“That’s when the light went off,” Chang said. “I thought this was the beginning of something new, and that if I was right, I would prefer to be a part of it rather than just write about it.”

He resigned from Morgan Stanley last May and made his foray into property ownership by co-founding Sylvan Road, named after a street in Atlanta, with Robert Lee, Sarah Lee and Gavin Kleinknecht, principals of Delmar Realty Advisors, a homebuilder that already owned an assortment of rentals in Atlanta.

Chang was “a central node in this business early on because he sought out the local real estate operators that were the first people executing the strategy,” said Carl Bell, a mortgage bond manager at Smith Breeden Associates. “Obviously he knew the data and through networking with local operators and flippers he built a large web for sourcing ground level information that combined with the data put him in a unique position when he jumped to the buy side of this industry.”

Attracting Investors

Sylvan Road hasn’t been on a buying spree like many of its competitors, said Chang, who declined to disclose exactly how many homes the firm owns or their cost. The firm has instead focused on building operations and software platforms, putting major renovations into the several hundred homes it has purchased.

His firm avoids foreclosure auctions -- where buyers can’t inspect inside the houses before the sale -- and doesn’t compete for the same properties as the majority of investors, who target three-bedroom homes built since 1990 that need few repairs.

Chang has attracted investors such as Ron Mass, who considered giving money to at least 10 other rental businesses before investing in Sylvan Road.

“Some of the companies I was looking at wanted to just buy as quickly as possible,” said Mass, who oversaw as much as $90 billion of fixed-income investments at Western Asset Management Co. which he left last year. “I liked the fact that Sylvan Road was going at a slower pace and building out while some folks in the market were five or more times their size, had less developed infrastructure and were taking months longer to lease out their properties.”

Declining Yields

Even as demand for rentals rises amid a falling homeownership rate, yields are declining and companies formed to buy the homes that have gone public have yet to show a profit because they acquired houses faster than they can fill them.