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Amherst could benefit in two ways: Home
prices would slacken, creating buying op-
portunities for investors, and rental demand
would rise. Whatever the economy does, he
argues, his industry will benefit as it scales
up. He’s convinced that the pool of homes
available to Amherst will grow by millions,
as aging landlords whose kids have no inter-
est in fixing toilets and dunning for rents
opt to sell to the big guys. “I have $5 billion
to $6 billion from outside investors knock-
ing on the door,” says Dobson. “In the end,
we’ll get to 1 million houses.”
However big the empire becomes, it’s
unlikely to ever include Dobson’s own
home. He and his wife and two kids share
a baronial brick manse of more than 7,500
square feet, complete with wine cellar, in
trendy Austin. It may not be huge by Texas
standards, but it’s the kind of home that
would never clear Amherst’s algorithms,
in the kind of market Dobson the landlord
wouldn’t touch.cost Amherst $28,000 would, by the company’s estimates, cost
a regular buyer at least $44,000. Because Amherst purchases
in such high volumes, it can buy fixtures on heavily discounted
national contracts. Its cost for the four GE appliances combined,
for example, is $1,850 per home; a do-it-yourselfer would pay
around $3,000 at Home Depot. The renovations are handled by
outside contractors, but many rely on Amherst for most of their
business, so costs are predictable and overruns are rare.
Amherst’s tenants also benefit from a time-honored privilege
of renting: not being on the hook for repairs. In-house crews in
each market handle most of that. In Dallas and its suburbs, a crew
of 28 maintenance workers pilots a fleet of 10 white repair vans,
each bearing the Main Street Renewal logo and each stocked with
spare tiles, trendy “moth gray” paint, and ceiling fans.AMHERST HAS FIGURED OUT HOW to serve a fast-growing
new cohort of renters. The question facing Dobson is
whether that cohort will keep growing.
Some experts think the downturn in ownership is
temporary and that more millennials and families
are on the verge of buying. That might not doom Amherst’s busi-
ness model, but it would put the brakes on investor enthusiasm,
says Ed Pinto, an economist at the American Enterprise Institute
and former chief credit officer of mortgage agency Fannie Mae.
“That Wall Street money is hot, not patient money,” Pinto says.
“They will head for the exits or cut back on acquisitions.”
Dobson acknowledges that a surge in demand could trip up his
strategy. If prices spike in the Bargain Belts, Amherst’s acquisi-
tion costs would go up. And since single-family rents tend to
track home prices, its customers might choose to rent apartments
rather than homes. “If home prices outpace income growth, we
can’t get the rents to be profitable and grow our portfolios,” he says.
Still, Dobson doesn’t see such threats on the horizon, and he
thinks most trends are breaking in his favor. If the economy slows,If that yield meets Amherst’s target
(which Fortune estimates is between 5%
and 6%), the team will make an offer.
About 20% of each day’s listings qualify;
Amherst bids on those candidates no more
than 12 hours after they’re first listed,
making all-cash offers. Around 10% of its
offers—on roughly 30 homes a day—get
accepted and go to contract. Amherst
dispatches inspectors to assess each home’s
condition during the grace period. Unless
they find fatal surprises—such as a cracked
foundation—the houses pass muster and
join the Main Street Renewal portfolio.
ONCE YOU OWN A FIXER-UPPER, of
course, you need to fix ’er up.
Amherst spends an average
$28,000 per home, roughly
20% of the purchase price,
on renovations. Many of the middle-class
families in Amherst’s customer base could
amass the down payment to buy the same
low-priced homes, but few would have the
savings to also fund big improvements.
Touring a dozen Main Street Renewal
houses in Dallas and Atlanta, I was
impressed by how closely the homes,
especially the interiors, resembled new
construction. The houses all had different
floor plans, but within each varied box,
Amherst installed the same features: the
kinds of fixtures and brands you’d find
in a new middle-to-higher-end subdivi-
sion. In a six-year-old, 3,100-square-foot
home in Douglasville, a suburb of Atlanta,
Amherst had installed four gleaming new
GE appliances: stove, dishwasher, fridge,
and microwave. The countertops were
thick quartz; the downstairs floors were
sturdy ceramic tile; Hampton Bay ceiling
fans whirred in the living room and master
bedroom. The rent: $1,850 a month.
In nearby Austell, a smaller, cheaper,
and older Main Street home—1,850 square
feet, built in 1997—was undergoing a gut
renovation. The carpeting was ripped
and stained, and the vinyl ceiling in the
kitchen sagged. But workers were installing
the same appliances, flooring, and other
features as in the Douglasville house. The
Austell renovations would eventually cost
twice what the Douglasville ones did. But
that house would rent for $1,695—enough
to reap the yield Amherst seeks.
Economies of scale help these renova-
tions pay off. The improvements that
“Singl e-fa mily
rental s
are a big
information
game. You
collect all
kinds of
informat ion
if you buy
at sc ale.”
CURTIS ARLEDGE,
CEO, MARINER
INVESTMENT GROUP