management and administration of that product. We research and manage PACE loans to reduce risk for our clients.
What is your advice for investors looking to enter the single-family rental investment space?
Have a thorough underwriting of each one of your assets as you're boarding. You're buying portfolios and you may pick and choose and say, do a snapshot of my risk on these portfolios. That will give you an idea of what you're buying into, but once you've purchased the property, you need to do a thorough delinquency search, check on your HOA, and make sure there's no PACE loan assessed as a special assessment.
Once you complete that review, then you will know what you're managing. If you do have a delinquent or sold tax out there, we'll give you the timeline you have to rectify that situation before you lose your asset. It may not be tomorrow. You may have two years before you have to do anything, but you need to be aware of what you own and what you're dealing with.
Is there anything you wish that more people understood about your job?
It's complex and high liability. We offer a kind of “insurance.” As a property owner, move that risk off to us as your trusted specialists. We take on your risk. We know what we're doing, and we have some of the industry’s most comprehensive data. We have decades’ worth of experience getting the necessary information. It’s why so many portfolio owners and lenders turn to us to reduce their risks.