IRVINE, CA-The movement of institutional investors into the single-family rental market has raised the issue of property management for these homes. Experts agree that managing single-family properties is very different from managing their multifamily counterparts, which is where local agents and brokers have created a niche for themselves.

“Many of these large investors have partnered with local property-management companies and real estate agents in the markets where they are purchasing, and they are hoping this will give them the foot soldiers to handle the details of property management,” Daren Blomquist, VP of locally based RealtyTrac, tells GlobeSt.com. “Property management is a concern when you have large institutions purchasing big quantities of properties in a diverse set of locations.”

The problem comes in when institutional investors treat managing single-family rentals like managing apartments. “It's nothing like apartments,” Alec Bernstein, owner of LRS Realty & Management Inc. in Los Angeles, a firm that has handled single-family rentals since 1988, tells GlobeSt.com. “The tenants are more sophisticated, and the changing economy has created a lot more single-family renters. Because we're local, we know the local market, and these companies are nationwide. They don't know or understand the local market. There are nuances in every local market, and knowing these nuances can help you manage more effectively.”

Blomquist says local property managers and real estate agents who are willing to do property management can benefit from the trend, particularly those who had gained a lot of business from the distressed market. “I have talked to agents who were working the distressed, REO market over the last few years who are now reinventing themselves as institutional investor agents. They can help these investors find properties to purchase do BPOs to help the investors determine how much to offer, arrange for rehabbing the property upon purchase if necessary and then list the property and possibly handle property management.”

Reggie Brown, CEO of All Property Management in San Diego, tells GlobeSt.com that as the new asset class of single-family rentals is developed, big shifts are occurring in the way they're managed. “The short-term effect for property managers is that some of them felt a little neglected and some were happy that they were being identified as possible partners with some of these institutions that are shifting to local management firms. There was a shift to buying activities that maybe would have gone to professional property managers now going to in-house property-management companies. However, most property managers believe that once the challenges of managing single-family assets start weighing on these institutions, they will come back and try to get the properties managed by local managers.”

Brown says that local property managers and brokers can aid institutional owners with single-family tenant placement and turnover, and some can even handle renovations and other nuts-and-bolts issues that can be better accomplished by companies that have knowledge of the area and relationships with local businesses. “In a strong market, tenant placement is not so much an issue, but really good property managers are good at building their tenant pipeline all the time. At some point, that's going to change, so they need to be patient because when the cycle turns they're going to get a lot of business.”

Most single-family homes are still not managed professionally, but rather by individual landlords, says Brown. The trend of institutional owners turning to local property managers is increasing the pool of professionally managed homes. “In the long run, it's good for our industry,” he says.

Bernstein feels that the current wave of institutional investors seeking local property managers and brokers to help with single-family property management has crested, but he believes it will happen again. “This wave is pretty much over. We haven't been contacted in a long time by institutional investors. About a year and a half ago, they started calling us. We didn't know it was coming—not like this. We were doing one or two of these calls every week for a few months. Now, the only things I see in the market are small companies trying to buy single-family rentals. The big ones still utilize us, though.”

Bernstein adds that depending on what the property manager or broker's strengths are, institutional buyers may utilize them for the duration of the single-family rental ownership or only on a project basis.