The real-estate brokerage Redfin last week announced it has entered an agreement to acquire RentPath Holdings for $608 million. The deal would pull RentPath out of bankruptcy and would make Redfin more competitive in the real estate listings business, according to a news release from Redfin.
Redfin's CEO Glenn Kelman believes RentPath will boost Redfin.com traffic by, among other advantages, attracting a new demographic of renters and increasing his company's stature among homebuyers and renters alike.
"Redfin’s brand will get bigger. We’ll show up higher for Internet searches on Phoenix housing or St. Louis real estate," Kelman said. "Redfin’s 2020 rapid traffic growth has already transformed our prospects, giving us a powerful channel for meeting customers and marketing listings directly to buyers. Together with RentPath, which grew traffic by more than 25% in 2020, Redfin will aim to compete with the largest portals on every front, for every visitor. It’ll be a wild battle."
Friday's deal follows an earlier purchase agreement between RentPath and CoStar, which federal antitrust regulators blocked, ruling that the partnership would "significantly increase concentration in the already highly concentrated markets for internet listing services advertising for large apartment complexes in 49 individual metropolitan areas across the United States." Since Redfin is brand new to rentals, no such concerns.
While Redfin with RentPath will welcome customers who pay the fee to list their communities on RentPath’s sites, it also plans to pilot a program for property managers to pay only for a signed lease.
At least for now, Redfin does not intend to hire real estate agents to represent renters.
"It’s common for real estate agents to represent renters in only a few North American cities, and we still have thousands of agents to hire for buying and selling homes in 2021," Kelman said. "Even if we don’t employ rental agents, we’ll still need a rentals sales-force."
The CEO added that "since signing up new customers, not just revenue, is our first priority," he won’t be able to forecast RentPath’s financial performance until the two companies can work out a sales strategy, which he anticipates will be a few months after the merger closes.
The single-family rental market has evolved over the past decade and interest is growing. In fact, a recent Bloomberg article pointed out that single-family rentals are drawing increased interest from not only independent investors but also institutional money, and that more builders and apartment firms are pushing into that corner of the market.
In addition, the pandemic reportedly has ignited Americans' desire for larger living spaces and thus sparked a new level of "zest" for the SFR sector of real estate.
As for Redfin, its CEO concludes that over time, "we’ll figure out how we can make the whole process of renting a home better, not just the initial search. This deal is just the beginning of a new, exciting journey."
Note: This spring, the Five Star Institute, with moderator Jeffrey Tesch, CEO of RCN Capital, presents the 2021 Single-Family Rental Summit (SFRS). The event is Wednesday, May 12 at Four Seasons Resort and Club Dallas at Las Colinas.