Many real estate investors start thinking about selling investment properties when real estate fundamentals are strong and markets are hot. And during such times, there seems to be no shortage of real estate agents and others anxious to benefit from another transaction. Unless there is a compelling need to cash out of your real estate investment, here are 6 reasons why you may want to think again about selling:

1. Real estate is a top-performing asset class. Few investments perform like real estate, doubling in value every 10 years on average in this country – and even more in bull markets. Too many investors wish they had held on to properties they previously sold because those assets would now be much more valuable and, in some cases, nearly irreplaceable.  
2.  You've got cash flow and growing equity. As your investment property increases in value, so does rent. And while your income is growing, tenants are paying down the mortgage, creating greater owner equity. The combination of market appreciation, increased revenue, and debt reduction consistently helps you build wealth over time.
3. There's financial power in leverage. As your property value increases and the mortgage balance decreases, you can refinance or “leverage” the property and pull equity out of the asset to purchase additional real estate. When properly done, this strategy can help you build greater wealth while increasing your leveraged return.
4. You've got tax advantages. Every year, tax write-offs for asset depreciation help shelter your income along with other expenses associated with your investment property. These are powerful tools that also help you build greater wealth.
5. 1031 exchanges can be challenging. It’s no secret that exchange properties are difficult to find in strong markets. There’s just too much competition for the same opportunities and cash will almost always win the day among competitive offers. And remember, a standard sale will result in capital gains tax and any applicable prepayment penalties.
6. Selling generates significant fees. The fees associated with selling an investment property are significant. They include brokerage fees of up to 6%, title insurance, closing fees, and many other associated fees. Investors are often surprised when their net proceeds are much less than anticipated.

As your investment property continues to increase in value, HomeRiver Group® remains committed to the preservation and sound management of your asset. If you’re interested in knowing more about how to improve the value and cash flow of your current property, we’re here to help.

Contact David Fisher at (208) 901-4965 or by email at dfisher@homeriver.com

HomeRiver Group® is an integrated national platform offering world-class property management services to owners and tenants in single-family and multifamily rental markets throughout the United States.

Many real estate investors start thinking about selling investment properties when real estate fundamentals are strong and markets are hot. And during such times, there seems to be no shortage of real estate agents and others anxious to benefit from another transaction. Unless there is a compelling need to cash out of your real estate inv...

October 1, 2020 - HomeRiver Group (HRG), the nation’s leading provider of property management services for single-family and small multifamily properties, announced today the acquisition of Property Frameworks from Realogy Brokerage Group, the nation's largest residential real estate brokerage company by sales volume. The acquisition will create the largest third-party property management company of its type in the U.S., with approximately 25,000 homes under management, and expand HRG’s operations from 14 to 22 states by adding Arizona, Delaware, Georgia, Hawaii, Maryland, Oklahoma, Pennsylvania, and Virginia as well as Washington, D.C. to HRG’s existing markets. 

“This acquisition enables HRG and Property Frameworks - two of the largest players in property management - to combine best practices and recognize unique advantages of scale on behalf of our clients and other stakeholders. It also creates a strategic opportunity with Realogy Brokerage Group by offering property management and related services to their clients,” said John Hirschfeld, Chairman and President of HRG. “The acquisition of Property Frameworks accelerates HRG’s expansion into multiple attractive geographies and will allow HRG and Property Frameworks to better serve clients of both organizations,” added Andrew Propst, CEO of HRG. 

Matthew Robbins, President of Property Frameworks said, “We are looking forward to working with HRG’s leadership team to expand and continue to refine our services across both platforms.” Mr. Robbins will join HRG as a senior member of the leadership team, working closely with HRG’s Chief Financial Officer, Andrew Napurano, and others to integrate, optimize and continue building out the combined company. 

Vladimir Gutin, Partner of TZP Group, HRG’s largest shareholder, said, “We are excited about HRG’s acquisition of Property Frameworks, which significantly enhances HRG’s market presence and ability to serve property owners in nearly all major SFR markets in the U.S.” 

Financial terms of the transaction were not disclosed. 

About HomeRiver Group 

HomeRiver Group (www.homeriver.com) is the nation’s leading integrated provider of single-family and small multifamily property management services. HRG offers a comprehensive suite of acquisition, renovation, leasing, management, maintenance, and brokerage services to large and small real estate investors as well as Community Association Management services for Home Owners Associations. The company currently manages over 13,000 homes, and 10,000 additional HOA units, across fourteen states. 

About Property Frameworks 

Property Frameworks (www.propertyframeworks.com) is one of the largest residential property management companies in the country, with over 11,000 homes under management. 

About TZP Group 

Founded in 2007, TZP is a private equity firm focused on investments in lower-middle market Technology & Business Services and Consumer Products & Services companies in the United States and Canada. TZP has raised over $1.7 billion since inception. 

October 1, 2020 - HomeRiver Group (HRG), the nation’s leading provider of property management services for single-family and small multifamily properties, announced today the acquisition of Property Frameworks from Realogy Brokerage Group, the nation's largest residential real estate brokerage company by sales volume. The a...

Q: What are Qualified Opportunity Zones? 

A: Qualified Opportunity Zones (QOZ) are designated areas that provide tax advantages for real estate investors. 

Q: Who came up with this tax advantage?  

A: Believe it or not, Napster founder, and former Facebook President, Sean Parker did. The tech billionaire was seeking a solution to investor cash sitting on the sidelines, that could otherwise be invested in underdeveloped areas. He worked with senators to introduce and pass the legislation in the Tax Cut and Jobs Act of 2017. 

Q: When are these tax benefits available?  

A: They become available when an investment is sold, and the gain realized is invested in a Qualified Opportunity Zone (QOZ).  Unlike a 1031 Exchange, the investment is not limited to a real estate for real estate exchange.  The gains could be from the sale of a business, stocks, bonds, or any investment with taxable gains. It should also be noted, there is no requirement to reinvest the entire proceeds of the sale.  You could potentially pocket cash and still defer all the gains by reinvesting only the gain portion of the proceeds. Even better, depending on the amount of time you stay invested in the QOZ the tax on the deferred gain could be reduced by up to 15%, and the new investment could be entirely tax free at disposition!  Even better you have 180 days from the time of your investment sale to reinvest in a QOZ giving you time to make that decision.

Q: Why should a QOZ interest me?  

A: A QOZ allows you or your investors to exit a current investment with gains and defer capital gains taxes resulting in potentially massive savings.  If you own land or property in a QOZ, it may be worth more than you think.

Q: How do I take advantage?  

A: Benefitting from a QOZ is easier than you might think. Simply (1.) sell an investment that has appreciated in value, and (2.) invest the gain in value into a QOZ.  

 

Case Study of How it Works:

Beat the Taxman.

John has successfully navigated the long and winding road of the lawn maintenance business.  He started his business from scratch, so his original basis in his business was $0.  After working eight days a week to build his business into a success, he sells it to Paul for $1,000,000. Great news for John, right? I don’t want to spoil the party, but John’s $1,000,000 return on the sale of his business means he has to write a check for $260,000 to pay his capital gains taxes. 

The euphoria John feels at selling his business quickly turns to frustration as his tax reality settles in. He turns to his tax accountant, George, for help. George tells him about Qualified Opportunity Zones.  

John calls real estate investment buddy Ringo, and Ringo finds John a qualified opportunity.  John buys the real estate. Below are John’s options and corresponding tax consequences depending on how long he holds the investment.

• If John holds the investment for five years he would defer the capital gain of $260,000 until the asset is sold.  John would then get a 10% discount on his gain for investing in a QOZ.  This leaves John owing $234,000 instead of $260,000, and he is able to defer the gain for 5 years.  

• If he holds for 7 years the discount on his gain would be 15% and he would owe $221,000. 

• As to the Qualified Investment, If John holds the investment for ten years in a QOZ he would pay ZERO tax on any gains on appreciation from real estate investment in the QOZ.

Breakdown: John invested $1,000,000 into a Qualified Opportunity Zone.  He holds it for 10 years and sells it for $2,000,000. John defers tax on the original investment until the time of sale and receives up to a 15% discount at the time of sale, and he owes ZERO capital gains on the QOF investment portion of the sale, saving him $299,000 in capital gain taxes simply because he invested in a Qualified Opportunity Zone.  AMAZING! 

If you’re still reading this, you’re probably intrigued and have more questions. While this is the flash version of the program, I’ve also included some helpful links below. If you have questions, feel free to reach out to me directly or comment below. Be sure to tune in next week for “The Flash Guide to Setting up a Qualified Opportunity Zone Fund.”

Where do I find Qualified Opportunity Zones? 

https://www.cims.cdfifund.gov/preparation/?config=config_nmtc.xml

Where is the best place to find more information about Qualified Opportunity Zones? 

https://www.irs.gov/newsroom/opportunity-zones-frequently-asked-questions

-Andrew L. Propst, MPM® CPM® CCIM®  

CEO

HomeRiver Group

Q: What are Qualified Opportunity Zones? A: Qualified Opportunity Zones (QOZ) are designated areas that provide tax advantages for real estate investors. Q: Who came up with this tax advantage?  A: Believe it or not, Napster founder, and former Facebook President, Sean Parker did. The tech billionaire was seeking a solution...

Redfin CEO, Glenn Kelman, discusses the state of the housing market as mortgage rates rise and tax reform affects coastal cities.

Redfin CEO on 'perfect storm' for housing market from CNBC.

Redfin CEO, Glenn Kelman, discusses the state of the housing market as mortgage rates rise and tax reform affects coastal cities.Redfin CEO on 'perfect storm' for housing market from CNBC.

Ask anyone who’s ever purchased a business, and they’ll tell you the key is not only finding the right business, but finding one that hasn’t been managed up to its potential. The worse it’s been managed relative to its potential, the better. In fact, if you can find a business with positive cash flow that is poorly managed, you’ve found the right one. Why is this? To put it simply: if the business generates cash with poor management, imagine what it can do with good management? It’s like adding rocket fuel.

Most longtime real estate investors know how important property management is for their success. That said, good management is getting harder and harder to find—just like quality investments. This, however, shouldn’t be the case for savvy investors who know what to look for. From 2009–2015, I purchased multiple investment properties within multiple partnerships and increased NOI by 65 percent. How? I made one simple change from the previous owner: management.

Finding Management

Finding quality management with the know-how to make the right changes is more difficult than ever. If you self-manage right now, you may find your long-time employees leaving for easier and higher paying jobs. If you hire a management company you may find that they have to start charging you more because their expenses are going up by trying to retain their top talent. This leaves you in the driver seat to find the worst managed properties — the proverbial diamond in the rough — needing only the right management to really take off.  

This, then, begs the question: How do I find a good property that isn’t being managed up to its potential? It’s actually simpler than you might think. Here’s my approach:

Job Postings

If an owner is trying to replace an underperforming manager or maintenance technician, that may be a symptom of a greater problem: larger-scale issues with management or maintenance. Both are opportunities to buy a property right. Your first step is to identify the market where you want to buy and start looking at the property management employment ads. You’ll find plenty of them right now. It won’t take but a few calls or emails before some owner who is beyond their capacity to own/manage this asset is begging for someone like you to come along and get them out of a horribly managed property.

Management Companies

As the CEO of a national property management company, I know how challenging it can be to manage residential real estate assets.  Most other property management companies do as well. Build a relationship with these hardworking people. They can be of great value for management or knowledge of local real estate and purchase opportunities.  Talk to them to find out if they are managing for owners who may be in over their heads or ready for an exit. If a property management company is draining all their resources to make an owner happy, and it isn’t working, you may be able to help solve both of their problems. 

Vacancies

In the current rental environment, vacancies have been at all-time lows on the national level, and most expect this trend to continue. Once you’ve identified the market you’re interested in, a quick online search will help you find units with either multiple vacancies or long-term vacancies. You’ll find their phone numbers and emails right on the ad. Reach out and make a deal!

Can you make money in a tight rental market? Without question. It just takes a little extra effort. But a little effort just might translate into a lot of equity. Just make sure you don’t repeat the seller’s mistake — hire the right property management company.

Ask anyone who’s ever purchased a business, and they’ll tell you the key is not only finding the right business, but finding one that hasn’t been managed up to its potential. The worse it’s been managed relative to its potential, the better. In fact, if you can find a business with positive cash flow that is poorly...

Does the recent upsurge in rent control initiatives and advocacy mean I could be making MORE selling my current residential investment property? Does that seem upside down? Don’t forget, there are two sides to every coin.

Photo by Jordan Rowland on Unsplash

Lawmakers and rent control advocates are currently working to repeal state laws forbidding rent control and revive this practice in states across the country. Illinois, California and Washington are gaining some foothold in their efforts to reinstate the practice in an effort to control housing costs. In Oregon, in spite of a narrowly defeated measure in 2017, the concept is gaining ground in cities with drastically increasing rents and limited housing availability. This is especially the case in the lower income ranges. 

Any undergraduate student enrolled in a Microeconomics 101 class will tell you that people respond to incentives. Rent control seeks to place an artificial price ceiling on a good or service (in much the same way that minimum wage places a price floor on wages). On paper, this policy caps the rent prices so investors reach an artificial maximized limit, while renters have a cap on the costs they’ll incur. However, like any economic policy, there are always unintended consequences. In the case of rent control, the policy changes the incentives for investors to invest funds in the market.

By placing an artificial ceiling on the revenue stream of the investment, rent control also places a limit on how much most investors are willing to invest. Having limited upside gain, while maintaining complete downside loss risk, means investors will contribute less in these markets as they seek a higher return elsewhere. People respond to incentives. Investors are less likely to both purchase properties, and less likely to perform repairs and maintenance to the same level they might have. It also means many investors will simply take the next exit and invest in other markets.

Photo by Franck V. on Unsplash 

As funds flee potential rent control markets, they will seek opportunity in other markets with less government interference. This creates a golden opportunity for investors in not-rent control markets to sell at a higher price.  If rent control dies in these select markets I predict a bit of a price correction downward in non-rent control markets. 

If you have considered selling your investment in a location that investors fleeing rent control areas might find attractive, now may be the time to sell. The largest exodus is most likely to occur before the election in November. Perhaps you are considering a 1031 exchange, retirement, or a host of other reasons, now is a great time to sell.

Another attractive option is selling your current property in an area further into its growth cycle and leverage that property into areas of newer growth. In many newer growth areas, the ratio of rents earned to initial capital investment dollars may be significantly higher than your current property. This allows you to multiply your investment by distributing that capital into multiple properties in these areas of reduced initial investment entry. The result is a more diversified investment portfolio across multiple markets and property types. This strategy can seriously improve your cash flow and IRR.

Photo by Michael Longmire on Unsplash

Does the recent upsurge in rent control initiatives and advocacy mean I could be making MORE selling my current residential investment property? Does that seem upside down? Don’t forget, there are two sides to every coin.Photo by Jordan Rowland on UnsplashLawmakers and rent control advocates are currently working to repeal state law...

If you’ve seen the iconic film Indiana Jones and the Last Crusade, you’ll recall the climactic scene where Indy needed to pass four tests in order to retrieve the Holy Grail. The margin for error was razor thin, and the stakes were high. One wrong move and he would have failed the test and lost everything, including his head (as would have happened had he not knelt as the penitent man to pass the test).

When we make investments, we focus on the reward and balance it against the risk. These four tests, as far as I am concerned, will allow us to get to the Holy Grail of wealth without losing our heads.  

1. Cash on Cash Return ($/$)

Cash on cash return is a tool used to calculate the value of investment property based on your actual cash investment versus the income the property will generate.

Cash on cash return is expressed in a percentage that reflects the amount of income each year against the initial cash investment. This investment metric is calculated by taking your net income and dividing this by your initial investment to determine the percentage. Your initial investment will include the following start-up and acquisition costs:

• Down payment
• Inspection, appraisal, and any other due diligence costs associated with the acquisition
• Total of repair and renovation costs
• Closing costs

Your annual net rental income will include your total rental income less your annual recurring expenses—the result of which will tell you whether the investment will have a positive or negative cash flow:

• Property taxes
• Maintenance costs
• HOA fees
• Property management
• Mortgage
• Vacancy rate

Cash flow divided by cash invested equals cash on cash return. If you’re seeing between 5% and 10%, you are in the zone, generally speaking, taking into consideration the specific property risk and current market. Watch this video to create yourself a simple Excel calculator to build your four-test worksheet.

2. Net Present Value (NPV)

Net Present Value is a metric used to calculate the present value of your net future cash flows from an investment property.

This metric is valuable in establishing the yield of an investment. It is based on whether anticipated future cash flows will present a value larger than what is required to invest in the property. Therefore, allowing an investor to calculate a yield that can be compared to other potential properties and opportunities by the same measuring stick. To calculate NPV, future cash flows are discounted by the desired rate of return and deducted from the initial capital invested. In order to calculate IRR, you will need to begin with the following:

• The total holding period in years
• Cash flow generated each year
• Discounted rate of return
• Initial cash investment

This calculation is used to tell us if the present value of future benefits is greater than or equal to the cost of those benefits, thus providing your desired rate of return. You will want to see a positive number as a result, as that will mean the investment outperforms your expectations.

3. Initial Rate of Return (IRR)

Internal rate of return is a key metric in the valuation of a potential investment used to show profitability by determining a discount rate that makes the net present value of all cash flows equal to zero.

It uses the same information need to calculate NPV to determine the initial rate of return with the NPV set to zero and solving for the desired discount rate. This tool will provide you with a projected rate of growth expected from the investment. You want to see a positive number in this category, and generally speaking, the higher the IRR, the better the investment. This calculation is valuable in comparing multiple properties by creating a level playing field in which to do so.

With IRR, there is no magic number. In most investment properties that are currently being underwritten, an IRR of 10% or less seems to be more of a negative result, while an IRR of 15% or more are generally found to be good investments.  

4. Modified Internal Rate of Return (MIRR)

Modified internal rate of return takes your desired investment goals into consideration with reference to the determined IRR and overall financial metrics contributed to that calculation.

Pre-investment will help you determine how much initial capital investment is needed and evaluate your rates of return on that initial amount. During the holding period, your cash flow analysis will help you determine your returns during the life of the investment period. Finally, MIRR will help you determine your exit strategy by taking your projected sales price and returns and evaluating them against the returns of other investments, varied hold times, and how much to invest initially for the best overall return. MIRR is the big picture calculation that comes as a result of these metrics and gives you an overall snapshot on returns to make your final evaluation of the property. Here is another useful video to help you build your own custom investment input worksheet along with your cash on cash calculation.

Equipped with this newfound knowledge, you’ll be able to assess potential investments to see if they pass each of these four tests as you evaluate both the short and long term performance of the investment. I strongly encourage you speak with a local property manager who has knowledge of the area to help determine the income to expense ratio so you can input accurate cash flows into your model. I would also never recommend a rent increase of more than 3% per year.

By following this guidance, you can avoid making poor choices, such as the one Marcus Brody made at the end of the movie when he was fooled by appearances and drank from the wrong cup. “He/She chose poorly” can be avoided. To put it simply: Never invest in something simply because it is shiny. 

-Andrew Propst, Bigger Pockets

If you’ve seen the iconic film Indiana Jones and the Last Crusade, you’ll recall the climactic scene where Indy needed to pass four tests in order to retrieve the Holy Grail. The margin for error was razor thin, and the stakes were high. One wrong move and he would have failed the test and lost everything, including his head (...

Andy Propst is CEO of HomeRiver Group, a Meridian company that has acquired a half-dozen property management companies around the nation in the last two years and now manages nearly 5,000 rentals in 20 states.

When Propst joined the company in 2008, it was called Park Place and had 200 rental units. Its owners at the time made him a full partner nine months after he came on board. He also served in 2015 as the national president of the National Association of Rental Property Managers, or NARPM.

Multifamily owners and managers like Propst are working in the tightest rental market in memory. Although there’s apartment construction going on in Idaho cities large and small, apartment growth, which stalled heavily in the recession, hasn’t caught up with the demand created by population growth and market conditions. Apartments have become scarce as members of the large millennial generation move out of their parents’ homes and baby boomers sell their houses and retire to more urban areas. Migration from other states is also driving the growth. Propst said in 2010, one rental application in ten was from out of state; now nine in ten are.

Propst spent some time talking to the Idaho Business Review about the multifamily real estate market in Idaho and elsewhere. The interview has been edited for length and clarity.

Why is the multifamily market so hot?
During the downturn, there were three years where in Ada and Canyon counties, only one duplex was built. Then it went back to normal, about 1,000 doors a year. Now, we’re producing 3,000 doors a year, so we’re trying to catch up for the years between 2008 and 2012.

A lot of roads are coming together. The economy is getting better, and a lot of people 18 to 33 are starting to migrate away from their parents. You also have delays in marriage causing people to rent longer, delays in having children, you have people having less children, you have an increase in single mothers over time, you have more divorces. One out of every 10 calls we get is, “Hey, I am separating, we now need two households.” There are just more people.

You can’t ignore that there are multi-millions more people in the millennial bubble than there were in baby boomers. All of them are coming into the market at the same time. The baby boomers are downsizing, getting rid of the house that the kids are starting to move out of. Or they’re saying it’s a good time to sell the house because the market has come back.

All reports say apartments are getting more luxurious. What’s prompting that?
There used to be a stigma where renting meant you’re not moving up and progressing. The American dream has really gone from a stable white picket fence to flexibility. The average person from 25 to 55 has 11 jobs, and it’s hard to do that owning a house. A lot of the millennials watched their parents lose their shirts in a downturn.

There are quite a few apartment complexes planned for downtown Boise. Are they overdoing it?
No. We’re trying to catch up. If they’re having a hard time getting those things leased up, it’s probably the price point, not the demand. To go vertical in a major city and provide parking … every deal that has multi-level parking doesn’t make sense in Idaho. We’re way too behind on rents. We’re one of the cheapest places in the country to rent.

They do need the parking, right?
Parking adds anywhere from $30,000 to $20,000 per door, and you just can’t make it up in the rent. Plus when you start going vertical, it gets more expensive the higher you go. When we have almost unlimited space going south and west, and we’re in such a commuter-friendly city, it’s hard for people to justify living two or three miles closer paying two or three times the rent when they can go up to Fairview or pay less. It’s so easy to get in and out of Boise.

How does Idaho differ from other markets?
Idaho has a unique model of multifamily housing. It’s the fourplex, the eightplex model. In other markets, fourplex is a four-letter word. Nobody has built a fourplex since the 1970s. In Texas, investors are running from that. Here, a fourplex is an A-plus garden-style property.

Whereas in other states all the new multifamily product that is being built goes for density, we have almost unlimited land. We can spread these out, and make it more of a home living situation vs. just jamming people in and going vertical. That’s what our renters kind of like. Even though they may be in a townhome, it feels like a home. They stay longer, the occupancy is higher; it’s a function of the product and the market. If you don’t have a neighbor above or below you making noise, you’ll be happier. If you’re in a five-story walkup, it gets noisy and that gets old.

Also, salaries are low, but rent is so cheap here compared to Portland or Salt Lake for the same type of product. If you go to Denver, it costs twice as much.

People are complaining that rent is going up, but rent is not going up anywhere as fast as home prices are. We’re seeing 3 to 6 percent rent appreciation a year, and home appreciation is 9 percent a quarter.

The other thing that separates Idaho from any other states we manage in is the amount of delinquencies. There are basically zero here. It’s a very low-risk market to invest in because the tenants always pay their rent, and it’s a very landlord-friendly state, meaning if they don’t pay, it’s pretty easy to get them out. That has something to do with it.

It’s very refreshing compared to some of the areas that we manage in. In Portland, it will take six months to do an eviction. People stop paying all the time.

In Idaho, if you do it right, you can have a non-paying tenant out by the end of the month. Our courts are not backed up for miles on evictions, whereas in some of these other courts you can wait a long time because there are so many delinquencies.

Isn’t that kind of harsh for tenants?
It’s harsh because everybody here pays on time, so there’s not this massive backup of tenants. I don’t know if I’d say this is landlord-friendly. From the landlord’s perspective, if somebody is living in your property and not paying rent, that’s a problem. Our job is to enforce the terms of the lease.

We manage almost 5,000 doors in Boise, and we don’t have a single tenant who is a month behind. In this market, why wouldn’t you evict someone when there is a line of tenants who want that product behind them?

What kind of apartments are people looking for?
It is an emergency situation for affordable apartments. That’s where we need subsidies of some kind, because nobody is building B or C properties; everything is A.

It’s pricing out the people who need affordable housing, because everything coming on has granite countertops, hardwood floors, and this is where my heart bleeds. If you’re a single mom or a family that is struggling and you need some type of product, there is literally nothing for these type of folks. The only thing that has been built here since the downturn is all A property, because land costs are high and construction prices are high. An A property today will be a B property in 10 years.

What is the solution to the shortage of affordable housing?
HUD needs to come out with better tax credits. They’re just not available. To my knowledge, there are not any affordable housing options available that would work in a market like this.

There’s really nothing in that $700 to $900 price point with two bedrooms, two baths. If you want that, you have to pay $1,100 to $1,200.

What are your predictions for the market?
People keep saying the prices are going to tap out at some point. When we sold our first fourplex in 2011, it was $265,000. It was in Nampa, right by the College of Western Idaho. It’s an awesome location. Today, if you were going to built it, it would be $550,000.

Market demand, construction, land costs, all those things have pushed the price up.

In 2010 and 2011, back in the day, It was $70,000 per door for a fourplex. Now, that same product, it’s $143,000 per door.

I hear all the time that we’re at the top of the market, but here’s the thing: California has started to introduce this law to add rent control. That’s pushing California investors to sell their properties at a very low cap rate, a 3 percent cap. They can buy in Idaho at 6 percent cap, doubling their investment return. Out of the 4,000-plus doors we manage, California investors probably own 60 to 70 percent.

All these California investors are selling to Chinese investors at stupid low cap rates, and that’s going to push our market higher than we can even wrap our heads around.

The rents are going to continue to stay at a normal rate of increase, 3 to 6 percent, but the investors will pay more. The investors are now paying $700,000 for a fourplex that would have cost $265,000 to build in 2011.

I have a graphic that shows that between 2016 and 2020, according to Green Street Advisors and the Bureau of Labor Statistics, that typically with this job growth, population growth, these demographics, you’d see 65 percent move into homes, and then you would see 35 percent into apartments or single family rentals. But they say the exact opposite is going to happen. They’re predicting that 65 percent of the new households formed will be renters. The new generation feels anxiety at being tied down to something.

Do you build apartments?
How we’ve grown is I find builders, investors, land and put all three of them together and we make property. That’s every project on our website, basically. We create opportunity.

-Idaho Business Review

Andy Propst is CEO of HomeRiver Group, a Meridian company that has acquired a half-dozen property management companies around the nation in the last two years and now manages nearly 5,000 rentals in 20 states.When Propst joined the company in 2008, it was called Park Place and had 200 rental units. Its owners at the time made him a full p...

If you’re the owner of a single family rental property or a small multi-family building, you might be wondering why you would do business with a national property management company rather than a local one. Today, we’re sharing some of the best reasons to hire a company like HomeRiver Group. 

National Resources and Expertise 

What Makes HomeRiver Group Different?

If you’re the owner of a single family rental property or a small multi-family building, you might be wondering why you would do business with a national property management company rather than a local one. Today, we’re sharing some of the best reasons to hire a company like HomeRiver Group.  National Resources ...

There are two different ways that we acquire property management companies at HomeRiver Group. If you’re interested in selling to us, you can do it in the way that makes the most sense for you. As you will see, it depends on how long you’ve been in business and where you see yourself fitting into the property management industry in the future. 

The HomeRiver Group Platform Acquisition Process 

The first method that we offer to property management companies is the platform acquisition. In this scenario, we buy the company, but the senior management team that’s selling to us will stay in place and partner with us. In a platform acquisition, we pay the purchase price in primarily cash, with a portion also paid in HomeRiver Group stock. This makes the seller our partner, and it also helps them to diversify their business investment a little bit. 

The HomeRiver Group Portfolio Acquisition Process 

Alternatively, we acquire properties using portfolio acquisition. In these cases, the company will sell its portfolio to us and the existing senior management does not stay in place. We pay for the company in all cash, and the current owners can take that and do something else. We also set up referral agreements once the deal is done and they become the company’s former owners. If they send properties our way to manage because of their relationships and long careers in the property management field, we’ll give them a commission. 

How to Decide Which Way to Sell 

Joining HomeRiver Group through the platform acquisition process is something you should do if you are still energized by property management and you want to stay in the business as part of something bigger and more innovative. We bring all the best and brightest operators around the country together. If you’re excited about that, and you’re interested in taking a consistent approach to an organization, and you desire a branded national property platform, you’ll want to join us in this way. If you have been in the property management business for a long time and you’re ready to move on, you might want to talk to us about portfolio acquisition instead. In the past, people selling to us in this way have been turnkey providers who are simply ready to do something else. 

We want to make this transition as easy as possible for you. Whether you see yourself as a platform seller or a portfolio seller or you’re not sure, contact us at HomeRiver Group. We’d love to talk to you. 

There are two different ways that we acquire property management companies at HomeRiver Group. If you’re interested in selling to us, you can do it in the way that makes the most sense for you. As you will see, it depends on how long you’ve been in business and where you see yourself fitting into the property management in...