Residential Property Management Attracting Capital

There are an estimated 22 to 24 million, one- to four-family units in the United States that are owned by investors who are renting to families. This represents a huge housing segment that remains served mainly by small- to medium-sized locally owned and operated property management firms. While there are a few national franchise organizations that have built large national scale, there are now few national firms that seek to own and operate a nationally scaled residential property management business.

by Steve Murray, publisher

Property Management Trends

Renters Warehouse, a relatively new company based in Minneapolis, has set its sights on building a national residential property management business where the company will own and operate the business. Originally started as a franchise business, the firm switched its sights on owning and operating its businesses going forward. Some strong franchises in its systems remain, but the company is focused on buying and growing its presence.

According to Anthony Cazazian, the firm’s chief investment officer, “Our goal is to be in 60 markets managing 200,000 properties within the next five years.”  Cazazian said that the firm is also pursuing growth through a related unit called Residential Portfolio Services that will focus on larger, more institutional owners of residential property managers and owners of large portfolios of residential for rent properties.

Centralized Services

“This is a large, fragmented market where we think the investment of capital and centralized services can create economies of scale for a company like ours. While there are thousands of residential property management firms, there are only a few that have achieved a size commensurate with the market size,” says Cazazian.

“We think this is a great opportunity to apply capital and centralized service techniques. Such services as rent collections and accounting, repair and maintenance and vendor management can be done more effectively and efficiently for the benefit of both the owners of these properties and the tenants as well.”

While it is likely that most single-family rentals are owned by individuals who own a couple of properties and manage them directly, there has been strong growth in those who own five or more units and are turning to professional property management firms who require professional management services. A growing number of brokerage firms have either entered the business recently or are seriously considering an entry. Those who have such businesses report to REAL Trends that once a certain level of properties under management has been achieved, the business is both a profitable one and provides additional brokerage opportunities for cross-selling services.

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