For American Homes 4 Rent, what started as an experiment has evolved into a thriving single-family residential REIT –
Leasing Lifestyle: American Homes 4 Rent – The aftermath of the financial crisis that roiled global markets from 2007 to 2010 brought numerous changes to the housing landscape of the United States, including the rise of institutional investors purchasing single-family homes for rentals. Once the province of mom-and-pop investors, the single-family home market began to see large-scale companies enter the segment to provide much-needed, well-maintained rental housing.
In the summer of 2011, David Singelyn, now the CEO of American Homes 4 Rent, and Wayne Hughes, founder of Public Storage, bought a few houses in Las Vegas as a test case to see if they wanted to create a business focused on single-family home rentals. Singelyn says that year was a turning point in the residential real estate segment.
“First, home prices dropped, but second, and just as important, tech advances reached a point where it was easier to access data like school information and demographics to make investment choices,” he says. “At the same time, there was an opportunity to invest in a management platform and a tech platform to better serve renters.”
American Homes was one of the first single-family rental REITs. Today, American Homes owns about 50,000 homes in 22 states, most of them purchased individually. The REIT owns houses in Texas, Arizona, Las Vegas, Georgia, the Carolinas, Tennessee, Florida, Chicago, Indianapolis, as well as other markets.
A rocky start didn’t hamper the company’s growth, according to John Pawlowski, an analyst with Green Street Advisors.
“In late 2015 to early 2016, [American Homes] refined its operating platforms and figured out how to cut costs, so there was a significant opportunity on both the revenue and operating side,” Pawlowski says.
Even though home prices have risen, American Homes is creating opportunities for growth by reducing operating costs, increasing rents and consolidating their market share. “American Homes has been disciplined, buying homes at the right price and focusing on yields, rather than just on getting a high rent,” says Haendel St. Juste, an analyst with Mizuho Securities.