Unlike many entrepreneurs who’ve made their fortunes in the digital economy, Mark Wolf has made his through bricks-and-mortar. Over the past decade he’s built a $1.6 billion real estate development and management company that has redefined the American dream of home ownership. His company AHV Communities, launched in 2013, pioneered the build-to-rent single-family home community concept. Building single-family homes—to rent, not buy—in gated communities with amenities like pools or clubhouses, is a market niche that has taken off over the past 10 years and become one of the hottest sectors in real estate.
Single-family build-for-rent homes account for 11% of all single-family home construction in the housing market, according to the National Association of Home Builders. And the $250 billion industry is expected to continue to grow driven by a confluence of factors: the high price of buying a home; rising mortgage rates; a more mobile and transitory workforce, and a growing desire among consumers for large living spaces along without the responsibilities that go along with homeownership.
Wolf, a former commercial mortgage banker, had his “aha moment” while running his boutique firm Sicuro Realty Partners that raised debt and equity funding for apartment property acquisitions. He launched Sicuro in 2009, when the U.S. housing market was reeling from the subprime mortgage crisis. It triggered a large spike in foreclosures and a jump in renting across the country. Big institutional investors were buying up portfolios of distressed single-family home properties from real estate firms and individuals and then setting up single-family home renting (SFR) businesses. At the time, big firms like American Homes for Rent, Blackstone, Starwood and Colony Capital were buying foreclosures for 30 cents on the dollar with hopes of renting or reselling them.
“I noticed the trend was picking up momentum year-after-year as I ran my firm and recognized that the single-family rental market needed reinvention,” Wolf recalls. “Why not combine the space and life-style of single-family homes with all the maintenance and amenities typically associated with class A apartments and offer a country club lifestyle.”
By 2012 Wolf started to write a business plan for AHV Communities and asked two of his Sicuro Realty Partners–Spencer Rinker and Gene Kim–to partner with him in the new venture. His audacious goal: to build and operate luxury single-family home rental communities throughout America that would include daily management and maintenance, as well as amenities as playgrounds, dog parks, fitness gyms, swimming pools, community centers and hiking trails.
It was an ambitious undertaking considering the capital-intensive nature of such an endeavor. To fund the start-up’s launch in 2013 Wolf used hundreds of thousands of dollars of his personal savings as well as fees and cash flow from his existing business. He then looked for an equity partner for his first $18 million project: Village at Vickery Grove, an 82-unit gated community with a small amenity center, pool, fitness center and barbecue area with professional on-site management. The project was located in Northwest San Antonio, Texas.
Wolf attracted a high-net-worth investor who ran a modular home business who was willing to put up most of the equity in the project. It took four years to complete the construction and development that opened in 2017.
The partner (who has requested anonymity) —anted up $350 million for a 90% equity stake in the project. Since then, he has reaped returns of over 20% on his investment.
But getting the first project up and running was not easy, and Wolf faced huge challenges. “There were disastrous construction delays and quality issues that caused cost overruns,” he recalls. “I realized I had to control my own destiny if my business was going to be successful.”
The experience made Wolf rethink his business model and develop a more holistic approach. He realized he needed to build his own development and construction team instead of outsourcing it. In addition, all homebuilding and management capabilities were brought inhouse, such as forward planning, design, project management, permitting, purchasing and accounting.
By 2018 AHV Communities had four projects underway, totaling 638 single-family rental homes in Texas: Legacy in Pfluggerville; Rivers Edge in Georgetown: Pradera in San Antonio, and Creekside in New Braunfels. By 2020 the company expanded BFR development in California with its 237-unit housing community in Temecula, California.
The pandemic put company growth into high gear. People were fleeing densely populated urban centers and looking for more open living spaces as they worked from home. Demand for single-family rental homes skyrocketed as consumers liked the fact they could live and work from anywhere.
As a result, many private equity funds and real estate investment companies poured millions of dollars in equity capital into Wolf’s company to fund build-to-rent projects in California, Texas and the Sunbelt. They saw a solid opportunity in this real estate niche. Today, AHV Communities has over 21 active projects under development that will build 5,000 rental homes in six states—Washington, Texas, California, Colorado, Tennessee and Alabama. Its company operating revenue should reach $13 million by yearend.
“Our goal is to have 10,000 rental homes by 2026,” says Wolf who is confident he can double the size of his 60-employee business by then. As he explains the build-to-rent single-family home industry has gone through a lot of changes since the financial crisis in 2008 and 2009. It’s no longer a mom-and-pop business, but rather a key asset class for institutional investors’ portfolios.
While rising interest rates and inflation may dampen near-term returns for build-to-rent companies like AHV Communities, Wolf is focused on long-term prospects for the industry. But these headwinds have actually been a boon for his rental homes because more consumers are opting to rent single-family homes instead of buying because mortgage rates are so high.
Some large real estate developers have copied his approach, how does he intend to outcompete them? “We will continue to target and operate communities in fantastic locations in the U.S. and offer the type of housing, amenities and services consumers love,” says Wolf. “The only way to outmaneuver big rivals is to continue to innovate and offer the best product.”
Favorite quote: “Ideas are a dime a dozen, execution is everything.”
Mentors: I have been blessed with several great teachers in my career in the fields of banking and real estate development that gave me great wisdom and inspiration. Among them: Sandy Sigal, founder and CEO and president of NewMark Merrill Companies. He taught me that fundamentals still rule the day in real estate; it’s location, cost basis and product that all matter.
No. 1 lesson learned: Control your destiny as best you can. Luck has a place in it all but leave as little to chance as you can.
Advice I’d give aspiring entrepreneurs: It’s never easy forging your own path. Starting and running a business has its highs and lows, but it’s very rewarding. Battles are won and lost daily, but the war continues. Be ready!
This story and others on New Builders Dispatch are made possible by a sponsorship from the Ewing Marion Kauffman Foundation. The Ewing Marion Kauffman Foundation is a private, nonpartisan foundation that provides access to opportunities that help people achieve financial stability, upward mobility, and economic prosperity – regardless of race, gender, or geography. The Kansas City, Mo.-based foundation uses its grantmaking, research, programs, and initiatives to support the start and growth of new businesses, a more prepared workforce, and stronger communities. For more information, visit www.kauffman.org and connect with www.twitter.com/kauffmanfdn and www.facebook.com/kauffmanfdn.