The session covered property tours extensively, as we considered the work that operators are currently doing to automate and – where possible – centralize core processes. It made me think about some work that I’ve been doing recently in the single-family rental (SFR) space and some things that multifamily operators can learn from their more geographically-dispersed brethren.

Why pay attention to Single Family Rentals?

It’s a good question. A few years ago, when I was researching the first-ever 20 for 20 report, there was a surprising level of push-back against allowing prospects to self-show in multifamily communities. By that time, SFR operators had already achieved impressive success with self-guided tours, so why wasn’t multifamily following suit?

Of course, there are different business drivers at play: self-show is a necessity in SFR because the properties are usually too dispersed for a multifamily-style leasing model. SFR operators do not have to account for common areas, neighbors within the same building, and the various challenges associated with apartment buildings. But the lockdown phase of the pandemic normalized self-show in multifamily, and the industry has largely started to follow SFR’s lead.

That’s one good reason for considering paying more attention to SFR experiences and operating models. Another is that an increasing number of multifamily operators are diversifying into the SFR space. According to this year’s 20 for 20 survey, 20% of the (multifamily) respondents were at some stage of moving into SFR operations.

Are multifamily and SFR converging?

The trends pushing investors to get into the SFR business are compelling. Young renters considering moving to their first single-family home are increasingly priced out of buying one. At the same time, attitudes to home-ownership among renters seem to be changing. For many, renting a house where services like internet and landscape maintenance are part of the package is more appealing than buying a house and being responsible for maintenance. 

The rise of work-from-home has also made SFR more attractive as renters move further from the office in search of more space. But the bias amongst multifamily operators and investors seems to be towards a specific kind of SFR: “Build For Rent” (BFR). In this model, a developer creates neighborhoods of houses and runs them similarly to multifamily communities.

BTR (referred to by some as “horizontal multifamily!”) is a natural extension of the multifamily model. While BTR is a natural point of convergence between the asset classes, it does not offer the same range of learnings for the multifamily industry (like the self-show example above).

In the more traditional, opportunistic SFR model, also known as the “scatter-buy” model, operators accumulate portfolios of assets that are separated by distance. Operators in this space have had to figure out solutions to new problems of distance and scale, rather than designing neighborhoods to which they can apply a multifamily operating model. I think they have much to teach the multifamily industry.

Photo by David McBee