FEEDING THE SINGLE FAMILY RENTAL BEAST
sellers begin to reduce asking prices, Garfield added.
1031 exchanges to cash out of higher- priced investment properties on the West Coast and buy more investment properties in the Mississippi River Valley. “They’re taking one asset and turning it into 10. … I’ll get some return on my capital, and 5 to 10 years from now they will sell that portfolio and they will do it again.” Changing the Buy Box Atlanta-based real estate investor and coach Jared Garfield is open to changing both where and what he buys when it comes to single family rentals — with the understanding that there are strategic tradeoffs involved.
“When you are buying in decline … stick to the primary markets — B to A class properties in primary markets that are experiencing population growth,” said Garfield, CEO of ROI Wealth Watch, a company that buys, rehabs and sells turnkey rental homes. “Towards the end of absorption, which is where we are now … you have to pick up C+ assets because there are not many foreclosures in the A and B areas.” Investors may need to stop acquisitions altogether as the market approaches equilibrium, where days on market start to lengthen and
During the most recent SFR buying spree, Garfield also found good opportunities in overlooked submarkets, including the outskirts of the Atlanta metro area. “We found a lot of wealth focusing on areas where others were not,” he said of his acquisition strategy between 2008 and 2012, when his company was buying 10 to 15 homes a month in the Atlanta metro area alone. “The billion- dollar hedge funds weren’t going as far out … we were buying properties for $35,000 that last sold for $170,000. … Now we’re selling those for $170,000.” Garfield also recommends following migration patterns when determining where and what to buy. “Who’s replacing the baby boomers is probably the most important question of our generation,” he said, explaining that absorption of boomer inventory may be challenging given that the next generation is smaller. “We’re seeing a lot of baby boomers start to leave the state of California … they’re moving to Boise, Idaho, and they’re moving to Las Vegas and they’re moving to Utah … driving up the prices in those states to historic highs. “We’re seeing a lot of millennials moving for affordable housing in Rust Belt cities,” he added. Changing Business Models While turnkey operators like Memphis Invest and ROI Wealth Watch are tweaking their acquisition strategies as
“Our average price point that we work in each city is 30 to 50 percent higher than it was 24 to 36 months ago. Whereas a few years ago it might have been easy to talk to an investor about building up a portfolio of cash-producing properties … now rather than cashflow you’re investing for long-term return.”
CHRIS CLOTHIER PARTNER AND VICE PRESIDENT OF SALES AND MARKETING MEMPHIS INVEST
HOME PURCHASES BY OCCUPANCY STATUS SHARE OF NONOWNER-OCCUPIED HOME PURCHASES IN LAST TWO YEARS -3% 47%
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NOV 2018 | ATTOM DATA SOLUTIONS
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