By focusing on what the ideal resident looks like, their needs and desires, SFR investors can create a buy box that attracts the very best tenants.
In real estate investing, a buy box is an investor’s description of the types of homes they want to buy — and most of the time when investors create a buy box, they’re focusing on different attributes of the homes they want to buy. This is a workable way to create a single-family residential (SFR) investment strategy, but a potentially more lucrative strategy is for investors to focus on residents.
A typical SFR investor’s buy box might be structured around the ideal investment home’s size, style, age, neighborhood, proximity to different amenities or utilities, or any combination of these attributes. This strategy can work well if investors are savvy enough to choose a buy box that aligns with demand in the markets where they’re purchasing homes. For example, maybe an SFR investor’s buy box is three- to four-bedroom, three-bathroom homes built after 1980 in neighborhoods near a large university campus; this investor is tapping into demand from the constantly replenishing population of students.
What if instead of thinking about the buy box in terms of the house, investors thought about the buy box in terms of the ideal resident? New technology is making it possible to apply better filtering to SFR investment opportunities. Investors can find previously hidden homes that fit your business model, and they won’t waste time on properties that seem like a good fit (but aren’t).
Here’s an example: Perhaps the investor understands that baby boomers and millennials are the two biggest adult population groups in the country, and wants to focus on millennials (which are poised to overtake boomers, population-wise). This has directed them toward the opportunities in university communities, but perhaps they want to attract more studious graduate students to their rentals, as opposed to the slightly less experienced (and potentially less responsible) undergraduate students. By understanding what those graduate students value, this investor can find SFR properties that are perfect for these ideal residents.
Most graduate students want proximity to campus (or to transportation options), but they don’t want to be in a party zone; they prefer some quiet and solitude. Smaller SFR units — two bedrooms maximum — that are located away from busy streets and loud neighborhoods but still within easy reaching distance of school would be ideal. The investor can drill down even further depending on what they know about the types of prestigious graduate programs available at the universities: an agricultural program might draw students who want at least a small garden or a chicken coop; music program students will require storage space for their instruments.
By focusing on what the ideal resident looks like, their needs and desires, SFR investors can create a buy box that attracts the very best tenants — but they have to use a platform that can leverage somewhat abstract values to determine which properties will offer the highest returns. Not every platform will let you measure curb appeal, storage space, or the ability to add an outbuilding like a chicken coop when you’re searching for new investment opportunities, and using one that can qualitatively evaluate how a home will fit your ideal resident’s profile can alert you to the highest-yield opportunities sooner, and can also help you determine the fairest price to offer.
If you’re not sure how to build your buy box around estimated demand and your ideal resident instead of home attributes, and you’d like to learn more, we can help you determine the best approach to take.