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Single Family Rentals Ignite Management Boom

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By Steve Cook

The explosion of single family rental houses bought by real estate investors and rented to a single tenant is creating a new category of property management companies to serve them.

Last year, 1.2 million U.S. properties were acquired for investment purposes, up from 749,000 in 2010, according to RealtyTrac. This year, the investment boom has continued, with investors accounting for about 20 percent of all home sales. With the vast majority of investors following a “buy and hold” strategy rather than flipping, millions of properties have entered the rental inventory. Two months ago, a study by CoreLogic found that single family rentals have outpaced multifamily, accounting for 54 percent of all rental units in the nation.

Though many small investors manage their property themselves, a growing number are turning to professional property management companies, who charge about 6 to10 percent of gross rents or a flat fee. For unexpected fees, like evictions and unplanned vacancies, professional managers can help limit costs. For example, a new survey by All Property Management, an online property management network specializing in the single family rental category, found that it takes one to two months to remove a non-paying client and most evictions average between $1,000 and $3,000 in costs.

“Single family rentals will continue to grow,” says All Property Management’s Dennis Green. “Another one and a half million foreclosures and shadow inventory are in the pipeline. Single family homes appeal to a different tenant than multifamily, many of them families that have lost their homes through foreclosures or short sales.”

A new segment of property management companies is springing up to serve investor-owned rentals. Some 30 to 35 percent of investor-owned homes now are managed professionally, most by small, local companies like those in APM’s network of nearly 2,500 property management companies or Real Property Management’s 200 franchisees.

A fifth of All Property Management’s clients have been in business less than two years and 70 percent have less than 10 people on staff. The median number of properties they manage is 175 units, though 17 percent have more than 500. Some 70 percent of APM’s managers expect to grow significantly this year.

For more information, visit www.realestateeconomywatch.com.

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