Make deals pencil by making SFRs sustainable – $200 in additional NOI / month

[Brett Jurgens]

SFR investing has been hard for a while. Pencils have been down and large investors have been focused on cutting costs, increasing renewal rates and improving operations. But there's only so much juice you can squeeze out of a portfolio.

Interest rates are coming down and activity will increase in 2025, though the housing shortage is keeping prices elevated.

So what can investors do?

What if you could add $200 / month in NOI (a 30-100 bps boost in cap rate depending on the asset value) without raising base rent?

Let’s do some simple math…

If you buy a $300k house, charge $1,900 in rent, and have a 35% expense ratio, you’re at a 4.94% cap. Fine, but not above most LP hurdles.

Let's add solar and other sustainability upgrades. Add $12k to your cost, generate an additional $200 / month in NOI, and now you're at a 5.52% cap. A 58 bps boost.