Everyone seems to want in on single-family rentals. Not everyone wants to manage them.
Poplar Homes, a Cupertino, California-based proptech firm that offers to help the 7 million “mom and pop” single-family rental owners in the U.S. find and keep tenants, raised $53 million in a Series B round at an undisclosed valuation.
The startup expects its business to triple this year, to more than 20,000 units from 7,500 units under management today, as it expands geographically. The company operates in California, Nevada, Colorado, Texas, North Carolina and Missouri.
“It’s definitely heated up,” CEO Greg Toschi said of the business. “Many companies see potential in consolidating this sector.”
Co-founded in 2014 by Toschi, Chuck Hattemer and Rico Mok, Poplar Homes planted its roots around the time major institutions such as Brookfield, Blackstone and Starwood began entering the single-family rental market in force. The startup’s target clientele — private individuals with only one or a few properties — still command an estimated 90 percent of the market.
Poplar Homes raised roughly $4 million in its Series A round in 2016. Its much larger Series B, detailed Monday, speaks to investors’ incredible thirst for exposure to the home rental business, which became more attractive as home prices spiked over the past couple of years.
The Series B was led by LL Funds, with participation from existing and new investors including Crescent Cove Advisors and AGNC mortgage REIT, among others.
Single-family rental managers, including “tech-enabled” ones like Poplar Homes, coordinate leasing, maintenance, legal and accounting matters for owners. Poplar Homes also claims to make things easier for renters, who can use the platform to tour properties, get approvals and pay rent.
The startup charges management fees ranging from 5 percent to 11 percent of the rent, depending on the market, as well as a one-time tenant placement fee ranging from 25 percent to 50 percent of the first month’s rent.
The management field is as fragmented as the asset class’s ownership; the U.S. is home to 80,000 management companies. Poplar has grown mainly by acquiring ones that oversee an average 500 doors — a growth model similar to that of Los Gatos, California-based Pure, one its chief competitors, which earlier this year raised $50 million in its first institutional funding round at a $300 million valuation.
There is enough opportunity to go around, according to Toschi. “We haven’t really competed that much on any deals,” the CEO said.
Poplar Homes has an acquisition pipeline of about 20 managers in existing and prospective new markets, according to Toschi. Like Pure, it tends to keep management around after it acquires a target.
“Our vision is for these teams to leverage our technology to empower their businesses, so that they can focus on building customer relationships,” he said.
Poplar Homes also buys some multifamily managers, focusing on ones with fewer than 100 units. Its “acquisition portfolio” as of 2022 is profitable, said Toschi, who declined to offer specifics.
Of the 123 million U.S. households, more than 14 million lived in single-family rentals as of 2019, the latest year for which there is comprehensive data, according to Statista.
Earlier this month, Roofstock, an online marketplace for single-family rental investors, raised $240 million at a $2 billion valuation, more than tripling its previous valuation.