Picket Homes – World Class
Picket Homes is Transforming Residential Real Estate
By Carole Vansickle Ellis
Picket Homes was founded in 2019 in response to what the company’s founders saw as a looming sea change in the single-family residential real estate sector. “We had built out a roadmap for how we thought the industry would evolve over the next few years and how we could be a part of that evolution,” recalled Charlie Mullan, co-founder and chief strategy officer at Picket Homes. “We knew a massive change was coming to the single-family asset class and wanted to bring positive, disruptive consumer housing experiences to the people living in those properties.” Mullan, along with co-founders Hench LeMaistre (CEO) and Q Shay (CTO), founded the company on a stated goal to “build a world-class housing product for residents.” In the process, they knew, they would have to build a world-class housing product for large-scale and institutional property owners as well.
“We designed Picket Homes to be a platform that is truly the best of both worlds and that could usher in the next generation of single-family rental products,” LeMaistre explained. “The best way to usher in the next generation of single-family rental products is to optimize institutional returns by catalyzing a better experience for millions of people living in rental homes across the country.”
The result of this grand idea was a system that is simple on the surface but highly complex underneath: a technology platform that relies on what Picket Homes refers to as “Decision Science” in order to help institutional investors acquire and build portfolios of single-family rental homes and then, Mullan added, “manage those homes in highly efficient ways [that] deliver exceptional returns to investors and exceptional housing and living experiences to residents.”
In 2020, the COVID-19 pandemic accelerated the trends that had shaped the company’s founding insight: that the unique characteristics of single-family rentals make them attractive to large-scale investors seeking stable returns and long-term growth and to Americans seeking geographic freedom, lifestyle flexibility, and personal convenience.
“When those trendlines converged, we had already imagined a world where large-scale investors could quickly and confidently deploy capital into the sector,” said Shay, “and the increasing ranks of American renters were looking to more easily find the high-quality homes and high-quality amenities that supported rather than stymied the lifestyles to which they aspired.”
Picket Homes consists of a proprietary investor services platform, called Decision Science, and two wholly-owned subsidiaries, Inertia Realty Services and ElaraOne (“Elara”) Home Management. “Our vision is for Decision Science to become the most-used and -trusted toolset for end-to-end investment management in SFR,” Shay concluded.
Using Data & Science to Make Fast, Actionable Decisions
All of the Picket Homes founders have complementary backgrounds that have clearly shaped the mission of the company. Mullan studied economics in college and founded his first startup before he graduated. Shay specializes in what he calls “tech-powered change” and cut his teeth at Amazon in the early 2000s, where he led teams of more than 150 people focused on engineering and international retail. Much of his work there remains in effect in the company’s hiring practices and technology infrastructure. LeMaistre has spent the last decade focused exclusively on institutional single-family rental operations and has overseen ground-up operations for more than 80,000 properties worth more than $20 billion.
“Our founders bring together world-class technologists, operators, engineers, and builders to focus on the rental space,” said Mullan. “We believe it is the perfect marriage for this time and this industry.”
Picket Homes uses a process it calls Decision Science in order to optimize and streamline all aspects of single-family rental ownership. The Decision Science platform, abbreviated DS when used at the company to refer to various operational facets powered by the process, is based on multiple systems that work in tandem to help institutional operators make decisions and acquisitions quickly. For example, when new properties enter an MLS system in markets across the country, the company’s dynamic modeling system assigns those listings a “DNA score” that may range anywhere from 0 to 100. That score will be uniquely adjusted to fit a client’s custom investment strategy, or “buy box,” so that available properties that are the right fit may be easily identified at any time.
Much of the data that feeds into the DNA score also is used for an asset’s return analysis, which includes suggested rental comps and localized datasets designed to help users compose their offers directly through the platform and stream-line the underwriting process as well.
“We do all of the facilitating work to make the process a seamless experience,” said LeMaistre. “We want our clients to be able to log in and acquire properties using a singular process across multiple geographies. The experience today for most owners relies on different brokers, different models per market, and then some way of funneling all that information into spreadsheets. It’s a really inconsistent process. We bring all of that into a single platform for our clients.”
This all-inclusive process centralizes things for Picket Homes clients, but it requires constant work and scrutiny from every angle by the experts behind the scenes in order to make the system effective.
“Everyone has a different way of doing things, and I do not mean just in terms of our clients!” laughed Shay. “Every state, every jurisdiction, every agent and company has a unique way of operating. The only way that we could enable companies and their own underwriters, originators, and analysts to work across all jurisdictions nationally is to build a pipeline for executing transactions that would meet universal customer needs while allowing for a high degree of customization. It can be tough.”
Picket Homes answered that tough call with determined creativity and what Shay calls “micro-scale innovations behind the scenes.” Those innovations often involve intense analysis of markets and market behavior, but the company is equally dedicated to careful scrutiny of the resident experience as well.
Mullan explained, “We are offering residents an innovative renting experience that is good for the residents and the owners of the properties. This is the key to our optimal outcomes.”
Putting the Pieces Together
When the co-founders of Picket Homes talk about their company, they tend to describe it as an exciting experience akin to putting together a complicated puzzle – one that has required them to build a few of the pieces from scratch.
“There are really three core pieces all operating using the Decision Science platform,” explained Mullan. DS Invest enables institutional investors to use data science throughout the entire acquisition process, from identifying and prioritizing the right purchases to making offers and getting through the underwriting process. “This is the listings marketplace,” Mullan summed up, “but it is much more than what most investors think of when they think of a listings marketplace.”
The second facet is DS Manage, which provides a centralized operating system to drive better-informed decisions about operations and resident communications, including billing, payments, and service management. LeMaistre explained that the system can create huge economies of scale for clients when it comes to innovating and offering the best living experiences possible to residents. This creates the opportunity for clients to “rebalance and create optimal outcomes for themselves and residents,” he said, noting that this type of consolidation also improves functionality and teamwork across different locations. This, in turn, benefits residents as well as owners and operators.
“It is a very different ballgame when you are managing 2 or 3 million homes in terms of what you can afford to do for every single customer,” he said. “Our technology-first approach enables the most optimization for every investor and every resident because it is all managed and guided by Decision Science.”
The third piece of the puzzle involves the codification of strategy, acquisition, and management for long-term growth and fine-tuned portfolio analysis. This module, called DS Optimize, is an example of one of the benefits of working with a true tech company in real estate, Shay said. “As a tech company in real estate as opposed to a real estate company with a tech arm, we think differently about innovation and problem-solving. We are thinking about and offering the things that do not just create more revenue for customers next quarter but that will change the way the entire industry works for the better.”
He cited as an example a Picket Homes automated valuation model (AVM) designed to remotely analyze value and condition of listed homes. This type of technology is extremely useful for making estimates about the value of individual properties already, but Shay envisions using it to also predict home price appreciation on a block-by-block level. “That’s a really challenging problem, but if we can improve the factors that go into accurate predictions we will put our investor clients in much better shape to do well in the market,” he said.
A Commitment to Execute at the Highest Level of Service
At its heart, Picket Homes is about “pushing and improving the industry as a whole,” said Mullan, noting that this means improving returns for investor clients while also delivering a “wonderful living experience and ease of use” for residents of properties under management.
Furthermore, added Shay, this means placing a heavy emphasis on the quality of leadership and the employee experience at the company. “We are serious about our values and our goals,” he said.
“This is a terrific team.” Mullan chimed in, “Our employees and vendors see on a daily basis that our values are not something that we only expose to our clients. We are a technology company, but we are really all about people. We are building a unique set of tools that are very, very scalable, and it is amazing to have people working with us so dedicated to that perpetual innovation and improving the industry as a whole.”
SIDEBAR 1
How the Post-Pandemic Economy will Affect the Booming Real Estate Sector
While many industries shut down almost entirely or, in some cases, entirely during the COVID-19 pandemic, real estate investors did no such thing. To whatever degree it was possible under various lock-down restrictions, investors continued to build up investment portfolios and try to make housing options available for a public that was clamoring for new homes and a change in inventory. With the market white-hot throughout much of the country during 2021 and into 2022, investors are beginning to wonder how and when the end might come. At Picket Homes, there are plenty of data-based insights to help shine some light on that question.
“We expect to see a bit of normalization to some degree along with rising interest rates,” said Mullan, emphasizing that he does not expect to see home prices decrease any time soon. “Most of our clients view this as a healthy thing for the market,” he added.
LeMaistre observed, “There is going to be potential pressure on the cost side of real estate and housing as it relates to supply chains and local market labor, but we expect the SFR asset class to remain highly, highly attractive in the near term and over the long-term as well. One of the reasons we built the company around the space is that there are not many – if any – better asset classes in the world from a durability, resiliency, and stability standpoint.”
Shay’s outlook was also positive for real estate investors, although he warned that the Russia-Ukraine conflict has placed some unexpected volatility in markets across the board.
“Macroeconomically, the world is in unclear territory right now, but if housing takes a hit, the impact will be felt most by highly leveraged individuals who bought at a peak and need to sell in a down market – and by all measures there are far fewer of those than in 2008. Our clients are the ones providing more options for consumers in those markets, so we are expecting to continue to execute and come out on the other side in a better position than we went in.”
SIDEBAR 2
Looking Forward
As a relatively young company, Picket Homes displays a special enthusiasm for looking toward the future. In addition to confidently describing how the company has grown its employee base and brought in engineers, data analysts, and SFR experts to refine its processes and take note of every important detail in every system, the co-founders also exuberantly look to the future of the platform and the benefits they expect it will bring to housing as a whole.
“We are building lots of features that are highly specific to client needs and client requests, but at the same time we are dealing with machine learning, AI, and game-changing technology that results in the ‘next-gen stuff’ no one is even thinking about yet,” said Shay excitedly. “We are constantly engaged in both micro-innovations and game-changing innovations behind the scenes.”
Furthermore, added LeMaistre, the Picket Homes model of innovation has something special: the toolsets are scalable. “We are a fusion of best-in-class operations, technology, and real estate,” he explained. “When there are problems to solve, we are always asking how to solve them in scalable ways that ultimately create efficiencies, give consumers better experiences, and give our clients better returns. We are in a state of perpetual improvement.”
