The United States is currently grappling with a severe affordable housing crisis, which has worsened due to rising mortgage interest rates and limited housing inventory. This challenge is particularly pressing for low-income families.
A Portland, Maine-based startup, Simply Homes, is taking a proactive approach to this issue by acquiring single-family homes in struggling neighborhoods, renovating them, and renting them to very low-income families, the elderly, and individuals with disabilities (including Section 8 voucher holders). Recently, Simply Homes secured $22 million in funding to advance its mission.
“We’re addressing the affordability crisis for those who need stable housing the most,” said CEO and co-founder Brian Bagdasarian. “While there have been attempts to buy homes programmatically in the past with varying success, our unique approach focuses on maintaining affordable homes for those most in need.”
Unlike most iBuyers, which target middle to upper-class neighborhoods, Simply Homes is dedicated to providing quality, affordable housing to under-privileged demographics. Bagdasarian noted that many builders are detached from the realities of affordable housing needs, creating homes that are simply out of reach for those who need them.
The founders, Bagdasarian and CFO Robert Kavanagh, are passionate about providing opportunities for social and economic mobility. “Children who move into neighborhoods with lower poverty rates can experience a 31% increase in their lifetime earnings,” Bagdasarian explained.
Founded in 2020, Simply Homes concentrated its initial years on developing its platform and operational model, acquiring its first property in January of this year. By the end of this month, the startup aims to manage 108 housing units. Since launching in the first quarter, revenue has surged by over 50% each quarter.
According to Bagdasarian, more than 80% of Simply Homes’ tenants are single parents who would need to work roughly 150 hours weekly to afford market-rate rents. Thanks to the HUD Housing Choice Voucher program, these families pay no more than 30% of their income on rent through Simply Homes.
Currently, Simply Homes operates in Pittsburgh, Pennsylvania, and Cleveland, Ohio, with plans to expand to Baltimore, Maryland, and various Midwest cities, including St. Louis, Missouri. The company targets stable markets that are resilient against drastic changes in the housing landscape.
Simply Homes is structured as an operating company and property management firm, utilizing technology and operational teams to source, renovate, and manage properties long-term.
While many proptech companies have faced struggles or closures this year due to high-interest rates, Simply Homes positioned itself strategically from the outset. Bagdasarian emphasized, “Our model accounts for high-interest rates, allowing us to remain profitable. We underwrite to a worst-case scenario, which many first-generation iBuyers overlooked. We’ve ensured that our expected return rates account for these variables.”
Initially, the company aimed to optimize the automated underwriting process for third parties, then for its own operations. Leveraging Bagdasarian’s extensive expertise in AI and Kavanagh’s real estate knowledge—Kavanagh has spearheaded the acquisition of one of Ireland’s largest social housing portfolios—Simply Homes can accurately assess rental potential using data from housing authorities.
“Our access to HUD data allows us to efficiently determine rental pricing and significantly reduces barriers for other institutions,” Bagdasarian remarked.
Simply Homes collects rent, which covers property management costs, charging transaction and ongoing management fees. With its recent funding, the company intends to develop AI-powered virtual analysts to efficiently process vast datasets for acquisition strategies.
Co-led by Gutter Capital and Watchung Capital, the recent funding round included contributions from Village Global, Ambush Capital, RavenOne Ventures, and various individual investors.
James Gettinger, managing partner at Gutter Capital, praised Simply Homes for its critical role in revitalizing the aging housing market. “By renovating existing homes, they provide essential affordable housing solutions. The shrinking presence of starter homes in the market is alarming, with new constructions growing in size but not in affordability for most Americans,” he noted. “Simply Homes is uniquely addressing the needs of the lower end of the housing market.”
In summary, Simply Homes stands out in the real estate market by bridging the gap between necessary housing and affordability, leveraging technology and targeted strategies to positively impact the communities they serve.
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