All Forum Posts by: Tyson Scheutze

In this week’s blog, I am turning it over to Auben Columbia’s Market Sales Manager, Chris deTreville, and his thoughts on what a 20-year scatter site residential rental professional thinks about new construction rentals and specifically intentionally developed (build-for-rent) rental communities.

Chris’ recent trip to IMN’s Build for Rent conference unexpectedly brought Chris back not only to his early real estate days, but also his high school days.

As Columbia Market Sales Manager, Chris points out below the iterative journey of change we all experience in high school and as a beginning real estate professional persists even at the highest level of high finance and development. No matter how much experience and capital you have, a dynamic debt and sales market always has a way of humbling even the most seasoned senior professional. Read below to hear from Chris:

Being a teenager is a difficult time, which most of us apply selective memory to. Your brain is going haywire and your body is simply trying to do all the changes and still fit into your skin. Though few express it outwardly, all teenagers are full of doubt. Yet inevitably, internally, you think everyone around you is doing it the right way and you are just fumbling along. Most teenagers think everyone has it figured out as they stay fixated on their shortcomings. The reality, of course, is that everyone else is feeling the same way. Some of your classmates and friends may be more vocal about expressing it or conversely be better at hiding it. In the end, we always discover everyone is just figuring it out through an iterative journey..

When I started my real estate career in 2006, I knew next to nothing about selling a house. I was a warm body in a model home selling spec homes in what turned out to be, in retrospect, a really crazy real estate environment. I had no idea that buyers were purchasing these homes with subprime mortgages. I didn’t even know what subprime meant until much later.

Turns out nobody else in the industry, including lenders, really understood the negative impact these loans would have on millions of people. We understand it now, as we always do with the benefit of rear view vision. But, during the boom and bust of the great housing bubble, everyone was caught in the frenetic pace. A similar frenetic pace to the one that has captured the last couple of years of residential rental investment and development

Nearly 20 years into my real estate career at this point, I can draw on that experience in order to have a much more measured approach to the business. But as I recently learned, even the most seasoned, senior real estate professionals and investors still have to rely on an iterative journey to success.

I recently had the opportunity to tag along with Auben Capital Partners founder, Tyson Schuetze, to IMN’s Build to Rent conference in Nashville this past week. Panelists discussed a myriad of topics, including financing, deal structure, product type and design. As expected, even how to best leverage AI for maximum efficiency was given airtime. Being new to the build-to-rent model, I was there to learn.

As I discussed with Tyson at the conclusion of the event, it was very clear that no matter the experience level or how many millions of dollars in capital a panelist has allocated to the build-to-rent business, everyone was there to learn.

It was restated many times how the model and asset class is very new, existing just a handful of years in a very dynamic market and economy.

Even though there were seasoned builders, investors, developers and lenders, not one panelist was able to draw from 20 years of experience specific to build to rent. It was clear they were all forging their own path, trying to figure out best practices, and unlike a teenager they were there to express and discuss those concerns and doubts outwardly so we could all benefit from the collective successes and mistakes of the group. One could see directly we were all drawing from our combined experience for a more measured approach to build to rent, which is on its own iterative journey to standardization.

@Will Gaston what we are seeing in Columbia is the same thing we are seeing in most of our markets. 

Recent winter months was the first time we have experienced typical seasonal slowdown since Covid. 

The market is normalizing which in the short term can feel a little unsettling, but given run-up of past couple of years, some normalization is needed. 

Lots of headwinds facing real estate, like the following: 

• Inflation
• Consumer Debt
• Lack of consumer liquidity-- renters don’t have first and last month’s rent, let alone a down payment to buy
• Owners interest-rate locked
• Oversupply of class A multifamily
• Stagnation of rent growth on assets aggressively underwritten at acquisition
• Maturation of term debt combined with stagnant rent growth against a backdrop of rising debt rates =investors unable to meet basic debt coverage service ratios on refinance
• Market normalization forcing operators and investors to rely on market fundamentals (recently) forsaken, while prioritizing expediency of deploying capital
• Institutional and local investors are both frozen by volatility and cost of capital and debt

All that being said, we feel good about B and C class assets we focus on and the markets we are in. let's connect soon 

Greetings BiggerPockets community,

My name is Tyson Schuetze and I am a 20-year SFR professional investor and manager.

I am a full-time investor and the owner/founder of Auben Realty, the southeast's first vertically-integrated full-service, investment brokerage. 

I recently founded Auben Capital Partners to focus my time and energy on raising capital.

Today, I lead a team of SFR experts who have transacted over 2 billion dollars in sales, completed over 30,000 renovations/developments and leased over 20,000 units.

However it was a long road to get to this point, full of lots of challenges and lessons learned.

Every week, I write a blog about my experiences as a long-term SFR investor and property manager who has has been fortunate enough to invest in many types of real estate in many different markets and many different market cycles.

My hope is my weekly blog will give others confidence to keep going and an easier journey to success.

I started real estate investing, while living in New York City and working as a leasing agent in my early twenties.

My first real estate investment was in Syracuse NY in 2005.

I relocated to Augusta, Georgia in 2006 to learn with a multi-family investor/mentor.

And then in 2009, I founded Auben Realty, which has grown from a small local shop to a regional presence with current locations in Chattanooga, TN, Columbia, SC, Greenville, Atlanta, Charlotte and Jacksonville.

Recently, Auben purchased a property management company in Kansas City to begin our Midwest expansion. This acquisition positioned us as one of the 10 largest single family property management companies in the country.

During the past 10 years, we have worked with a variety of large institutional clients in all phases of SFR including: acquisition/disposition, renovations, leasing and management.

However, Auben's model is deeply rooted in a strong local presence in each market.

Our goal is be local, while also offering an institutional grade service and back-end support.

I am excited to welcome two new divisions into the Auben ecosystem as of January 2024, Auben Capital Partners and Auben Development.

These divisions will allow Auben to continue to meet increased passive investor demand, primarily focused on raising capital for larger projects and investments, specifically portfolios of scatter site single family and new construction build-for-rent communities.

I love working and networking with investors, so please reach out and connect with me

Middle school dances and starting a business…

In many ways, creating a business is really like attending your first middle school dance. There is a foreign, awkward excitement that is hard to put into words. Many thoughts and actions lead up to the day. And then suddenly you are there–back against the wall, surveying the landscape–looking for anyone eager to give you a shot.

I’ve often struggled to describe the powerful combination of anxiety and elation of entrepreneurship but maybe I was not tapping into the right middle school memories, buried beneath braces and rejection.

When you start a business, and as you begin to realize people are not beating down the door to engage with you, a certain real pragmatism sets in. You have to be open to anyone! Anyone who is ultimately willing to look past your inexperience; anyone who is willing to prioritize your enthusiasm over your core competency. And so you work with/for (or dance) with whomever will have you. Friends, family, less-than-ideal prospects, any and all are welcome as long as they can help to get you out of the corner and off the proverbial wall.

If you are lucky and/or fortunate as I have been in business (and dancing–as anyone who has seen my wife dance can attest), you survive long enough to get another shot, another chance to show maybe, just maybe, you can learn a thing or two. You may never become Steve Jobs (or Fred Astaire), but, if you play your cards right, you get enough reps to get that innate awareness of your own frequency and rhythm and you begin to find music (and prospects) that suit your speed.

With this awareness, you understand that you will also never be on Dancing with the Stars but perhaps you can find a beat and venue that leads to real competency and proficiency. Maybe, just maybe, you can hang around long enough to say no to enough songs, to enough opportunities, you reach the rare air of becoming expert in a certain niche, industry, market and skill.

thanks @Katie Miller!

I wanted to take a moment and discuss some questions about SFR and respond with some specific trends we expect to see more of in 2024. Many of the topics below were hot topics for debate by SFR industry leaders at the recent IMN CONFERENCE in Scottsdale Arizona.

Institutional SFR buyers are moving on to other asset classes.

Nope. We think some of the easy money has definitely already been made, and we spoke with many people who said they were pruning and optimizing their portfolios, while also reevaluating what they buy and where they buy. But we believe SFR has a long runway as a solid asset class for years to come.

BFR will replace scatter-site SFR as the preferred vehicle for owning SFR.

Yes. We are leaning heavily into this statement. Some of the same organizations currently disposing assets are looking at new BFR communities in various stages of development. The reasons are the same as what has always made multifamily so attractive: uniformity, density, etc.

Now is a bad time to develop/build?

Not true. Supply chain issues seem to have largely normalized. The labor market is still challenging (and not showing signs of improving based on the escalating average age of most contractors). But as one participant said, given the difficulties of getting new BFR online (particularly capital restraints), those who can get new BFR developments to lease-ready status in the next year or two should be handsomely rewarded by a lack of inventory.

Multifamily’s wave will crest causing the asset class to struggle

Many different thoughts on this. Most reports say, given affordability constraints and overall market volatility, renters are staying put for much longer periods of time, reducing turnover. However you also have huge amounts of multifamily inventory hitting the market simultaneously. All of the product is nearly identical in target market reach (Class A, high rent). We see the party slowing down but see a lot of upside in Class B and Class C product which have not been able to make it out of underwriting for the past couple of years (and really has not been built for several decades, at this point).

Institutional buyers will return in 2024?

There were many hopeful SFR industry people at IMN in Arizona, desirous of a better pace for acquisitions in 2024. It wouldn't take much to beat 2023. But we remain cautious in our optimism as the capital stack requirements are still making it really difficult for large and small aggregator/operators to be able to craft the right deal structure. Unless rates lower it may be status quo. We hope to see some movement by end of Q2

Atlanta is losing its luster?

People still love the Southeast and its shining star, the ATL. But the market du jour is clearly Charlotte, with nearly every owner/aggregator we talked to interested in this market. It doesn’t hurt that the Charlotte MSA is now Statesville to Rock Hill, Hickory to Salisbury with coverage at all points in between. We also heard a lot of chatter and a lot of interest in some traditionally less sexy, midwestern markets like Kansas City, Columbus, etc.

Capital is coming in from the coast?

As acquisitions have slowed, there is much more focus on the day-to-day, including a lot of chatter about OpEx and the biggest issue for most fans of the Southeast: insurance. In addition to many insurance providers pulling out of the state of Florida, we heard of big insurance issues in coastal cities in South Carolina, Georgia, etc. That being said, many of these same markets are too strong to ignore but we heard a lot of people reconsidering what are the best coastal markets, with cities like Jacksonville replacing Tampa/St. Pete.

When I moved to Augusta in 2006, it would have been challenging for me to point out Augusta on a map. I knew it was in Georgia, not Atlanta, and home of the Masters. That was the extent of my local knowledge. When I moved to Augusta, I also had no clue I would grow to know Augusta better than any city I have ever lived in.

Scatter site single family rentals force you to cover a lot of terra firma in your operations. Initially, my time spent meeting the city of Augusta was “driving for dollars” looking for homes to buy to flip. As I referenced in an earlier newsletter, driving for dollars is the pursuit of driving “farm areas” (neighborhoods of interest) looking for abandoned and vacant homes. You are part Google Maps recording vehicle, part explorer, and part private investigator. When you are looking to buy, you are trying to search for things that others might not see.

The obvious signs are overgrown landscaping, stacks of newspapers in driveways, and junk in the yard. While looking for these things, you get to know the streets. Really, really well. You learn what locals in Augusta know, that the street Battle Row can go from $3 million to $30,000 homes in a mile’s drive. AI has a hard time capturing this reality. But locals know.

After I bought some initial properties, I learned the city even better. Running materials to job sites and checking on progress, and then I learned it again going to check on a problematic maintenance issue and viewing vacant homes that needed turn-renovations.

In addition to ample windshield time learning the city, I had a lot of local folks help me see the opportunity in Augusta. Amazingly, it was initially a lot of the non-native local folks (transplants) who saw the most potential and opportunity in Augusta.

Non-native Augustans like Justin, Don, Bernard, Scott, Bob and Sue knew that Grovetown was going to grow to be a lot more than trailers and cow pastures. They saw the potential in South Augusta even though there was a lot of crime at the time. Many of these people were also catalysts of the change

I was always most drawn to the urban core and met other transplant Augustans like Janie Peel, who knew someday/someway downtown Augusta was going to be more than a late night food and drink destination. This concept of local experts has been core to Auben since day one, but we don’t go it alone. We are consistently seeking more local experts to learn and grow from and with.

How much do people matter in managing SFR?

Tech is great, but what happens when you don’t know who you are leasing from or who your escalation point is?

In my last post, we talked about how leasing occurred in scatter site single family home rentals in the olden days before Bluetooth and self-showing lockboxes. Self-showing lockboxes have undoubtedly been one of the most important tech improvements for SFR.

Clearing this hurdle of showing in-person with leasing agents gave SFR aggregator/operators a little more confidence in their ability to lease. Further subsequent improvements to the self-showing lockbox technology and data also allowed for deep pre-screening of residents while also streamlining 24/7 access to homes.

Prospective residents could be required to answer customized landlord questions while also needing to provide a valid credit card prior to entry. After viewing properties, potential renters would receive programmable follow-up questions and even be given follow-up questions to determine their level of interest. If potential residents were not interested in the particular home they viewed, app interfaces allowed residents to see similar and neighboring homes managed/owned by the same party.

To say it made our previous self-showing open houses seem antiquated would be a massive understatement. While running the operations for a large hedge fund circa 2016, there were times where we had over a 100 active listings in the far corners of a single MSA like Birmingham, Alabama. With old school, in-person agent showings, the human capital needed to lease that many units simultaneously was simply not tenable.

Simultaneous to the self-showing options, digital contract signing options like DootLoop and DocuSign became standard and normal. It was possible for a resident to view a property, be approved, sign a lease, and move-in without ever talking to or meeting a human affiliated with the owner or property manager. In all the new technology SFR operators and property managers thought they had discovered the Rosetta Stone to make SFR (even lacking density) mirror multifamily.

It was not uncommon for large SFR managers or owners to lean heavy, heavy into tech and remote team members. For a 1000 unit SFR portfolio in Tampa, you could have a portfolio manager in Cleveland, OH, a call in Center in Topeka, Kansas, remote customer service team members in Mexico or (offshore) in India, and a rental payment processing center in New York.

How could anything go wrong?

The euphoria around centralization, consolidation, and tech was palpable in the industry. Covid became even more gasoline on the flames of excitement. There was (and is) just one small problem, absolutely nothing in scatter site SFR is uniform or standard–no matter how much the manager or owner try to make it so. The variability of the product often made the uniform remote process a non-sequitur. Some owner/aggregators tried to throw more tech at the process; some owner/operators didn't care because they were building machines to only eat equity. The most observant owner/operators understood that local matters and people matter.

At Auben, our core philosophy has always been based around local experts.

All the emphasis and effort on renovations and inspections is ultimately an attempt to control the controllables enough to create a desirable home for a future resident. Once a home is “rent ready,” it signals the baton handoff to the next department and team member.

Single family rental leasing has consistently tried to take pages from the multifamily playbook but SFR has always lacked the two biggest multifamily advantages/attributes: uniformity and density. Even without these characteristics, in the early days of Auben we tried to copy the multifamily showing techniques and design a personalized resident viewing experience.

Prior to the invention of electronic self-showing lockboxes, we scheduled and arranged personal tours of our homes in a very analog process. Residents called in, and, if we were lucky, we were able to answer. Until you have listed and tried to lease an affordable priced rental, it is hard to fathom the intensity of call volume that a single rental listing can generate. Years later while using Voice over IP phone systems which tracked all of our activity, we saw that with 30-50 active listings, it was not uncommon to field 200 phone calls a day.

The questions and inquiries always ran the full gamut, however, because our initial homes were predominantly in working class neighborhoods, the most common initial question we received was, “Do you accept Section 8?”

We did and do. But, having a Section 8 voucher was not immediate grounds for approval. We discovered with many other landlords or rental agencies that a voucher meant automatic approval. If memory serves, we made this mistake just often enough to create a policy change where, regardless of any subsidies or assistance programs, you still had to meet our rental criteria.

As the calls rolled in, we scheduled resident viewings with very little pre-screening activity. Residents called, asked to view one of our properties, and went on our scheduled showings calendar. Our leasing specialist, originally my dad, logged many miles covering the far corners of the CSRA, opening up doors for prospective residents—when they bothered to show up.

It was remarkable how many “no call, no shows” we encountered. Affordable home leasing is not easy on the ego.

We learned, in time, to trust but verify. Calling to confirm appointments and trying to group scheduled showings was the result of many mad dashes to empty doorsteps and unanswered calls to residents who had been extremely eager to access our homes only 24 hours prior.

In addition to grouping showings and verifying appointments, our other biggest improvement was pre-screening questions. Asking residents to confirm they had no prior evictions, met income requirements, and had the minimum credit score didn’t ensure they were going to tell us the truth, but it did at least allow the honest ones to opt themselves out.

Many of the processes would be fundamentally changed by self-showing lockboxes, but core practices continued.

In my last post, we discussed home variability and how a lack of uniformity contributes to challenges in property renovations. Equally important to the initial renovation process are the initial inspections and then the ongoing repairs and maintenance.

While at Auben, I rarely lost sleep over inspections because our size and scale allowed me to see every home somewhere (often everywhere) in the process. However, during my time managing renovations for the hedge fund, we were completing over 100 renovations a month and needed detailed, visible checkpoints.

As we attempted to standardize renovations, we also worked to improve our inspections, repairs, and maintenance processes prior to occupancy. One of our first attempts was to incorporate detailed inspection assessments prior to listing our homes for rent. We hired individuals with construction and renovation backgrounds to inspect the work of our project managers in an attempt to catch flaws before listings hit the market. We also allowed property managers to walk our homes and create their own punch lists.

In markets with post-occupancy or quality-control issues, the inspection process became absurd. We would have our renovation manager do a final punch list on our contractors. Our inspector would then inspect the work of our renovation managers prior to listing. Our property manager would then do a pre-listing inspection. Finally, one of the above (or sometimes all three) would come back and do a pre-move in inspection before the resident moved into our home.

How did we manage to continue missing items?

Because the lenses our folks were looking through were different for every person.

We discovered our property managers and inspectors usually focused on different things and both needed calibration. Inspectors were consistently focused on technical workmanship–zeroing in on if things were square, level or plumb. While property managers would tend to only look for paint overspray and curb appeal.

Both parties were right–and wrong–simultaneously, and it required a lot of hand holding and collaboration. Our local teams were created to work together, but this handoff from Renovation to Leasing was contentious even with our most functional teams. The inspectors who were intended to be Switzerland (diplomatically neutral) seemed to have a hard time understanding that the homes were not new construction and could never be flawless. Our property managers who were routinely asked to achieve nearly impossible asking rents could not understand that the budget was not infinite.

I tried to reduce the process (and friction) to focus on safety, functionality and curb appeal.

For curb appeal, we did in-market training with the entire team gathering in the front yard at the curb of our homes and looking at the home from a prospective renter’s perspective. Most of our properties were fairly basic 1960’s ranch homes, which we made small improvements to like adding red mulch, painting front doors and shutters, and planting hearty, low maintenance bushes like boxwoods.

I was a stickler for curb appeal, as we were consistently pushing rent and were the highest-priced rentals in historically working class neighborhoods unaccustomed to the rental prices we were asking.

Inside our homes we had more attractive features like stainless steel appliances and new LVP (laminated vinyl plank) flooring, but we still needed to get our residents out of the car and through our front doors. One of the most routine scenarios we had was large budget home renovations having lots of issues post-occupancy. We discovered that the homes we bought that were in the worst shape, often had the most ongoing issues–no matter how much money we spent renovating them. There was a really strong correlation to the fact that these homes often sat vacant as distressed properties for long periods of time prior to us purchasing. No matter how much time and money was spent on renovation, trying to simulate heavy use of the mechanical systems as a result of the occupancy by a family was different. Families who had paid thousands of dollars to move into their dream home had collapsed sewer lines during their first week of living in their homes.