There are numerous articles highlighting the latest investment strategy of Wall Street. The financial prowess of the likes of Warren Buffet and Blackstone seem to be focused on the following strategy: acquisition of thousands of distressed homes, fixing and operating as rentals going forward maybe selling them at a later time but maybe just hold as income property.
The acquisition of single homes and operating them as rentals is not new. For more than a decade FBS (though always headquartered in San Diego) was the largest rental operator of single homes in the state of Arizona. Purchase criteria had to be established based on our investment objectives. Utilizing this criteria a buying team was assembled and trained. Thousands of acquisitions were considered one house at a time and turned down. Relatively few (50 or fewer per month) were negotiated one seller at a time and closed one escrow at a time. During this incubation period we assigned each acquisition to one of our holding entities, an individual investor or small group of investors we represented. The acquisition and assignment of these assets went on for years and was a lot of hard work that was questioned by more than a few critics.
However, the required energy and organization that went into this acquisition process paled in comparison to the leasing, maintenance, rent collection, property operational reporting and ongoing management of these homes. All accomplished without today’s technologies including: showing and application online via smartphones, rent payments and maintenance requests via mobile internet access, property inspections with financial reporting and investor cash flows all getting to owners in real time via secure portals. As a matter of fact back then we could not find an out-of-box property management computer application to handle our Arizona rental portfolio that had grown to over 3000 single homes. In addition, we operated other real estate-related businesses that needed to be coordinated with our rental portfolio. Last but not least, we operated an 1008 unit apartment community while executing a major remodel and repositioning to capture additional market value. We learned in house what we needed to computerize our operations and created FBS proprietary software that kept our departments and property management teams on track.
Then there were the tax planning, physical improvements and equity refinancing to reposition these assets for resale and/or exchange to optimize return on investment. Perhaps as many as one-third of these properties are still held for investment and operated as rentals. It was all harder than we could have imagined and taught us more than we could have hoped. We had always understood that the financial benefits of real estate are long-term. We had always suggested to our investors that there are only two REAL problems with independent rental ownership. One is the lack of comprehensive professional advice over the life of each real estate investment. The other is the daily business management of each rental property. The practical experience of more than four decades of specialized activities that define our experience has created a body of FBS expertise and best practices. This legacy continues today with the value we add to every assignment we do for our clients and the quality rental housing we make available to preferred renters.