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» VISIT US ONLINE @ DSNEWS.COM 51 Sells said the "reality TV factor" has also impacted where more experienced investors are putting their money, with many bigger buyers shifting away from major metropolitan areas such as Atlanta or Charlotte, leaving those markets to the starry-eyed new arrivals. "ere are a lot of what I call 'one and done' investors in those regions. Fortunately, the wholesalers usually aren't working with those guys. For big buyers like us, we're still dominating the markets that we're in." PointCentral's Miller said that one sector seeing growth in the current market is the "build to rent" concept—properties being purpose-built to become rental homes. "Builders are seeing high land costs, high labor costs, and high material costs. ey're also seeing this continued demand for rental homes," Miller said. "While purpose-built rentals may still be expensive to build initially, it helps the operator and the owner see the return they need versus just buying an open home on the market." ese homes often don't require the same level of investment as far as amenities, since it's presumed they will see turnover and not become someone's "forever home," so items such as carpeting will likely have to be replaced multiple times over the years as new tenants cycle through. WATCHING FOR LANDMINES In spite of all the opportunities for profit property investment offers, there are of course just as many potential pitfalls. e experts DS News spoke to warned about the dangers of crafting an investment strategy based solely on the initial purchase price of a potential rental property. Time and again, they said, they had seen this approach come back to bite investors. "If a property looks too good to be true, it often is," Ortner said. "A lot of times you see people get excited about property that's yielding 20 percent, but they forget it's a lower quality home that's going to need more routine maintenance and more preventative maintenance. Doing your diligence on the asset and understanding if you are going for those really high-yield properties, you have to know your risk and understand that." Nor should this advice only extend to a property's initial purchase price. Gannaway cautioned that trying to cut corners when it comes to insuring a property can also prove disastrous. Cheaper prices may look like a bargain initially, but that could be cold comfort when the time comes to file a claim and the bargain policy has gaps in critical areas. "Say an investor buys an insurance policy and finds out after the loss that it has a vacancy clause in it," Gannaway posited. "If I buy a policy and that property has been vacant more than 30 days, and then I have a fire loss or a vandalism loss after that, there's no coverage. ey bought this house and now it's a total loss. How are they going to pay for it?" Sells also highlighted bankruptcy issues as an area that is sometimes overlooked. "Bankruptcy can come in and absolutely destroy your cash flow." He told DS News that e PIP Group has purchased properties at auction in the past, only to lose the property "15 minutes after we won the bid" because a bankruptcy was filed. "It's definitely part of the business, and it's something that regardless of how good you are, it could happen." Beit-Or emphasized the importance of selecting the right property management company for properties entering an SFR portfolio. He said he typically speaks to between five and eight property management companies before he makes a decision, spending at least an hour talking to each during that process. "ere's no such thing as a perfect property management company, but at least you learn to avoid the bad ones." Sells recommended always taking for granted that the heating, ventilation, and air conditioning will be wrecked in any given property. It's a safe bet, he said, and even if it proves not to be the case, that can only mean good news. "We put that into our budget as far as what we're willing to spend for the property," Sells said. "Nine times out of 10, the HVAC is fine, so it just becomes money on top of the profit that we already built in." Another often overlooked factor for investors purchasing properties is flood insurance—a lesson learned the hard way by many homeowners hit by hurricanes and flooding in recent years. Homes often are not required to have flood insurance if they aren't in a FEMA-designated flood plain, but those maps are not always up to date, and surprise uninsured flood damage can turn a property from a long-term investment into a long-term nightmare over the course of a single strong storm. "Nobody in Houston thought they needed flood insurance," Sells said. "Panama City last year was the same situation. Even on the beach itself, people didn't have coverage." Nor does a home need to ride out a flood in order for water damage to be a potential issue. PointCentral's Miller explained that one area of property management he's excited about is tech that allows for the automated monitoring of issues such as water leaks. "Water damage doesn't just randomly happen," Miller said. "ere is always some small hole or leak that starts, and then that grows and eventually ruptures." Miller "A lot of people just jump in because they're following the herd. They're not even spending a few minutes to ask themselves the important questions." —Dani Beit-Or, Founder and CEO, Simply Do It

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