Deep Dive: Investing in Micro-Multifamily with the Groma Real Estate Trust

Don’t miss Thesis Driven’s Buy Box live interview with Groma founders Seth Priebatsch & Chris Lehman next Wednesday, October 22nd. 

We’ll be exploring how Groma is turning overlooked small apartment buildings into an institutional-quality investment platform.

Register here (for accredited & institutional investors only)

There are over two million small multifamily buildings in America. Most have two to twenty units and line the streets of cities like Boston, Providence, and Chicago–the three-deckers, walk-ups, and triple-deckers that house millions of renters. Yet despite its scale, this asset class has been almost completely ignored by institutional investors, with fewer than 1% of these buildings being institutionally owned.

The reason is simple: small buildings are hard to buy, hard to renovate, and even harder to manage efficiently. They’re scattered across neighborhoods, often owned by individuals with limited capital and inconsistent upkeep. The result is a fragmented, underperforming slice of the rental market that remains stuck in a mom-and-pop operating model.

That’s the white space being tackled by Groma, a Boston-based real estate and technology company reimagining how small urban buildings are acquired, upgraded, and operated. Their proprietary AI platform, Grobot, transforms the economics of this overlooked category: sourcing properties in seconds, standardizing renovations through a consistent “Groma Grade” finish, and automating property management tasks that once required entire teams.  

The company first proved its model through Groma Boston Growth Fund I: a 39-building, 136-unit portfolio that has delivered a ~20% IRR and 4% average annual distributions since 2020. In this Thesis Driven letter, we’ll break down:

• The opportunity in small buildings;
• The role of technology in helping Groma's operations;
• Groma's track record to date;
• How the Groma Real Estate Trust works–and why it’s now expanding to Providence.

America’s “Micro-Multifamily” Gap

According to the U.S. Census Bureau, roughly one-third of all rental units in the country are housed in 2- to 20-unit properties – more than two million buildings in total. Yet fewer than 1% are owned by institutional investors.

The reason has less to do with performance and more to do with friction. Small buildings are dispersed, idiosyncratic, and difficult to analyze in bulk (for example, each comes with its own heating system, roofline, and in-place leases). For a large fund, underwriting these assets one by one yields little economy of scale. And managing them is even harder: scattered locations, older infrastructure, and small rent rolls make it expensive to staff and maintain. The result is a market dominated by local owners–often individuals or family partnerships–who operate with limited capital and inconsistent maintenance standards.

That fragmentation has created a structural inefficiency that persists even in mature markets. Across comparable neighborhoods, small-cap multifamily assets typically trade at 150 to 200 basis-point higher cap rates than large, professionally managed apartment buildings. In plain terms, investors earn higher yields for properties sitting on the same blocks simply because they are smaller and harder to manage.

The disconnect looks like this:

• Cap rates are higher because small properties lack the institutional processes that justify tighter pricing
• Operating expenses are higher because owners don’t benefit from shared maintenance, purchasing power, or data feedback loops
• Capital access is lower because most lenders and equity partners view these assets as too small to underwrite efficiently.

“There are millions of small buildings in the U.S. that look and perform like institutional housing once you operate them that way,” said Seth Priebatsch, Groma’s co-founder and President. “The opportunity isn’t to reinvent real estate–it’s to apply modern systems to a market segment that larger investors ignore.”

At the same time, demand fundamentals remain strong. Housing supply in most urban markets continues to lag population growth, and the cost of homeownership has risen sharply with higher mortgage rates. Renters who might once have bought condominiums are staying longer, pushing occupancy levels near historic highs. In many metros, the rent-to-income ratio for Class B apartments remains well below that of large new developments, providing a cushion in downturns. These dynamics make the small-building segment one of the most resilient corners of the rental market–cash-flow-rich, locally diversified, and tied to essential housing rather than discretionary luxury.

“When you zoom out, micro-multifamily is a systems problem,” added Chris Lehman, Groma’s co-founder & Head of Research & Policy. “Fragmented ownership, inconsistent data, and manual workflows have prevented scale. Our job is to design infrastructure that lets efficiency compound across thousands of small assets.”

The pattern resembles what occurred in the single-family-rental (SFR) sector a decade ago. Before 2010, scattered houses were considered too operationally messy for institutions. Technology, standardized renovations, and scale changed that, transforming an informal asset type into a multi-hundred-billion-dollar industry. The same ingredients are now converging around micro-multifamily. Data accessibility, portfolio-level analytics, and new management platforms are beginning to remove the operational penalty that once kept institutions out.

For investors, micro-multifamily represents the newest opportunity to capitalize on an asset class and market that is hard to operate and fragmented–ahead of large institutional investment.

The Groma Model: “Acquire. Standardize. Operate.”

Turning micro-multifamily into an investable, repeatable business starts with solving three problems: how to buy, how to upgrade, and how to operate at scale. Groma’s answer is Grobot–an internal technology platform that automates the full property lifecycle and applies data feedback loops that compound across every building in the portfolio.

1. Acquire smarter. While traditional analysts may evaluate a handful of deals per week, Grobot screens tens of thousands of potential properties across a city in seconds. It filters listings and public-record data using hundreds of variables–building size, renovation potential, rent levels, cap-rate targets–and flags those that meet Groma’s parameters. In Boston alone, the system tracks roughly 90,000 viable buildings. Human underwriters then focus their time on the top fraction that fits the investment model.
2. Upgrade faster. Once purchased, Groma applies a standardized renovation protocol known as Groma Grade. Using the company’s catalog of preferred materials and finish packages, Grobot generates budgets, scopes, and procurement lists. Renovations that once took months can now be completed in six to eight weeks, and Groma reports +15% returns on renovation capital and 40-50% NOI growth within two years. Standardization also means technicians and vendors can work interchangeably across properties, lowering both cost and downtime.
3. Operate at scale. After stabilization, the same system governs daily operations. Grobot aggregates service requests, schedules maintenance, reconciles invoices, and tracks energy and water data. It currently performs the equivalent of 50 hours per week of property-management work–a volume projected to surpass the output of Groma’s entire human operations team within a year. Over time, that automation has reduced operating-expense ratios from roughly 45% to 30% percent across the portfolio.

“Every property we add makes the next one easier to buy and operate,” says Priebatsch. “The software learns from each renovation and tenant interaction, so efficiency compounds with scale. The cumulative result is that small buildings–once considered too operationally inefficient for institutions–now perform like mid-scale multifamily assets.” 

Boston Fund I Performance

Before launching the Groma Real Estate Trust, the team tested its model in Boston through a closed-end vehicle called Groma Boston Growth Fund I. 

The fund acquired 39 buildings totaling 136 units across neighborhoods such as Mission Hill, Dorchester, Roxbury, and Jamaica Plain between 2020 and 2021. The assets were small–typically three- to six-unit walk-ups–but collectively represented a proof of concept for how Grobot’s technology could perform in a live operating environment.

Fund I performance, at a glance:

• The portfolio’s total acquisition cost was $62.5 million 
• Its most recent internal valuation, as of Q4 2024, stood at $82.3 million
• Average annual distributions have run around 4%
• The fund’s gross internal rate of return is approximately 20%
• Occupancy sits near 98%, with rent collections exceeding 99%

Under prior ownership, properties of similar size in Boston typically operated with expense ratios between 45-50%. Groma’s standardized materials, centralized maintenance scheduling, and automated tracking have reduced that figure to roughly 30-32%. The resulting increase in NOI has allowed the portfolio to outperform regional averages even during a period of cost inflation and rising insurance expenses.

Representative outcomes include:

• A three-unit property in Mission Hill acquired for $2.4 million in 2020 was revalued at $3.8 million after standardized upgrades and lease renewals
• A six-unit building in Dorchester purchased for $2.8 million now generates $212,000 in annual rent, up more than 20 percent since acquisition
• A 12-unit building in Chelsea saw its operating margin expand by nearly 300 basis points after integration into Groma’s management platform.

“Fund I proved that the constraint in operating micro-multifamily at scale wasn’t the asset class–it was the operating system,” says Lehman. “Now that the system works, the next step is to make it continuous, moving from a closed fund to a perpetual platform that compounds efficiency and data over time.”

The Vehicle: Groma Real Estate Trust and Accessible Institutional Investing

The efficiencies achieved across 39 small buildings demonstrated that Grobot’s operating model could scale well beyond a single city. So rather than raise a series of discrete funds, Groma has used that data and infrastructure to form a perpetual investment vehicle–the Groma Real Estate Trust, which is designed to acquire, renovate, and manage small multifamily buildings across multiple markets.

The transition from fund to trust was largely structural:

• Fund I operated as a fixed-life partnership, limited to a defined portfolio and investment period
• The Groma Real Estate Trust is an open-ended private REIT, allowing continuous capital inflows and reinvestment
• The REIT format compounds efficiencies across a growing portfolio instead of restarting with each new fund
• Investors purchase shares in the trust rather than direct property interests, gaining exposure to hundreds of small buildings through a single, diversified platform

Today, the Groma Real Estate Trust holds over 100 properties and roughly 550 units in Greater Boston, with plans to expand to new markets, like Providence, in the coming months.

Unlike most private funds, the trust’s structure is designed to provide flexibility and transparency. Shares are priced quarterly based on a net-asset-value (NAV) process undertaken in partnership with a third-party valuation firm, and redemptions are permitted on a limited, quarterly basis. Today, investors must be accredited, but the minimum commitment–$1,000–is far lower than typical institutional thresholds. And Groma is testing the waters to allow non-accredited investors as well in the near future. That combination of professional oversight and accessible entry point has attracted a mix of family offices, high-net-worth investors, and emerging wealth-management platforms seeking steady income with technological leverage behind it.

Future iterations will include tokenized share representations (“GromaCoins”) recorded on blockchain infrastructure and a “Rentvesting” program that enables residents turn some of their monthly rent into ownership in the Groma Real Estate Investment Trust. Both initiatives are designed to align incentives between the people who live in Groma properties and those who invest in them.

The first expansion market is Providence, Rhode Island, where smaller buildings account for nearly three-quarters of the multifamily inventory. With limited new supply, consistent rent growth, and cap rates in the “mid-6s”, Providence offers conditions similar to early-stage Boston, making it a natural next step in Groma’s effort to institutionalize the small-building segment.

The Bigger Idea: Turning Small Buildings Into a Scalable Asset Class

For decades, efficiency in the real estate industry has been tied to scale–larger projects, larger checks, and larger teams.  Because size was the only way to make operations economical.  

Groma challenges that assumption by proving that efficiency can come from standardization and software rather than square footage. In most cities, small buildings make up the majority of the housing supply but remain disconnected from professional capital for operational, not economic, reasons. By applying data-driven underwriting, repeatable renovation systems, and consistent management, Groma blurs the line between “micro-multifamily” and traditional multifamily–potentially compressing the 150-200 basis-point cap-rate spread that separates small assets from institutional ones and unlocking both yield and appreciation in the process.

In other words, technology is the catalyst:

• Automation lowers per-unit management costs, making small assets perform like large ones
• Data feedback loops improve underwriting accuracy, shrinking the perceived risk premium
• Standardized renovations create repeatable quality, giving lenders and appraisers greater confidence in value
• Centralized operations enable a single team to manage hundreds of scattered sites efficiently

Together, these shifts turn fragmentation into scale. The same principles that institutionalized single-family rentals in the 2010s–data transparency, process discipline, and capital alignment–are now being applied to neighborhood-scale housing.

“Institutional real estate has always favored the big box,” says Lehman. “But the next wave of efficiency will come from connecting the small ones. Once data unifies the system, small buildings stop behaving like isolated assets and start functioning like a network.”

That network effect extends from operational efficiency to ownership itself. Groma’s roadmap includes tokenized shares (GromaCoins) and a Rentvesting program that allows residents to build fractional ownership over time. Both are designed to close the gap between the people who live in these buildings and those who fund them. If successful, the model could represent one of the first large-scale examples of participatory housing investment–a structure where renters, investors, and technology infrastructure share in the same long-term value creation.

We’re excited to dig deeper with the founding team from Groma on Wednesday, October 22nd at 3pm EDT to discuss the platform, business model, growth strategy, and opportunities to invest.

Register here (for accredited & institutional investors only).

-Paul Stanton