The single-family rental industry is starting to consolidate

The single-family rental (SFR) space has undergone a dramatic transformation since the housing bust 10 years ago, as private-equity backed companies like Invitation Homes and American Homes 4 Rent have acquired hundreds of thousands of homes and formed publicly traded companies to rent them out.

The ripple effects of this trend have traveled from Wall Street down to Main Street. Single-family rental platforms—think Zillow for SFR homes—launched in hopes of bringing the same institutional data and analytics that the Invitation Homes of the world use to smaller retail investors who might want to add a rental property as part of their retirement planning or just to generate some extra income.

And last week, one of those platforms, OwnAmerica, took a step to make it even easier to invest in SFR homes by selling itself to property manager Renters Warehouse. Under the deal, the new Renters Warehouse will give investors an easy way to buy an SFR property online, as well as provide in-house property management services.

“The industry now is kind of hitting a second inning,” said Greg Rand, founder of OwnAmerica, who now becomes the chief strategy officer for the new Renters Warehouse. “The consolidation of large ownership players like [Invitation Homes], that’s been the story for a couple of years, but now there’s consolidation of service provider industry players, like businesses within the SFR industry. That’s now starting to take place.”

The new Renters Warehouse gives investors end-to-end services, from identifying the right property or portfolio to buying it and managing them as rentals to selling the properties if or when the time comes.

Rand says he realized that without the property management component, OwnAmerica was only providing a piece of the puzzle. Prior to the sale to Renters Warehouse, OwnAmerica could help an SFR buyer find a property manager through a referral, which was usually Renters Warehouse. He says most buyers didn’t take the company up on that offer, however.

Rand’s move to join forces with a property manager is somewhat divergent from the other two major platforms. Over the summer, Roofstock acquired property manager Streetlane, which specializes in institutional investors or portfolios worth more than $20 million, according to Roofstock founder Gary Beasley. However, Roofstock has continued its practice of referring smaller retail investors to a third-party property manager in the market where the house is, and Streetlane remains focused on larger investors.

“Think of us like the real estate investment cloud,” Beasley told Curbed over email. “All investors need is capital and an investment thesis, and we can execute it seamlessly through our Roofstock Platform Services group. Investors end up with a professionally constructed and managed portfolio built to their desired specifications, leveraging our team, technology, and infrastructure.”

Investimate, a product of HomeUnion, originally served as a platform to connect retail investors with SFR properties, but has since transformed into a platform for businesses like property management companies and real estate agents to connect with investors. If a property management company is servicing a house owned by someone who wants to sell, the company can list the property on Investimate and find a new buyer who wants to retain them as the property manager.

Investimate founder Don Ganguly believes this approach allows his platform to broaden the scope of who it can serve, instead of limiting it to investors who want full service from end-to-end. He says the number of SFR investors who self-serve on things like property management is as much as 99 percent of the market.

“There are many people that are buying on their own that don’t necessarily need the full service offering but would like to use the platform,” Ganguly said. “For the investment community we felt like there’s a much bigger audience if we allowed people to use the platform to actually do what they want and not just target the full service folks.”

While the SFR platforms launched to bring institutional tools to mom and pop investors, institutional players like Invitation Homes use them as well. Rand says that big SFR companies tap into his platform’s API to monitor the available inventory and make offers on homes that match their buying criteria. Ganguly says Investimate also serves institutional players.

While the big players in SFR have made a lot of noise over the last five years, they still make up a relatively small portion of the market. Of the estimated 16 million SFR homes in the United States, roughly 250,000 of them are owned by big institutional companies like Invitation Homes. About half of all SFR landlords own only one rental property.

With the SFR properties having only recently become a full-blown sector of the real estate industry, the consolidation of SFR service providers is likely to continue.

“We do believe that scale matters, so I would not be surprised to see more consolidation in our sector, both on the ownership and property management side,” Beasley said.