Master Leases in the Single Family Rental Space

Wally Smith:
We talked about master leases. Have you seen anybody successfully yet doing master leases with single family rental communities?

Jeff Hertz:
There are a few sponsors that have gotten involved in that space, and I think there’s a lot to be attracted to that space. It is much more, I think, management intensive than say a multifamily property, because the difference is when you have, let’s just use the same numbers, you have a 200 unit apartment complex. You can have specials, you can have food trucks, you can have pottery making classes. You can do a lot of things to enhance not only the value and attractiveness of the property, but the experience of the residents there. When it comes to single family rentals, it’s a very different scenario. The properties might be in the same town, they might be spread out across multiple states-

Wally Smith:
And IDing them can be a nightmare.

Jeff Hertz:
The identification can be a real challenge, and that’s where, again, it’s easy to buy, let’s say $100 million dollar apartment complex, that could be one property, one check, and you’re done with it. $100 million dollars in single family rentals, buying in bulk can be challenging in that space.

Wally Smith:
Well, if it could be more like, I don’t know, a manufactured housing community for example, where this is defining the addresses, is that plot of land with all those dwellings on it.

Jeff Hertz:
I just wonder honestly how they deal with the maintenance. Because if you had 100 homes that maybe don’t all have the same furnace or the same washer and dryer or the same appliances, all of a sudden now you have a lot of, again, that’s where multifamily can be nice from the standpoint that most multifamily properties are very homogenous, what’s true in one unit is true across all of them. So from a management standpoint could be maybe a little easier to deal with.

Wally Smith:
I think the way they’ll crack that code is when it’s build to rent.

Jeff Hertz:
Exactly.

Wally Smith:
The whole community, so you still get that homogeneity that you would get in a multifamily. They just happen to have yards.

Jeff Hertz:
Exactly. Exactly.