- Single-family rental platform Mynd said it will buy thousands of homes from iBuyers like Opendoor.
- The growing connection between SFR players and iBuyers could further corporatize the American home.
- Corporate interlocutors in the housing markets maker it harder for everyday homebuyers to compete.
A fast-growing player in the booming single-family rental business has a plan to supercharge its expansion.
Mynd, an Oakland-based property management firm for single-family rental (SFR) home investors, will acquire thousands of houses from iBuyers, a growing constellation of companies that buy homes completely online and flip them at a profit, its chief executive told Insider.
Mynd’s plans highlight the growing interconnection between two industries and how that could further accelerate the corporatization of the American home.
For their part, SFR investors — from major asset management firms like Blackstone to modest pension funds — have purchased hundreds of thousands of homes over the past decade to repurpose as rentals. Lately, their growing presence has created further competition for homebuyers in an already-hot property market.
But they have struggled to continue to deploy billions of dollars buying homes one by one across the country. Working with iBuyers, which have become adept at digitally purchasing houses en masse using pricing algorithms, may allow them to grow their scale more quickly and efficiently.
Mynd plans to buy 4,000 homes from iBuyers instead of regular sellers
Last month, Mynd announced it had reached an agreement to buy 20,000 homes across the country over the next three years on behalf of the institutional investment manager Invesco, which has said it will spend $5 billion on the initiative and will lease the houses to renters.
Doug Brien, Mynd’s co-founder and CEO, said he anticipates that up to 20% of the homes — around 4,000 properties — will come from iBuyer firms. Brien said that Mynd will also purchase houses through more conventional acquisition channels, such as local property listing services and home builders.
“You have to be playing in every channel there is,” Brien said, alluding to the lofty task of buying so many homes one by one off the open market. “Of the 20,000 homes, between 15% and 20% of our purchases could come from iBuyers.”
Investors flock to single-family homes for solid returns
The SFR business has been given a lift as the pandemic has encouraged Americans to relocate from cities to suburban homes that boasted more space and could better accommodate remote work and sheltering in place.
As the pandemic has waned, the housing market has continued to heat up. The National Association of Realtors reported that the median home price rose by a record 23.6% in May over the previous year.
Major SFR players see the situation as an opportunity. As prospective homebuyers are priced out by the feverish competition for housing and with mortgage rates expected to rise, more Americans could be forced to rent, buoying the SFR market in the coming years.
US single-family home rents hit 14-year high in May, according to CoreLogic data cited by Bloomberg, funds that further line SFR firms’ coffers.
A growing number of investment firms and institutional investors have piled in, potentially complicating the dream of homeownership for prospective buyers by creating more competition, outmaneuvering other bidders by extending cash offers, and buying newly built homes in bulk before they can hit the market.
SFR firms join forces with iBuyers to grow faster
For major investors, the challenge has been spending the billions of dollars they want to allocate to the sector by scooping up $250,000 homes one by one.
“Buying homes off of multiple listing services is one of the hardest things to do in this business,” Brien said.
The major iBuyers, meanwhile, have thrived by mastering the business of vacuuming up thousands of homes. The firms — which include newer, purpose-built companies like Opendoor and Offerpad, and existing real-estate players such as Zillow and Redfin, which have launched iBuying arms — acquire homes, then flip them for a profit. They seek to capture other lucrative fees such as providing title insurance and mortgage financing.
Although they generally seek to acquire houses at a discount to market prices, home sellers have been drawn to them even in a rising market for the convenience they offer. The firms can close quickly, pay all cash, and have brought the task of selling a home almost fully online, streamlining what is normally a tedious, paperwork-intensive process.
A recent analysis by Insider of data provided by the real estate sales tracking firm Attom suggested that iBuyers sold about 3.5% of their inventory to SFR buyers over the past five years. But other information and reports suggest that iBuyers may be accelerating their sales to the SFR industry. Dallas Tanner, the CEO of Invitation Homes, the largest SFR company with over 80,000 homes nationally, said during the firm’s first quarter earnings call that about 6% of its acquisitions came from iBuyers. Invitation Homes has invested in Opendoor.
The private equity firm Cerberus, which has poured hundreds of millions of dollars in the SFR business, purchased more than 200 homes from iBuyers in the first quarter of 2021, according to a Bloomberg report.
Michael del Prete, a scholar in residence at the University of Colorado who tracks newer segments of the real estate industry, such as the SFR business and iBuying, said that the convergence of the two industries makes it even easier for both to profit.
“Institutional investors have acquisitions teams out there looking for houses to buy,” he told Insider, “but if they can outsource that to a dedicated company, it makes it a lot easier.”
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