Markets & Finance

Wally Charnoff's RentRange, the Data King of Rental Housing


“We try to balance the fun of being part of the whirlwind with not getting too into the hype of it”

Photograph by Benjamin Rasmussen for Bloomberg Businessweek

“We try to balance the fun of being part of the whirlwind with not getting too into the hype of it”

Financiers may be familiar with the going rates for luxury Manhattan condos, but when they want the latest on rents in Atlanta, Phoenix, or other places where they’re scooping up single-family homes, they turn to Wally Charnoff. Using data from 12 million properties around the country, RentRange, Charnoff’s six-year-old company, can estimate how much monthly rent a property is likely to generate. That helps drive the data-hungry financial models private equity firms use to determine where to buy distressed homes to convert to rentals. “We’re the only ones with a deep, well-scrubbed, reliable rental database,” says Charnoff.

RentRange is part of the ecosystem that’s growing up around buying foreclosed and low-priced single-family homes and renting them out. At an April trade show in Miami focused on rentals, businesses pitching their services included firms researching property titles, estimating renovation costs, finding unlisted homes for sale, and offering “tenant transition,” a sanitized term for eviction. Even Home Depot (HD) had a booth to promote its Renovation Services group, which rehabs foreclosed homes to get them into habitable condition.

Before founding RentRange in 2007, Charnoff, 41, a jovial New Jersey native who’s built like a pro wrestler, worked as a financial planner and ran a website to help small investors find rental properties to buy. He got the idea for his company when he realized there were plenty of sources for home-price data but almost no information on rents for single-family homes. Charnoff used his own money to buy data from property managers, rental listing websites, and landlords. RentRange’s algorithms take that raw data and account for variables, such as whether dogs or smoking are allowed, to predict a likely rent. Charnoff’s company also provides information on other factors that can affect a property’s profit potential, such as whether the local area is already saturated with rental homes. “It took us a few years to get enough rental data to have meaningful outputs” that predict the rates for other properties, he says.

Charnoff’s timing was perfect. When he started his company, renting out single-family homes was mostly a mom-and-pop business. That changed in the aftermath of the housing bust, as Wall Street began flooding the market with money. Blackstone Group (BX), the largest investor, has spent $4 billion on 24,000 homes, buying hundreds if not thousands of properties a month. Other private equity giants including BlackRock (BLK) and Colony Capital are joining the rush. Renters now occupy 35 percent of all single-family homes in the U.S., up from 30 percent in 2005, according to Goldman Sachs Group (GS).

Big investors first focused on the most depressed markets, including Phoenix and Atlanta. As competition from other bargain hunters grew and prices in those areas rose, they started scouring the country for other opportunities. That’s where Charnoff comes in. Customers pay $50,000 for five years’ worth of RentRange’s data at regional, county, city, and Zip Code levels to help them figure out which markets might be profitable. Once investors pick a market, they pay $2 to $12 for rental estimates on specific properties. David Feldman, vice president of acquisitions for Haven Realty Capital, which is backed by Leon Black’s Apollo Global Management (APO), says RentRange’s estimates have generally been within 1 percent to 3 percent of what Haven ends up getting. “We’ve found markets where it’s absolutely spot on,” he says. “It’s a pretty impressive tool.”

RentRange, which is based near Denver, also licenses its stats to CoreLogic (CLGX), DataQuick, and other data providers. Eric Taylor, who joined as president last year, says almost 19,000 users buy data directly from RentRange. That includes about 50 institutional clients, such as Colony, Carrington Holding, and American Homes 4 Rent, which make up more than 70 percent of the market’s big investors. “We’re part of the fuel for their engines,” says Taylor.

Jonathan Philips, managing director of Anka Funds, has invested in rentals since 1998 and cautions that some newer investors may rely too much on data, buying properties that look good on a spreadsheet without seeing them in person. “We don’t put a lot of stock in the published data that we’ve seen so far,” he says. “We prefer to work more with boots on the ground and our teams of people who are living and breathing house to house, block to block, and talking to neighbors.”

Some large landlords and investment banks that help finance mass home purchases, such as Deutsche Bank (DB), are working to bundle the properties and the monthly rental income they generate into securities that would be sold to investors—just like mortgage bonds and commercial real estate bonds. Single-family rentals haven’t been securitized before, posing a challenge for ratings firms. “Not only is it a new asset class, but the various companies involved are either new to us or are new, period,” says Glenn Costello, senior managing director at Kroll Bond Rating Agency. In the absence of past performance data, the type of historical market information RentRange has compiled is a “very important” proxy, he says.

Taylor says RentRange, which has a staff of 22, saw its revenue climb 1,900 percent in the past two years and became profitable in 2012. The company is about to close a third round of private equity funding. “At some point, we will get bought,” Charnoff says. “But our growth curve is so aggressive right now that I don’t think it’s time for us to sell yet.”

It’s not clear how long the buy-to-rent boom will last, as rising home prices make it a less-profitable pursuit. In February, home prices increased 9.3 percent over the previous year, the biggest jump since May 2006, according to the S&P/Case-Shiller Home Price Index of property values in 20 cities. RentRange is trying to reduce its dependence on big investors by finding other customers for its data. For example, some credit-card companies have begun using RentRange’s estimates in evaluating applicants’ creditworthiness. “We try to balance the fun of being part of the whirlwind with not getting too into the hype of it,” says Charnoff. “If Wall Street decides tomorrow that the institutional play is over or needs to be slowed, we need to be able to survive that.”

The bottom line: As big investors make mass home purchases, they rely on RentRange’s data, based on the monthly rents of 12 million properties.

Weise_190

Weise is a reporter for Bloomberg Businessweek in Seattle. Follow her on Twitter @kyweise.

Perlberg is a reporter for Bloomberg News in New York.

The Good Business Issue
LIMITED-TIME OFFER SUBSCRIBE NOW

Companies Mentioned

  • HD
    (Home Depot Inc/The)
    • $103.75 USD
    • 0.19
    • 0.18%
  • BX
    (Blackstone Group LP/The)
    • $33.92 USD
    • -0.09
    • -0.27%
Market data is delayed at least 15 minutes.

Sponsored Financial Commentaries

Sponsored Links

Buy a link now!

 
blog comments powered by Disqus