2023 Emerson Owner-Client Recap

Written By Liz Holubec

Below is the annual Emerson Owner-Client recap I sent to all our owners at the end of 2023. Note: Non-applicable content has been removed for clarity and focus.

Summary of the information covered in this review:

  • Houston Market Review 2023

  • Emerson’s Performance 2023

  • Emerson’s Improvements for 2024

My hope is you’ll use the information below for two main reasons: (1) to be better informed when making future investment decisions and (2) to pull the proverbial curtain back on how we’re protecting and increasing the profits of your rental property. Note: most of the data is either from the local Houston MLS or our own portfolio data (including our client’s properties!).

Houston Market Review 2023

  • Single Family Rents:

    • YOY: Oct 2022 vs Oct 2023 – $2,257 vs $2,201 (2.48% decrease)

    • YTD: Jan 2023 vs Oct 2023 - $2,287 vs $2,201 (3.76% decrease)

  • Cumulative Days on Market (CDOM):

    • YOY: Oct 2022 vs Oct 2023 – 30.7 vs 36.7 (19.5% increase)

    • YTD: Jan 2023 vs Oct 2023 – 47.9 vs 36.7 (23.4% decrease)

    • Note: CDOM is a better representation of time to lease than DOM because CDOM includes all the DOM if the property was listed multiple times i.e., listed, delisted, and listed again.

Rents were slightly down to relatively flat year-over-year in the Greater Houston area. The leading causes adding to the rent supply are:

  • Owners Wanting to Keep Cheap Mortgages – Per a recent Redfin study, 62% of all mortgages are below 4%. Instead of selling when property owners relocate, downsize, etc., owners are turning to renting the house to keep their low interest rate.

  • New Multifamily Supply – Normally I would say multifamily does not compete for single-family renters, but with the continued rent increases over the past few years, and the amenities of the multifamily properties, renters now have more options.

  • Short Term Rentals (STRs) Converting to Long Term – We all heard the crazy cash flow figures Airbnb hosts were making in 2020-2022. All that seems to be changing as more companies abandon the work-from-home model, increases in the number of Airbnb hosts, and tightening regulation from cities across the US. Airbnb host revenue declined in 2023, causing some investors to convert the STRs back into long-term rentals. It is unknown how this will affect Houston, but according to AirDNA Houston has approximately 70,000 Airbnb’s. If just 10% of STRs are converted back to long-term rentals that would add 7,000 rentals to the supply…

If more rental inventory continues to come online next year, this could continue to put downward pressure on rental prices.

Please be prepared that you may not see the record setting 5-10% annual rental appreciation that we had over the past 3-5 years. Normal rental appreciation is between 2-5% per year so it may be prudent to use that range when underwriting future purchases.

Emerson’s Performance 2023

Maintenance:

  • Median Work Order Cost: $172

  • Issues Resolved Without Dispatching a Vendor: 72 (estimated $12,384 in owner savings)

  • Median Speed of Repair: 3.9 days

  • Tenant Satisfaction: 4.5/5.0

I’m very happy with our maintenance team and what they’ve accomplished this year. I challenge you to find another company that has the combination of cost control, speed of repair and tenant satisfaction.

A notable difference between Emerson and other management companies is we resolved over 70 tenant work orders without dispatching a vendor – saving our owners approximately $12,384. While other companies outsource maintenance to Mexico or the Philippines, we have experienced individuals reviewing all incoming requests and troubleshooting BEFORE dispatching a vendor – at no cost to you.

The #1 reason tenants leave is due to lack of attention to maintenance, which is why we heavily monitor our median speed of repair (3.9 days) – leading to less turnovers and higher owner profits.

We will continue to track these metrics vigilantly as we manage more properties and add more vendors.

Leasing:

  • Median Lease Days on Market (DOM): 18 days

  • Median Lease Price: $1,799

The primary goal of our leasing team is to lease the properties as quickly as possible, at the highest price possible, to the best tenant possible. The team’s performance was stellar to say the least, as they leased properties 28% faster than the general market (CDOM Jan1-Oct31 for Greater Houston was 25 days).

While our year’s performance was strong, we saw a slowdown towards the second half of the year – mostly due to seasonality and the aforementioned increase in rental inventory.

General:

  • Median Turnover Time: 11 days

  • Average Turnover Cost: $1,690

  • Percentage of Tenants Renewed: 84.8%

  • Average Length of Tenancy: 2.71 years

The team delivered strong performance in the other areas of the business as well. An almost 85% renewal rate is well above industry average of 50-60% and while the rising interest rates reduced affordability for many of our tenants, our team’s attentiveness to the residents created a first-class rental experience – leading to only a small number of residents leaving – mostly for reasons out of our control like job relocation, family size increasing, etc.

Our average length of tenancy has historically been between 3-4 years, this year however we saw that average drop just below 3 years. The root cause of the drop is due to the significant number of new doors we added this year, creating a major increase in residents who have been with us for less than one year. Next year and beyond, I suspect we’ll see that figure go back into the 3–4-year range.

Turnover costs surprisingly beat industry's average. Now that the construction labor market has stabilized, and we’ve added other reputable vendors, we’re hoping that turnover costs continue to moderate into 2024.

Another trend continued this year that has been apparent since founding Emerson in 2019 – owners who completed their own make-readies resulted in significantly longer turnovers and vacancy. In 2023, if the owner completed their own make-ready, it more than tripled the length of the turnover (35 days vs 11 days), adding almost a month of vacancy and, if your property rents at $1,800, that’s the equivalent of losing ~$150/mo over a 12 month lease.

While it’s always your choice as the owner to decide who completes the make-ready, I strongly recommend you allow Emerson to get the property ready for the next tenant – not only saving you time, frustration, and liability, but completing the make-ready in a more timely manner.

Emerson’s Improvements for 2024

If you’ve been a client for any length of time, I think you’ll find our team cares deeply about you, your property, and the residents – in my opinion, more so than any other property management company. This is why we continue to find ways to increase the value you receive from our service. I won’t bore you with the operational efficiencies we’ve implemented for next year, but below are just a few ways we’re improving:

  • Guarantees: We added several new guarantees for 2024 to back up our service claims! You can find all of them on our website here and highlighted below are the two that you may find most relevant:

    • 30-Day Lease Guarantee - If we are unable to lease your home in 30 days or less, we will waive 2 months of management fees!

    • Property Management Transfer Guarantee - Don’t let a pesky termination fee keep you or other properties with a bad management company. After becoming a client, we’ll pay your termination fee at the old company!

  • Bringing Leasing and Sales Entirely In-House: We have historically used realtor partners to assist with leasing the properties quickly, at the highest price, to the best tenant. Next year we will be hiring an agent to work solely on Emerson properties. What does this mean for you? More consistency amongst your property listings and a higher level of quality control.  

Thank YOU!

In summary, I can confidently speak for the team when I say we greatly appreciate your business and your trust with one (or several) of your most valuable investments. Believe me when I say, we take your faith in us very seriously and continue to find ways to increase our service and your profitability.

We look forward to another year of caring for your investment(s)!

Liz Holubec