We have seen tremendous growth in the single-family rental (SFR) market over the past few years and, by all analyst accounts, it will continue to grow steadily for the next decade. A major driver of this trend has been the arrival of institutional owners growing through acquisition of scattered properties or built to rent (BTR) developments. In parallel we have also seen the rise of enterprise-scale third party property management firms.
Hunter Housing Economics forecasts that BTR production will hit 154,000 homes in 2024 and grow through 2027 to 188,000 units per year. A quick calculation shows that BTR would comprise nearly 17% of all homes built annually by 2027.
Furthermore, MetLife Investment Management (MIM) estimates that institutions owned ~700K single-family rentals in 2022 or ~5% of the 14 million SFRs nationally. MIM forecasts institutions will increase SFR holdings to 7.6 million SFRs, more than 40% of all SFRs by 2030.
Both institutional owner operators and large third party property managers face a complex challenge delivering high quality and efficient maintenance for their residents in distributed SFR environments. In this blog we will define distributed maintenance, highlight some of the key objectives that should be pursued by multi-marker SFR operators and then discuss some approaches to achieving those objectives.
What is SFR Distributed Maintenance?
Unlike multifamily, the nature of SFR is inherently distributed. Even in a single, pre-planned BTR community, there is geographic separation that can stretch across a few square miles of homes from one end of the community to the other. Furthermore, a more traditional acquisition approach often results in scattered SFR with greater geographic distribution, perhaps tens of miles across a single market. At institutional scale, there are likely multiple regional markets with multiple submarket neighborhoods or BTR communities nested underneath. This can result in SFR operators managing thousands or even tens of thousands of doors across multiple levels of geographic distribution. At FacilGo we believe this SFR maintenance scenario is significant enough to be characterized by the dedicated term “Distributed Maintenance”.
In the context of Distributed Maintenance, the challenge for large scale SFR operators is how to centralize control, automate and standardize maintenance practices and to achieve cost efficiencies across all markets and sub-markets. The goal is to achieve these economies of scale and cost efficiencies while simultaneously delivering high quality maintenance experiences to residents. In a distributed SFR environment this can be challenging, so let’s break down some of the key objectives.
Key Objectives for Quality Maintenance Delivery in a Distributed Environment
- Maximizing the efficiency of internal technicians and external service providers
In the distributed SFR environment where driving distances between scattered homes may be significant, it is essential to target a single visit to close the work order. Multiple trips eat into efficiency and may create resident dissatisfaction due to their personal schedule being impacted. Work orders must be assigned to internal personnel or suppliers who have the correct set of skills. Then those resources must be routed intelligently during their shift and they must arrive at the home site with the proper inventory and tools to close the work order on the first visit.
- Delivering a high quality and consistent experience to residents across all markets
With multiple markets comes multiple maintenance teams, which can lead to varied approaches and skill sets, communication difficulties and varying levels of maintenance quality. A high quality maintenance experience results in happy residents and owners. On the other hand, a low quality maintenance experience and slow resolution of work orders creates frustrated residents that can affect lease renewals and, in the worst case, result in social media bashing by residents, causing damage to the brand.
- Empowering maintenance coordinators and leadership to improve processes
Maintenance coordinators must be efficient so they have the time to ensure quality maintenance is being delivered versus spending the majority of their time manually scheduling, handling resident complaints and serving as communication go-between. In a similar vein, corporate maintenance leadership also needs to be efficient. They must avoid the exercise of exporting work order data into spreadsheets to manually tag and filter data as a prerequisite to identifying process or regional team issues.
- Keeping property managers connected into the maintenance process
It is important that local and regional SFR property managers are connected into the maintenance process. They must know what is going on with their residents and also be able to do move-in and move-out inspections that can generate work orders that are tied into the same WO database.
- Ensuring a communication record of truth across staff, providers and residents
It is critical that all communications between the maintenance team, property manager, service provider and resident are recorded and tracked. Ideally this includes any photos or descriptions of the problem or the subsequent fix. This can be challenging in a highly distributed environment with multiple forms of communication including phone calls, text and email.
- Achieving spend control and procurement compliance
A final challenge of distributed maintenance across multiple markets is cost management. With multiple markets comes the potential for higher costs due to varying labor rates, material costs in different regions. Purchasing can be intentionally or unintentionally abused without the proper controls in place. Additionally, using multiple contractors for different markets can lead to higher costs overall.
An approach to SFR Distributed Maintenance Challenges and Objectives
There are really four key initiatives that need to be deployed by multi-market SFR players to address the challenges of Distributed Maintenance and achieve the objectives listed above.
- Establishing and documenting processes
It is important to create and document a standard set of processes that can be leveraged across all markets. Of course there needs to be some wiggle room to adapt to local building codes but most maintenance processes can be standardized.
- Continuous training of internal staff
FacilGo data shows that internally staffed maintenance technicians can be one third the cost of outsourcing repairs to vendors for many basic maintenance tasks. However, these field maintenance technicians must have the right skills. Maintenance staff often do not receive enough training. They may receive numerous trainings on fair housing practices and other HR driven topics, but they also need to receive training on company processes and for the skills that they use everyday such as training on basic electrical knowledge and safety procedures.
- Building relationships with MRO and service provider suppliers
Institutional SFR operators can implement cost-saving measures such as preventative maintenance programs to reduce the need for costly repairs in the first place. Additionally, property managers can negotiate pricing with contractors by using the larger MRO and service provider supplier firms across markets and leveraging their volume of business.
- Leveraging centralized technology solutions
The most high impact initiative that will help achieve the objectives above is to deploy a centralized maintenance software solution designed for multi-market SFR operators. Here are some key attributes that should be part of any software solution targeting SFR Distributed Maintenance:
- Designed with an architecture that can support a few hundred doors but smoothly scale up to tens of thousands of doors as needed.
- Provide the ability for smart scheduling to match work orders with skills and availability to make sure the right internal or external resource is assigned.
- Support intelligent routing, same property groupings, and geofenced check-in/check-out for maintenance technicians to ensure an efficient route across multiple home sites during their shift.
- Provide a smartphone application for both internal staff and external vendors that ensures all steps in the work order are documented while “on the move”. This includes the ability to take before and after pictures and capture critical information, even when disconnected from the internet.
- Provide a turn-key and integrated inspections module that connects into the maintenance and work order software system to support property managers for move-in/move out and mid-lease inspections and allows them to trigger WOs.
- Support in-app procurement to ensure only approved MRO products with appropriate discounts are purchased from a catalog to enforce spend controls and procurement compliance.
- Enable bidding, contract management and NTE pricing with service providers via the software solution to keep costs in check. Incorporate approval procedures when an invoice crosses the NTE threshold.
- Attach all text, email, pictures and phone communications across staff, suppliers and residents to the work order to ensure a single source of truth from the service request to the WO closure, vendor payment and possible resident chargeback.
- Provide a rich set of actionable and configurable dashboards to eliminate the requirement to export and manipulate data in excel. These dashboards should allow operations leaders to view the performance of maintenance teams and inspection teams in any market.
In the report “The future of maintenance for distributed fixed assets” by McKinsey & Co they look at industries such as telecommunications that face a similar challenge of maintaining high distributed fixed assets. They conclude that “new technologies yield vast maintenance efficiency potential for industries with distributed fixed assets. Companies that have digitized and automated their maintenance processes now show a significant increase in labor productivity and a 20 to 30 percent reduction in maintenance costs.” The SFR industry will need to take a similar approach for Distributed Maintenance and deploy a purpose-built maintenance, inspections and turns solutions to achieve similar results.