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FORTUNE.COM // JULY 2019
mortgages and building equity, and that’s
Amherst’s target market. Its specialty is
grabbing run-down properties in nice,
middle-class subdivisions—guided by
algorithms that help it avoid bidding wars
and money pits—which it then spruces up
for the new rental generation. Amherst’s
typical customers are couples in their early
forties with one or two kids and household
incomes around $60,000. They’re paying
an average rent of $1,450 a month. “That’s
almost exactly what they’d pay on a mort-
gage and other expenses if they owned the
house,” says Dobson. “We’re catering to a
whole new class of Americans—the former
buyers who are now either forced renters
or renters by choice.” And Dobson is bet-
ting that this new class is a permanent one.SINGLE-FAMILY-HOME rentals
have long been dominated by
local entrepreneurs—mom-
and-pop investors or groups of
businesspeople who own and
manage no more than a couple of dozen
properties (and often as few as one). His-
torically, when bigger fish, such as hedge
funds and real estate investment trusts
(REITs), invested in rental housing, they
focused on apartment buildings—larger
assets whose bunched-together density
made them more cost-effective to manage.
The housing crash of the 2000s changed
the math. As hard-pressed households gave
up on ownership, and demand for rentals
increased, investors realized single-family
houses could be a more stable income
source than apartments. An empty unit is
a money loser, and houses were empty less
often. Tom Barrack, head of real estate in-
vestment firm Colony Capital, explains that
in single-family homes, “families stayed for
two or three years, versus six months to a
year in apartments.” Demand has stayed
high, he adds, in part because consumers
who used to see homes as investments are
no longer confident that prices will rise.with Burrus). And each is now playing a small part in an ambi-
tious experiment.
Main Street Renewal is an arm of Amherst Holdings, a real es-
tate investing firm with $20 billion under management. It owns
or manages some 16,000 single-family homes, scattered across
the Midwest and the Sunbelt. That portfolio makes Amherst one
of the biggest, fastest-growing players in institutionally owned
rental homes, a $45 billion subsector of the real estate industry
that barely existed before the Great Recession.
Sean Dobson, Amherst’s CEO, is an imposing Texan data
savant who dropped out of college to get into mortgage trading.
A decade ago, he made a killing shorting shaky debt during the
housing crash. Today he’s adding 1,000 homes a month to his em-
pire with the help of artificial intelligence, using data modeling
to make dozens of offers a day on potentially profitable houses.
The Main Street homes are a $3.2 billion investment that gener-
ates around $300 million in annual rental income, but Dobson
harbors far bigger ambitions: “We want to get to 1 million homes
in the next 15 years or so,” he says. While that figure reflects as
much bravado as realism—it’s more than 60 times the number of
homes Amherst owns today—the fact that it’s conceivable shows
how much the housing market has changed, and how technology
is helping investors profit from those changes.
The rise of the single-family-rental industry reflects profound
shifts in the finances and attitudes of America’s families. Home-
ownership, long a bedrock of financial stability, has become
unattainable or undesirable for many middle-income workers—
for reasons including tighter lending standards, large college-
debt loads, and lagging wage growth and savings. According to
Yar deni Research, slightly more than one in three households
that would have been buying first homes before the financial
crisis is now either renting or still living with their parents.
These trends translate into roughly 5 million households
that are renting single-family homes rather than taking out
TRACT-HOUSE EMPIRE BUILDER
Dobson says aging baby boomers will provide a steady stream of
new properties for him and his investors to buy: “ We want to get
to 1 million homes in the next 15 years or so.”