Why Build-to-Rent Homes are the Greatest Opportunity for Investors

New Construction
Market Insights
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11 Jan 2022
5 min read
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At a time when housing inventory feels tight and scooping up any property feels like an uphill battle, strategy has shifted to shine a light on the latest trend of new rental constructions, particularly for single-family homes. While constructing entire communities of rental homes dates back to the 1980s, it really became popular after the 2008 recession, and as housing demand continues to increase, build-to-rent (or BTR) projects seem to make more and more sense.

According to the Hunter Housing Economics’ September 2021 forecast, nearly 100,000 BTR homes were constructed; the number is expected to jump to 120,000 this year and skyrocket to over 485,000 between 2023 and 2025. Given that high-income earners represented nearly 75% of rental growth between 2010 and 2018, the opportunity to develop BTR homes has never made more sense for investors.

For investors looking to grow their portfolios, BTR properties also offer diverse opportunities. Gone are the days of the standard multi-family apartment complex. BTRs can now cater to virtually any renter’s needs; single-family, garden-style apartments, townhomes, and infills can all offer ideal living arrangements for young professionals, retirees, and those who primarily work from home.

Of course, as with all real estate investments, investors must weigh the pros and cons to consider the benefits—and risks—of BTRs. Opposite of fix-and-flip properties, BTRs rely heavily on reliable, quality renters to generate an income. As a result, there’s a higher propensity for properties (or units) to remain vacant between renters. Additionally, while traditional home sales are guided by consumer protections laws, BTRs are governed by commercial agreements.

As we come out on the other side a pandemic with work habits that have shifted (think remote work and mass exoduses out of expensive cities), the opportunities for BTR developments not only benefit the investors who tackle them, but also the demographics of people who would use the most. Young families, single professionals with hybrid or remote work arrangements, and retirees are all prime candidates likely to straddle the fence between expensive home ownership and renting a newly built single-family home. Live the suburban life without committing long-term. Investors, as well as builders, are well positioned to take advantage of the market and the incoming boom of BTRs.

If you are ready to explore your financing options with a private money lender, contact us today.