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18 | Th e M Rep o RT ExposurE 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. The key to keeping costs down is to remove waste from the process, according to one expert on at the Rehab Lab at the inaugural Five Star Institute Single-Family Rental Summit. "The 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. "The 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.'" "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. So we're moving that waste and making processes more efficient both inside and outside with our own performers or contractors." 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." SFR Market Investors Turn to Technological Advances for Competitive Edge A s the single-family rental space becomes more populated with investors, all of whom are trying to gain any advantage that will help them cut costs and streamline processes, therefore maximizing profits, more of them are turning to technology. Many new technologies have come along just in the last few years to aid single-family rental investors with their business, and technology is expected to play an even more significant role in the SFR market going forward. That was the topic of discussion at the inaugural Five Star Institute Single-Family Rental Summit as Five Star President and CEO Ed Delgado led a general assembly discussion featuring Walter Charnoff, CEO of Investability; Gary Beasley, CEO of Roofstock; and Socrate Exantus, Owner/ General Manager of All County Professional Property Management. "A lot of technology and sophistication chased Wall Street into the space," Charnoff said. "The real estate investment sector and the real estate sector in general is one of the last great fragmented opportune markets for technology. We're going to see a lot more transaction management software, acquisi- tion management software, and even property and asset manage- ment disposition software hit the market, and in the next few years we're going to see real estate transactions taking place significantly more online from end-to-end, but also a lot more technologies that empower and make the process of buying a home and/or holding a home and borrowing against it much, much smoother." As further evidence that the role of technology will increase in the single-family rental space, technology services provider Altisource Porftolio Solutions on Tuesday announced the acquisi- tion of both technology compa- nies founded by Charnoff: RentRange, which provides rental home data and informa- tion to the financial services and real estate industries, and Investability, an online real estate search and acquisition platform. The acquisition will make RentRange's and Investability's offerings more available to a wider range of investors. "If we can take this data and make it available to the public with a search engine that allowed them to search by their invest- ment performance, we can help non-institutional search for real estate like institutions do, and it would be a meaningful opportu- nity for a massive market that's grossly underserved." The founding of RentRange seven years ago came from the realization by Charnoff and his team that there was no decent single-family rental software product to estimate what the rent should be on a single-family home. "Before Wall Street even entered the space, we had to build a good rental algorithm to provide a rental number for some of those other softwares," Charnoff said. "So when the market shifted and Wall Street started coming in, we were the only ones who had already collected data and figured out how to get to an accurate assessment of what the rent potential was for a single-family home." Charnoff said that even with Wall Street's aggressive entry into the single-family rental space, he and his team came to realize that non-institutional investors, commonly called "Mom and Pop" investors, still made up a vast majority of the SFR market, and thought, "If we can take this data and make it available to the public with a search engine that allowed them to search by their investment performance, we can help non-institutional search for real estate like institutions do, and it would be a meaningful opportunity for a massive market that's grossly underserved." SFR Market Pros Utilize Unorthodox Acquisition Strategies W ith 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. The thing is looking into other acquisition strategies." Reid was a panelist in the Property Types and Acquisitions discussion of the Property Acquisition Lab of the inaugural Five Star Institute Single-Family