Eric Garrett vividly remembers his first apartment. He was 5 years old, living close to the poverty line in Evansville, Indiana, and his single mother had finally saved enough money to afford a security deposit and first month's rent. As they stood in a room devoid of furniture, with their few boxes of belongings, Garrett felt an acute sense of pride: They had a home that was only theirs.
Now 41, he develops, builds, and manages apartment complexes for other families across the United States--successfully, if you judge by revenue from his four-year-old startup the Garrett Companies. In 2014, the company made $550,000. Last year, it pulled in more than $82 million, and this 14,822 percent growth rate earned it the No. 10 spot on this year's Inc. 5000 list of America's fastest-growing private companies. According to Garrett, the 47-employee company is projected to make more than $238 million in 2018 revenue. (He says the company is profitable, but declined to give specific figures.)
The multifamily apartment business has been a particularly hot niche in the real estate industry since the end of the Great Recession, when people's ability to buy houses cratered across the country. Even now, multifamily construction is more than double its historical average since 1991, according to Rick Palacios Jr., director of research at John Burns Real Estate Consulting.
Garrett's timing was good, but not perfect. He left Indiana State University six credit hours short of graduating in 1999--he'd earn his degree a few years later from Indiana University--and fell into real estate during a stint at a regional bank's credit department. Tasked with working on the bank's financing of a real estate transaction, he was shocked to find the broker making four times his salary on the deal.
In 2008, after a few industry jobs, he decided to start his own firm--but a lack of business due to the recession forced him to partner with a local development and construction company instead. The partnership lasted more than five years, with Garrett leaving because of what he describes as managerial and personal differences.
The Garrett Companies was born a day later. Garrett was the lone employee, his office a card table and a laptop in his Greenwood, Indiana, barn. Within a week, he'd made his first hire. A month after that, he personally funded a move into a proper office space.
Why is "Companies" plural? Most real estate businesses focus on a single aspect of the market: developing, building, or managing. The Garrett Companies does all three, which Garrett says is a key to the startup's rapid growth and eye-popping revenue figures. His team is currently building or managing more than 2,400 apartments in 12 complexes across the country, from Fort Myers, Florida, to Denver and San Antonio. Collectively, Garrett estimates, those units are worth $600 million.
Another practice that has set the business apart is its painfully slow approach to hiring. The startup employs a "three-touch rule," wherein at least three people from different departments have to interview an applicant before that person is hired. Garrett assumes you can tell from candidates' résumés whether they have the requisite job skills, but you can't tell how they'll fit into your company culture unless multiple employees spend time with them. A lot of time.
The strategy has alienated more than a few applicants who expected timelier decisions. It does, however, help cultivate a group of employees who like working there--the Garrett Companies was named one of Inc.'s Best Workplaces of 2018 in June--and perform well in an entrepreneurial atmosphere. "The people we're hiring all have one thing in common, regardless of where they are in this company," Garrett says. "They all have an instinct to compete and to win. That's what we're really looking for."
His clients have noticed. "You can have great real estate, but if you can't execute on it with manpower, it doesn't really matter," says R.D. Khoury, an acquisitions director at Phoenix Capital Partners who's worked with the Garrett Companies since 2016. "[Garrett] has done an outstanding job of putting together a really cohesive group."
That's crucial when dealing with the new challenges the business faces every day, from losing project funding to a delay on a deal in Colorado because of a nearby bald eagle's nest. Garrett's biggest hurdle is manpower: There's been a shortage in subcontractors since the recession, he says, and a lack of experienced construction managers that's forced the Garrett Companies to hire from outside the industry.
The shortage hasn't stopped his growth plans--Garrett aims to hire 100 new employees by the end of next year. Don't be surprised, however, if that doesn't happen. Palacios, the analyst, warns that growth may be difficult going forward: It's finally becoming easier for people to buy homes again, he says, which is already swinging the pendulum away from multifamily apartments.
For his part, Garrett views the company's hefty revenue as a safety net. Even though he wants to expand, he doesn't have to. If only five people make it through the rigorous application process in 2019, so be it. "We're not growing for the sake of growing," he says. "We're growing to grow our profit. Period. To be very capitalistic about it."