American Homes 4 Rent eyes Zillow flop on flips

Calabasas-based REIT among nation’s largest single-family rental owners

Los Angeles /
Nov.November 08, 2021 03:30 PM
David Singelyn, chief executive officer, American Homes 4 Rent (Cal Poly Pomona, iStock)

A Southern California-based REIT is considering buying homes from Zillow as the online real estate giant looks to offload thousands of properties following the announcement that it would dissolve its failing home flipping business.

The REIT, American Homes 4 Rent, is based in Calabasas and ranks among the country’s largest owners of single family rental homes.

A representative for American Homes 4 Rent confirmed the company was in the early stages of talks with Zillow.

The Wall Street Journal first reported on the talks. The Journal also reported that two other large firms, Pretium Partners and Invitation Homes Inc., also are considering buying some of Zillow’s inventory. Pretium Partners is based in New York, and Invitation Homes is based in Dallas.

American Homes 4 Rent already owns 56,000 single family homes in 22 states, according to its website, and over the last year has also increased its occupancy rate to around 95 percent, with nearly 53,000 of its homes occupied in the third quarter, the firm reported recently.

The company also generated more income by raising its rental rates and fees. The company’s third quarter revenue was $340 million, more than 10% higher than the third quarter of 2020. Earlier this month American Homes 4 Rent also raised its cash flow expectations for next year.

“We continue to see a long runway of strong demand for single-family rentals,” CEO David Singelyn said in the release, “driven by our country’s housing shortage and the increasing number of households that desire single-family living but prefer the ease of rental lifestyle.”

Exactly how many homes the company might be looking to pick up from Zillow remains unclear. After launching its “iBuying” business in 2018 — in which the company’s algorithm identified houses to buy, repair and flip back for sale — Zillow had been bleeding money on the endeavor, It announced earlier this month that it was shuttering the operation and laying off a quarter of its staff.

The shutdown left Zillow with a backlog of some 7,000 homes, representing a potentially hefty chunk of inventory even for a bulk buyer such as American Homes 4 Rent.

American Homes 4 Rent was founded in 2012 by Wayne Hughes, a businessman who had earlier founded a storage space empire. American Homes 4 Rent was able to cheaply acquire a large portfolio in its early years, as the U.S. emerged from the Great Recession. The firm grew into a rental giant through acquisitions and the development of dozens of single family home rental communities in the southeast and West.

Hughes died in August, at a horse breeding ranch he owned in Kentucky.





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