What Is Build-to-Rent?

build-to-rent multifamily new build new construction real estate market Jan 20, 2022

Is it build for rent or build to rent? BTR or B2R or BFR?

We were having a lively debate about which one it should be. We feel it is synonymous.

That's what the internet says and if the internet says it, it's gospel.

Summary of What Build-to-Rent Is

When we talk about build to rent, it's a concept that has come to light over the last 5-10 years. It's been done forever. If you build an office building, you've built it, to rent it. And that's been going on in industrial and storage. What else is storage other than build to rent, right?

The concept of build-to-rent has really arrived in force in the residential world in the last 5-10 years, especially when it comes to homes. An apartment building has always been built to rent. But when we talk about, would somebody actually build a community of 50 homes and rent the entire thing out.

I think most notably, it's a little different in the fact that before you would build homes, the city would allow you to get 40 different parcels. And Dr. Horton is going to come in there and build homes and sell them to Sally Homeowner, right?

In this case, the city is not allowing you to get 40 different tax IDs. But you're still going to build 40 homes in there.

The whole idea is, well, could we actually give rentals to the market which they need, but not make the cities and the residents mad?

They don't really know the difference.

Reason To Invest In Build-to-Rent

The argument for build to rent, especially on these nicer detached communities, is that it's a better experience for the renter. It takes the stigma out of renting. You live in a nice place, you got a really nice pool, you got great common areas, you got a lot of amenities that a homeowner would sure love to have, and it makes renting more desirable.

There's an article on Forbes that was posted recently. Matthew Avitol at Forbes, and he point he wrote out this article this was toward the beginning of this year, kind of defining what build to rent is.

He said,

"investors who want to take advantage of these trends driving rapid growth in the BT are built around asset class should make sure to do their due diligence before entering into an investment." Yeah, duh. "Investors should seek properties in low-density suburban markets. With high multifamily occupancy rates. I want to talk about that in a second. "

"Site Location is important proximity to major retail parks and high-quality schools and the visibility of the property from highly traffic roads will also promote location, desirability."

"Amenity quality should also be considered because BTR communities with high-quality amenities will perform well often topping the market in terms of actual rents achieved. Although the relatively high cost of land and building a ground-up BTR project may act as a barrier to entry for some retail investors. Smaller investors can gain exposure through crowdfunding, private syndication, and publicly traded REITs."

Shameless plug, you could call us at the Fourplex Investment Group (FIG) too. That's literally what we do.

When we talk about what build-to-rent is in the context of a bunch of detached homes. You want to build that community in another community. That's what it is. So if Dr. Horton's next door to you and they built and they sold the Sally Homeowner, to the casual observer, those are two very similar neighborhoods, they would never know. And I think that's maybe what the tenants are after? Nobody knows I'm in a build for rent community.

I mean, think of our personal development projects. I don't think the majority of people realize that those are investor-owned properties. They're just tenants, they're leasing them. They don't know if they own or if they are leased. I think going through a lot of our projects, you would just say, "Oh, this is just a townhome community", like some of our other builders build, you wouldn't necessarily know this is a full rental community...

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