For entrepreneurs like Kevin Ortner and Greg Rand, problems equal opportunity.
And as far as problems go, you can’t get much bigger than the Great Recession in the late 2000s and early 2010s.
When the $8 trillion housing bubble burst in 2008, it spurred the loss of 8.4 million U.S. jobs that equaled about 6.1 percent of all payroll employment, according to the Economic Policy Institute. As the stock market tanked, millions of homeowners experienced foreclosure, and home prices sank 33 percent nationwide by 2011.
But instead of joining the throngs dumping homes and emptying their portfolios, Ortner and Rand set out to address the housing crisis in their own way. Though they didn’t know one another at the time, the men were independently deploying solutions that targeted the same challenge: Helping investors and homeowners during one of the largest economic downturns in U.S. history.
Ortner opened the first Renters Warehouse franchise in Phoenix, while Rand launched OwnAmerica in Mooresville, North Carolina.
“The genesis of both companies was a different answer to the same problem,” Rand said. “At the same time, in a different part of the country, we were looking at the exact same crisis and saying, ‘There’s going to be an investment boom on the other end of this thing because [the real estate market] is coming back.’ The common thread was that it was a temporary problem. It’s understandable, it’s explainable, it was self-inflicted, and the market is going to come screaming back.”
In 2010, Rand launched the tech-fueled OwnAmerica marketplace for single-family rental investment, offering investors access to deals, data on market fundamentals, population trends, employment stats, and price performance. It would eventually grow to be one of the nation’s largest investment marketplaces for single-family rentals, facilitating thousands of deals across the U.S.
Two thousand miles away in Phoenix, Ortner was encouraging people hit hard by the crisis not to short-sell their homes or to enter foreclosure, but to instead rent out their homes with the help of Renters Warehouse’s management.
“They weren’t specifically investment properties — many of them were homes where people lived, and they had to downsize for whatever reason or relocate to find work,” Ortner said. “Many of our early marketing campaigns were around the idea don’t foreclose, don’t short-sell. Rent out your home, we’ll teach you how to do that and live to fight another day. Renters Warehouse really hit its stride through what we call accidental landlords, meaning people who never really thought that they were going to own real estate as an investment or buy their particular home to rent out as an investment, but the circumstances led them to do so.”
In 2013, Ortner became president and CEO of the Renters Warehouse, headquartered in Minneapolis. He helped lead the company to manage what’s now worth more than $3 billion in residential real estate across the U.S.
While they had met a handful of times before, it wasn’t until 2018 that the two men realized how well their visions and companies aligned. Rand said that although both companies were successful, each had limitations.
“Last year, a client asked, ‘Do you do property management,’ and I said ‘No’ for the fourth time that week,” Rand recalled. “It occurred to me, I wonder if Kevin is being asked, ‘Do you sell rental properties’ as often as I’m asked if I manage rental properties. So I texted him, ‘Do you feel like you’re a puzzle piece instead of the whole puzzle?’ He said come to Minneapolis, and I hopped on a plane three days later.”
Connecting the Puzzle Pieces
About one year after that text message, on Jan. 1, 2019, Renters Warehouse closed on its acquisition of OwnAmerica for an undisclosed amount.
By merging one of the nation’s fastest-growing real estate management firms and the second-largest single-family rental investment marketplace, the combined entity creates a powerful and entirely new platform.
“We could take a lot of the work out of it for investors and make it something more manageable, but we didn’t have half of the puzzle, which was: how do we find those properties, how do we help facilitate those transactions, and really tee up great rental properties for people,” Ortner said. “Even though this is just getting started, we are already the largest national full-service solution out there.”
With the new Renters Warehouse marketplace, investors can research, buy, manage, and sell properties from their computer. The platform will also provide access to stock-like analytics and day-to-day property management, making it America’s first full-service real estate investment company.
Functionality and services aside, the new platform already has considerable heft behind it. Before selling to Renters Warehouse, OwnAmerica had more than $21 billion in total assets on its platform with more than $200 million in assets for sale. Renters Warehouse managed more than $3 billion in residential real estate, servicing more than 14,000 investors across more than 22,000 homes in 25 states. The combined company also has 250 employees and 175 contract advisors across the United States.
Real Estate for the Rest of Us
Core to Renters Warehouse’s mission is the belief that real estate investment is more accessible than many people may believe. It’s in part why the company coined and trademarked the term “Rent Estate.”
“Rent Estate is essentially using real estate over the long term to create wealth,” Ortner said. “Rent estate is real estate for the rest of us. It’s about democratizing real estate investment and making it less scary or unknown to the ordinary American.”
In creating the term, the company hopes to differentiate the visual many people have of real estate investment being that of fixing and flipping homes, Ortner said. Real estate investment also includes the less-risky and fast growing single-family rental market, he added.
And as people are tending to move jobs more frequently, wait longer to buy their first home, and get married and have children later in life, Ortner said many trends are boosting the single-family rental market.
“All of these things are being pushed back, but what that means is we have a great rental pool of people who need these homes,” Ortner said. “Across all generations, we’re seeing people have a high propensity to rent for a lot of reasons, and that creates a unique opportunity when it comes to demand for single-family rental properties.”
Data on renting affordability compared to homeownership buttresses Ortner’s case. While price differences vary from state-to-state, homeowners with a mortgage are spending more each month than renters in all 50 states, according to data from the U.S. Census Bureau. Monthly homeownership costs increased 14 percent between 2017 and 2018 compared to just four percent for rent increases, according to an analysis by CNBC.
“In every single state, it’s cheaper to rent than own a home, which is amazing,” Ortner said. “It’s definitely pushing a lot of people to make that decision, and it creates a lot of opportunity for people who want to get into owning investment real estate.”
Such trends and opportunities have materialized into huge goals for Renters Warehouse over the next three years. In addition to boosting its “Rent Estate” advisor headcount from 175 to 2,000 people, Ortner believes the company can also more than double the number of homes under management to nearly 50,000 properties.
“This is definitely a multi-billion-dollar business, Ortner said. “We want to be a household name in 10 years, and we think we can be.”
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