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FORTUNE.COM // JULY 2019
MEDIAN HOME PRICE
NEW CONSTRUCTION
(AS A % OF ENTRY-LEVEL SALES)
EMPLOYMENT
GROWTH SINCE 1990
PORTLAND SEATTLE LOS ANGELES
7% 4% 3%
NASHVILLE RALEIGH DALLAS
13% 19% 17%
$379,000 $450,000 $632,000 $256,000 $278,000 $277,000
60% 50% 10% 76% 114% 77%
In the Sunbelt and Rust Belt markets where Amherst Capital operates, looser zoning
rules encourage new construction. That helps make single-family homes relatively
affordable, even when the economy is growing fast.MORE BUILDING, MORE BARGAINS
ATLANTAATLANTA
JACKSONVILLE
CENTER
HOUSING
INSTITUTE
ENTERPRISE
AMERICAN
SOURCE:
INDIANAPOLIS
HOUSTON
OKLAHOMA CITY
ST. LOUIS COLUMBUS
LOUISVILLE
HOUSTON
OKLAHOMA CITY
ST. LOUIS COLUMBUS
LOUISVILLE
AMHERST CAPITAL MAIN MARKETS
buying specialists screen leads on their
workstations, delivered by a proprietary
program called Explorer, an offshoot of the
software Dobson developed to price mort-
gages. Each morning, the team gets alerts
on newly listed homes that meet its price
range and geographic criteria—around
1,400 listings a day.
For each “first cut” listing, Explorer
estimates the costs of renovation. This is
machine learning at work: The estimate is
based on Amherst’s experience with homes
of similar age and size in the same or
nearby neighborhoods. In an older home,
this might include replacing the HVAC sys-
tem; for one whose listing photos suggest
wear and tear, it might include a new roof.
(Team members help the software make
that call.) Explorer has become so precise,
Negri says, that the actual renovation costs
average within 5% of the estimates.
Explorer also runs a separate calculation,
finding three homes being rented within a
two-mile radius that are close in age, size,
and bed-and-bath specs to the newly listed
home. Machine learning helps the software
estimate what each house would rent for
based on these “comps.” Explorer then
churns out an estimated “rental yield”—the
net rent after such expenses as taxes and
maintenance, divided by all-in cost.Boston, where a dearth of new building and su perheated local
economies inflate prices. Focusing on fixer-uppers in modestly
priced markets helps keep Amherst’s all-in costs for each home,
including repairs, remarkably low, ranging from an average of
$140,000 in Memphis to $208,000 in Dallas. (The median
existing-home price nationwide is $267,300.) They’re almost
always priced below the average in those markets too.
Making sure low prices aren’t a sign of economic zombiehood
is Negri’s job. “The No. 1 criteria is diversity of employment,”
he says, especially in blue-collar and middle-class jobs. Before
Amherst chooses a new metro, Negri explores its neighbor-
hoods firsthand. “I’ll live in a hotel for a month straight, driving
around with an iPad,” he says. “I was driving the Florissant area
of St. Louis early in the morning, and one out of every two or
three people are dressed in Boeing uniforms. That gave me a lot
of confidence.” A dealbreaker: cars sitting in the driveway in mid-
morning, a sign that a lot of residents aren’t getting paychecks.
Based on research like Negri’s, Amherst now targets around
1,000 zip codes in 30 metro areas. Choosing homes there is the
job of Amherst’s highly automated purchasing system. In its
19th-floor office on New York City’s Madison Avenue, a dozen