A Hypothetical: Scattered SFR Portfolio Strategy

[Michael Rodriguez]

An investor took advantage during the downturn and recovery years (technically still in recovery) and has acquired over 50 single family rental homes scattered around Columbus, Ohio. Through property improvements and healthy rental increases (over 4% YOY in Columbus) this owner has a portfolio of properties with very strong appreciation since initial purchase. This experience has caused trapped equity (Gross Yield was 15% at purchase but as property value increases, they've reduced to 9%). In addition to the management expenses that a scattered portfolio demands, this owner has been thinking of making a move...

Of course, goals vary by owner, but generally speaking, what would you advise as a next move for this investor?

A.) Sell as a portfolio and1031 proceeds into a condensed property/portfolio (i.e. Larger Apartment Complex; National Tenant Properties)

B.) Refinance select properties and acquire more SFRs

C.) Not sure - I'm in this situation myself!

D.) Another Suggestion 

Please explain!

Interested to hear your thoughts! I've been talking to a number of investors in a similar situation as described above - whether it's 5 or 50 properties.

[Aaron K.]

The investor needs to A know what they are comfortable with and B run the numbers.  It could be that there are better investments out there, but it could also be the case that what they have is pretty good too and holding would avoid sale fees.  Could you save on management by consolidating into 1 or 2 properties? Probably.  But they may also be able to reduce management costs by shopping around and/ or negotiating with property managers because they have so many properties.