Kevin Ortner is the CEO of Renters Warehouse, a national residential property management company headquartered in Minnesota which manages more than $3 billion in residential real estate, servicing 12,000-plus investors across 17,000-plus residential homes in 33 markets and 18 states. Ortner recently spoke with MReport about some of the current challenges facing the single-family rental space and how to address those challenges.
What are you finding that some of your clients' biggest needs are?
Consistency across the markets. When we have a client that owns properties in Florida, Minneapolis, and California, one of the biggest issues is there is not consistency of the delivery of that service. That's what we are trying to change as we go out and become a national player. But we have to find partners that can work with us to deliver that consistent experience. Similar or same pricing on things as we have to rehab a home. There are going to be local variances on prices, but a toilet shouldn't go from $200 to $500 from one market to another. Finding consistency is the biggest thing.
Standardized reporting and processes is another big issue. One of the challenges the industry has when you're dealing with large portfolio owners across the country in different places is they have to work with smaller property manager on the East Coast and a smaller property manager on the West Coast, and the reporting is different. The accounting statements they get are different, and they have to interpret a bunch of different things. So bringing that standardized consistent experience is really one of the biggest needs with our clients that we're trying to address right now.
How are you addressing those issues?
We're relying heavily on technology. We're developing some of our own technology as well as trying to partner with the right third-party providers for that. We actually haven't cracked the code entirely on that yet, but we're doing some in-house developing on technology as well as looking at a lot of new software that's coming into the space. For a long time, the SFR space was ignored and this was an industry that no one was really paying attention to. Now, everyone is starting to see the opportunities. We're starting to see technology companies jump in to develop tech specifically for the SFR space, which has never happened before, and we're seeing a lot of other industries jump into the space as well. We're vetting those and finding which players will work, but ultimately we believe building our own and insourcing that tech will be the answer, and we've already started on that development.
Where do you see the SFR market in, say, a year or five years?
I think what we're going through now in the SFR space is what the apartment and multifamily world went through in the late '80s. Before the late '80s, apartment buildings were owned by individual owners. They weren't owned by institutions and REITs. When the opportunity presented itself in the late '80s, it was determined to be a really legitimate asset class. I think we're seeing that now with the SFR space. I think we're going to see the industry mature. We're going to see larger national players and more sophisticated regional players in the space and more tools and technology to deliver that consistency we want, and I think the space is going to continue to grow and opportunities are going to grow.
I think what we're seeing with the market right now is that the homeownership rate is at a 52-year low, yet the market is hot, and homes are selling, and things are moving, and so what does that indicate? It means that people are buying more than one house. We're seeing ordinary mom and pop investors that live in a home and decide, "I'm going to get into this. I'm going to buy one or two single-family investments." And so we're seeing a shift in the demographics of what's happening across the country. More people are owning investment properties to rent, and frankly more people are renting than buying. The last number I saw was three and a half million new rental households that will be added between now and 2020. That's huge. We're shifting to more of a renter nation. People are renting longer, and I think that's going to provide more and more incentive for people to continue to be in this asset class and to grow it and really evolve into something that is not so fragmented.
Editor’s note: The Five Star Institute will present its second annual Single-Family Rental Summit in Frisco, Texas, on November 1 to 3. Click here for more information or to register.
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