If all goes according to its business plan, Promise Homes Company will boost financial literacy, show people how to cut their taxes and add to affordable housing stock.
And also make a profit.
“It is possible to do everything we do and provide a good return, without being a jerk,” said John Hope Bryant, chief executive officer of the Atlanta-based company, founded almost exactly a year ago as an institutional owner of single-family homes.
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This week, Bryant told The Atlanta Journal-Constitution that Promise had made an acquisition that nearly doubles its size. With the purchase of 167 properties from Invitation Homes, the Promise portfolio is swelling to more than 400 homes, most of them in metro Atlanta.
Bryant is best known for being founder, chairman and CEO of Atlanta-based Operation HOPE, Inc., which describes itself as “the largest not-for-profit provider of financial literacy, financial inclusion and economic empowerment tools and services in the United States.”
He is also an author of several books, including “How the Poor Can Save Capitalism: Rebuilding the Path to the Middle Class.”
With $130 million in capital, Promise Homes launched in June of 2017, immediately becoming one of the largest minority-owned companies owning and renting single-family homes.
And in some ways, Promise reprises the goals of Operation HOPE. Tenants are offered a series of educational programs aimed at boosting their financial literacy and advice on eligibility for the earned income tax credit. Tenants are rewarded for improving their credit scores.
“And if you do, we will give you a gift card for Target or a grocery store,” he said.
Hit a high rating and Promise will cut your rent by 10 percent.
While the company might sacrifice some short-term profit, the idea is to benefit both landlord and tenant in the long run, Bryant said. “The tenants that we have will be left stronger, and they will become more valuable both to themselves and to us.”
Like any property owner, Promise needs to hire workers to do maintenance, plumbing and electrical work, as well as general management. But the company will hire local, minority employees and contractors to perform those services, Bryant said.
The result will be a recycling of millions of dollars back into the community, he said.
Typically, Promise is paying between $100,000 and $125,000 for each home it buys and it charges rent of $1,000 to $1,200 a month, Bryant said.
The business model is aimed squarely at renters with modest incomes who work hard and need a break, he said. He calls them the “invisible class.”
“The invisible class are the majority of Americans who are living from paycheck to paycheck with too much month left at the end of their money,” Bryant said. “They are middle class and working middle-class people. If you are making $40,000 to $50,000 – that is our sweet spot.”
After the crash, some investors – some backed by deep-pocketed hedge funds — swooped into Atlanta, snapping up foreclosed homes at depressed prices. Some like Dallas-based Harbour Portfolio made controversial rent-to-buy offers that enticed people who might not have qualified for a mortgage. Others just wanted the steady cash flow of rent with the idea of selling the homes once prices climbed back.
But the profit at Promise does not depend on price appreciation, Bryant said. “We are not an appreciation model. Our business depends on cash flow. This is a long-term buy and hold play.”
It also helps the bottom line to grow the business – a bonus of the deal announced this week, he said.
Larger owners have “economies of scale,” that is, they can spread out expenses and bargain for volume discounts when purchasing materials or services.
Promise Home Company
CEO: John Hope Bryant
Typical value of home purchased: $125,000
Rent charged: $1,000-$1,200
Income, typical tenant: $40,000-$50,000
Home purchases announced this week: 167
Number of homes owned: 400-450