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» VISIT US ONLINE @ DSNEWS.COM 17 17 SURVIVAL IN THE SFR MARKET REQUIRES UNORTHODOX ACQUISITION STRATEGIES With more and more investors entering the single-family rental space, that means more competition. And more competition means getting creative when it comes to acquiring investment properties. "It comes down to looking outside the box," said Brennan Reid, CEO of Florida- based Joyce Reid Capital. "Everyone knows how to buy REOs and knows how to buy off MLS. e thing is looking into other acquisition strategies." Reid was a panelist in the Property Types and Acquisitions discussion of the Property Acquisition Lab at the inaugural Five Star Institute Single-Family Rental Summit in Las Vegas on Monday, October 12. Moderated by OwnAmerica CEO Greg Rand, the panel also included Sepehr Bekam, principal with Dyson Investment Properties; Chris Crippen, managing director at US Residential Asset Fund, and Eddie Speed, president/founder of Note School. "Strategic alliances have been very huge for us," Reid said. "A lot of the leads we get actually stem from our management company, and we're able to source for our management company and make it a win-win there as well. e probate market is something we're really honing in on, and it's been very good to us." Reid said he receives properties from his attorneys who have suggested his company's services to their clients. "ey're sitting down hearing their client's problems or issues," Reid said. "Maybe they inherited a home in Florida, but they live in Texas. Maybe they don't have the means or the management to take over that property. If someone inherits a home out of state, they don't have the funds for the property taxes or to rehab the property. It's just a headache and additional expenses they didn't expect, and now they have to take on. So we're offering an exit strategy for us to come in and close quick and pay cash. So either we can put that into a management program; or we can offer cash for that asset to liquidate, buy it at a discount, and then sell it to our management partners for a buy and hold asset." As a prime example of looking outside the box to acquire properties, Reid said funeral homes have even become a source from which to gain new assets. Reid said he tells the funeral homes that when they hear clients are looking to liquidate to please let him know, and his company will offer the funeral home client that option. "I was actually very reluctant at first because it is a funeral home," Reid said. "But actually what we find is they're very grateful that we're stopping by and offering our services because they're the ones sitting down with their clients and seeing this on a day-to-day basis, and they don't have that option to give the client." e many changes in the market just in the last three years have required a shift in strategy. "In 2012 to 2015, you saw that huge spike in the SFR market," Reid said. "e general market's going up, but the yields are going down. It also offers another incentive for the investors. You're not buying on the yield, you're buying on the appreciation of the asset. I think like it comes down to changing your strategy and adapting to the markets themselves." Reid said for about a three-year period between 2010 and up to 2013, his company was able to target homes, watch them through auction, and then buy them at auction. But with the REO market getting thin, more people are finding out about auctions and getting in on them. "We're not the only players in the game anymore," Reid said. "So we're adapting and finding other ways of finding these people and getting to them first. Whoever does the most marketing wins, so we really focus on doing as much volume in marketing and reaching sellers as we possibly can." REMOVING WASTE FROM THE PROCESS IS KEY TO KEEPING COSTS DOWN IN SFR REHAB With the costs of labor and materials increasing, investors and contractors are constantly searching for ways to lower the cost of doing business when it comes to renovating or rehabbing their rental properties. e key to keeping costs down is to remove waste from the process, according to one expert at the Rehab Lab at the inaugural Five Star Insti- tute Single-Family Rental Summit in Las Vegas. "e price of labor includes the processes, so if you can streamline your processes and take waste out of the processes, and cut your overhead costs or pass that on to a client," said Steven Helser, CEO of ASONS, a panelist during the lab. "e other way to look at this is the materials. By only buying the level of materials you need at the right quality, you get massive discounts for national material suppliers like Home Depot and Lowe's. Leveraging off of that, you can save that and pass that onto the client." One way to keep costs down is to convert fixed costs into variable costs, Helser said. "If the client has a rehab team that goes out to do their renovations or their flips, they can get rid of that rehab team, and we as contractors can come in and take that fixed cost and make that a variable," Helser said. "So if they're not buying, they don't have that labor cost. So it's on our dime. And if we're not performing for them, we're out performing for somebody else. So we're able to take and use that labor efficiently across multiple clients where one client would say, 'I have 10 or 15 people over here to do rehab or maintenance, and now I don't have that anymore. I just pick up the phone, and we know I'm going to have the right level of labor and performance and my costs are going to be lower.'" In order to remove the waste from the processes, Helser said his company uses the Six Sigma approach, which was famously utilized by Jack Welch during his tenure as CEO of General Electric. While not many real estate investors or contractors are current utilizing this approach, more and more are coming on, Helser said. "We take waste out of the system, and we minimize the time from the time we get a purchase order to the time we invoice the client," he said. "So we're moving that waste and making processes more efficient both inside and outside with our own performers or contractors. It allows us to have a complete hold on those overhead costs so we can take them down to a bare minimum. You match your labor with what business you have, and it seems to work out. Same thing with materials." While keeping costs of labor and materials down is an ongoing challenge for contractors in the single-family property rehab space, the availability of labor has also been an issue. "If you're not self-performing with the way construction is going nowadays, all of the labor is going to the next job, like the big commercial jobs," Helser said. "Having that labor available and keeping that labor engaged in this environment is very tough."

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