Invitation Homes of Dallas has purchased more than 300 homes in the Colorado Springs area over the last five years because of people just like Jacob and Caley Harel.
Jacob, a sergeant in the Army, was being transferred last year to Fort Carson from Schoefield Barracks in Hawaii. He, Caley, and their newborn son, also named Jacob, began searching for a Springs-area home.
They considered buying, but Jacob worried the COVID-19 pandemic could lead to a housing crash and plunging values. The couple also was concerned about soaring costs, Caley said; homes were going for thousands over asking price and it was difficult to know what to offer.
With their move from Hawaii two weeks away and still without a place to live, Caley began daily checks of the website of Invitation Homes. The Dallas-based company is the nation’s largest home-rental company and owns more than 80,000 properties in 16 markets, according to its website. It’s also among corporate homebuyers, including Home Partners of America and Zillow, that have ramped up their presence in the Pikes Peak region in recent years
Through Invitation Homes, Caley found a three-bedroom, 2½-bath house in Fountain, south of Colorado Springs.
“As soon as we saw this one, we really liked the bedrooms and the amount of space and everything, so we jumped on this as soon as we could,” Caley said.
They moved in early October, and the roomy home worked out great, the couple said. The commute to Fort Carson was easy for Jacob, while Caley liked the maintenance-free aspect of being renters.
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The Harels, though, already are on the move. Caley and their son, now 1, are moving home to Alabama to be near relatives because Jacob is being deployed to the Middle East. Still, they enjoyed their time in the Invitation Homes rental property.
“It’s kind of like owning a house, but then like if something breaks, you can call people to come fix it for free,” Caley said. “It’s not on your responsibility. It’s been a lot nicer than owning, I think.”
While the Harels are happy, some local real estate agents aren’t; they fret about the impact of corporate buyers such as Invitation Homes on the Springs housing market.
Corporate buyers purchase single-family, detached homes and townhomes that typically would have been bought by first-time buyers, existing homeowners looking to move up and empty nesters seeking to downsize.
But doing so takes the homes off the market at a time when there’s already a housing shortage, the agents say.
Some agents also accuse the large companies of aggressive tactics that pit their deep pockets against rank-and-file buyers; the companies pay with cash and their bids often exceed a seller’s asking price by as much as tens of thousands of dollars, which gives traditional buyers little chance to compete.
“They are aiding in the inflation of the market,” said Tiffany Lachnidt of Keller Williams Premier in Colorado Springs.
She remembers one of the first times she encountered a corporate buyer. The company bid more than $25,000 over the asking price for a home in a northeast side Springs neighborhood, which effectively boosted property values for all homes in the area by 8% to 9% in just a single month, she said.
And when sellers are presented with a cash offer that far-and-away exceeds other bids, not surprisingly they go with the highest offer, she said.
“Because they’re cash, because they close fast, our owner-occupied buyers can’t compete,” Lachnidt said.
Joe Clement, broker-owner of Re/Max Properties, said many first-time buyers will scrape together money for a down payment and make a reasonable offer on the home. Yet they lose out to corporate buyers.
“It’s cash and it’s for more money, and the young couple goes as high as they can go,” Clement said. “The seller’s looking at it, like, ‘I’ve got to take what’s best for me and my family. And the cash and the extra money and whatever is where I need to be.’ And they take the offer from the big guys.”
Relatively few homeowners who’ve lived in their house for decades and raised their kids there will reject a corporate buyer’s over-the-top offer in favor of selling to another family, Clement said.
“My heart goes out to the young families trying to get a house because they’ve got to compete with this,” he said.
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Corporate buyers, however, counter that they provide a product and service that homebuyers and renters demand in markets such as Colorado Springs. And, they say, they hardly can have such an ominous effect on the market since the homes they buy are a fraction of the overall number bought and sold each year.
While Invitation Homes rents its properties, Chicago-based Home Partners purchases houses as rentals, but gives tenants an option to buy. Zillow, the Seattle online housing service, also buys homes in Colorado Springs and other markets with a strategy to quickly sell them for a profit.
Combined, the companies have bought nearly 1,600 single-family homes in the Colorado Springs area from Jan. 1, 2016, through Aug. 20 of this year. That number is based on a review of El Paso County land records, though the actual number could be different because it’s sometimes difficult to identify corporate buyers whose purchases often are made through limited liability companies.
Founded in 2012, Home Partners owns 17,000 homes nationwide, according to its website. It’s been the most active corporate buyer in the Colorado Springs area with 1,050 homes purchased between Jan. 1, 2016, and Aug. 20, according to El Paso County land records. Of Home Partners’ purchases, 302, or almost 29%, have come just in 2021.
Home Partners will have more financial resources for purchases going forward. Blackstone Real Estate Income Trust, an arm of the Blackstone Group, a New York-based private equity firm that manages nearly $650 billion in global assets, is buying Home Partners in a deal that values the company at $6 billion, according to national news reports.
Invitation Homes, meanwhile, has purchased 329 homes in El Paso County between 2016 and Aug. 20; of that number, two-thirds, or 222, have come in the first 8½ months of this year. Coincidentally, Invitation Homes was founded by Blackstone, which sold its interests in the company two years ago.
Zillow, which launched a homebuying service in 2018 and expanded it to Colorado Springs the following year, has purchased just over 100 homes through Aug. 20, records show.
Such companies are buying homes at a time when strong demand and a housing shortage have made it tough for many traditional buyers to find homes.
The corporate buyers, however, reject the notion that they’re homebuying bullies.
Pikes Peak Association of Realtors reports show that more than 90,000 homes were sold from Jan. 1, 2016, through July of this year. The roughly 1,600 homes purchased by Invitation Homes, Homes Partners of America and Zillow over that span are less than 2% of the Realtors Association’s total.
“The truth is, institutional ownership remains a very small part of the overall home rental market and an even smaller slice of the overall housing market,” Invitation Homes said via email in response to Gazette questions. “Invitation Homes is a tiny sliver of both. We represent less than 0.5% of the total single-family rental market, and less than 0.1% of single-family homes in the entire country.”
Invitation Homes says its business model also means it’s not necessarily competing with first-time buyers. The company’s purchases include homes that need improvements, such as new or updated appliances, cabinetry and flooring.
“This is not with the intention of flipping the home, but providing residents with the layouts and amenities they expect,” Invitation Homes said of its upgrades. “It’s important to note that this also places us in a different market than most first-time homebuyers who typically don’t want to take on a home that requires significant immediate investment.”
Home Partners of America, meanwhile, operates its rent-to-own concept that effectively allows renters to try before they buy.
Some potential buyers can’t afford a home, don’t qualify for a mortgage or are hesitant to make a large financial commitment that comes with purchasing a house, Home Partners says on its website. Others might be new to an area and want to rent before they put down roots.
Home Partners offers to purchase properties on behalf of applicants who want to rent and possibly buy and who’ve cleared credit, background and income checks with the company, among other qualifications. As a result, purchases by Home Partners are demand driven, the company says.
Applicants then work with local real estate agents to select a home that fits their needs and income levels.
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If Home Partners signs off on the home, the company makes what it calls “a competitive cash offer” to a seller. If its bid is successful, Home Partners completes the purchase and begins the process of renting it to the tenant.
During the time they rent, tenants face annual rent increases of up to 3.75%. If they buy the home, they can expect to pay a price that rises 3% to 5% a year from the original price paid by Home Partners, depending on the home’s location, according to the company’s website.
“The fundamental premise of the (Home Partners of America) platform is to provide residents with the opportunity to live in their chosen home with the option to purchase it,” Jacob Werner, a real estate senior managing director for new owner Blackstone, said via email.
How many people actually buy homes from Home Partners of America? The company has been quoted as saying that upward of 20% of its renters buy homes.
But while Home Partners of America has bought 1,050 Colorado Springs-area homes since the start of 2016, it’s sold only about 75 properties in El Paso County during that span, land records show.
“To me, that means their process to help renters turn into homeowners isn’t very realistic or very attractive,” said Eddie Hurt of ERA Shields Real Estate in the Colorado Springs. “To me, if that’s kind of your pump to get these renters and to buy these properties, then you should have a significant number of those renters turn into homeowners. That would be a good thing. In reality, the vast, vast majority of them are not ever turning into actual homeowners.”
Hurt also worries what could happen to property values if the housing bubble bursts and corporate buyers begin to dump their homes at below-market prices.
He and Lachnidt, of Keller Williams Premier, also question if the out-of-state companies maintain their homes to the same degree as local owners, including Springs-area investors.
Lachnidt, who herself has bought homes as investment properties, said she purchased a property last year that had been used as a meth lab.
“We took out all the drywall, repaired the house, replaced the HVAC system, replaced every porous surface in the house and then re-listed and sold it to a buyer,” Lachnidt said. “There’s investors who go in there and fix up properties and flip them. Maybe they keep them as investment properties, maybe they don’t.
“But the problem is, when you’re selling to these institutional buyers, they will never resell these homes and they manage them from a distance,” she said. “So one of the biggest complaints you’ll find from consumers on Home Partners is that they’ve become slumlords.”
Home Partners didn’t respond to a question about the care of its properties, but the company has a property management firm that maintains its homes and supports tenants during their lease, according to the Home Partners’ website.
Invitation Homes rejected any suggestion that it fails to keep up its homes; the company says it routinely maintains homes “to a high standard.”
“We conduct both proactive and reactive service on each home,” Invitation Homes said via email. “Our business is successful because we provide the product and the ongoing service that our residents want; if we didn’t, we wouldn’t be experiencing more than 98% occupancy and renewal rates north of 70%.”
Not all real estate agents object to the influx of corporate buyers such as Invitation Homes and Home Partners of America.
Rick Van Wieren of Re/Max Properties said he represented a couple who had purchased a townhome last year for $282,500 and listed in the spring for $340,000.
Home Partners bought it for cash, and paid what Van Wieren considered to be an inflated price of $380,000. The $40,000 difference between the list and sale price was equal to the annual salary of one of the sellers, he said.
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“We had bids well above the asking price,” Van Wieren said. “But we didn’t have anything going to $380,000. … I wouldn’t have paid $380,000 for that townhome. But why wouldn’t I as his agent want him to sell to the highest bidder to maximize his return? And these are young kids.”
The big money paid out by corporate buyers is one reason many real estate agents don’t like corporate buyers, though Van Wieren said the large companies obtain their financing and make their purchases in similar ways to other businesses in the commercial world.
“Honestly, I think part of the frustration is just that when you’re up against them, you tend not to win,” Van Wieren said. “So they make it feel like not a level playing field.”