Built-to-Rent Homes: The Next Big Trend in Rental Market

Next Big Trend In Rental

From young professionals to retirees and families of any size, more and more people are opting to rent instead of buying residential real estate. As these renters look for a housing alternative that offers more privacy and space, more and more developers adopt by creating entire communities of single-family homes built specifically for the purpose of renting.

What exactly are built-to-rent homes, and how can a real estate investor benefit from these? Keep reading to learn more.

What Are Built-to-Rent Homes?

A built-to-rent home is a single-family home constructed for the purpose of long-term rental. Also referred to as BTR homes, B2R homes, or built-for-rent (BFR) homes, such properties have become the hottest trend in the rental market over the past few years. Today, entire communities of houses built for the sole purpose of renting continue arising across the country.

While typical new-build communities are developed with prospective buyers in mind, B2R homes are designed to be used by tenants. This can affect the property itself, as well as the overall layout of the community. Typically, built-to-rent communities combine versatility (to meet varying residents’ needs) and luxury (to serve as an attractive alternative to other rental options).

Types of Built-to-Rent Homes

A typical built-to-rent home can look like a traditional, suburban family house. However, it can also encompass a variety of building plans, such as:

  • Small lot homes. These are standard individual homes that have been built close together, with lots as small as 600 square feet each.
  • Row homes. Row homes are built side-by-side and share a common wall in between.
  • A duplex includes two rental units attached to each other.
  • Horizontal apartments. This is a relatively new term describing a tight cluster of freestanding, single-family rental residences that is professionally managed by the same company.

Benefits of Investing in a Built-to-Rent Home

For investors looking to acquire a rental property, built-to-rent is often a good option. Here are some important benefits that these types of homes offer over typical rental units:

  • You may be able to collect higher rent. Rent payments for single-family homes are growing at a faster rate as compared to payments for multi-family apartments. This means that with built-to-rent homes, you may be able to achieve faster growth to your passive income.
  • You have more flexibility in property location. If you want to get into real estate within an up-and-coming location, building there is often easier than finding an existing property.
  • You will experience less tenant turnover. While apartments typically attract more temporary renters, single-family homes are preferred by families looking for long-term housing.
  • You may be able to invest in real estate with less competition. By building your own rental property, you will be able to avoid bidding wars and other competitive struggles associated with purchasing real estate.

Built-to-Rent: Additional Considerations

While building your own rental property offers several attractive benefits, there are a few other factors any prospective landlord should keep in mind.

Every experienced real estate investor knows that the less you spend, the more likely you will be able to get a good ROI. So, buying distressed property and increasing its value through renovations will often be more profitable than purchasing a new house from the builder. Your new rental property’s value will continue to increase with the real estate market while it is still under construction, which will often help to offset some of the extra costs.

Final Thoughts

Without a doubt, built-to-rent homes are a hot trend for a reason. For those who aren’t ready to buy, these units offer a more comfortable alternative to rental apartments. For real estate investors, BTR housing is a great way to get around an overly competitive market.

As with any other type of rental real estate, generating ROI from a built-to-rent home often requires the help of a professional property manager. Luckily, Lofty Property Management can help you to take care of your new built-to-rent property and ensure that your tenants are in good hands. Give us a call today to learn more.