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Investors Vying for Build-to-Rent Single-Family Homes

A pandemic-inspired push from cities to suburbs has sparked interest from investors who see profit in buying build-to-rent homes to lease to those urban relocators.

NEW YORK – More subdivisions of new single-family rental homes are emerging as the pandemic draws urban renters to the extra space in the suburbs. Investors are backing the “build-to-rent” homes under construction across the country on the assumption that the trend of renters looking to upsize from their smaller urban apartments will continue.

This year, about 55,000 to 60,000 new rental housing starts are under construction or have been completed in the U.S., according to the National Rental Home Council. That marks a significant increase over recent years, in which developers built about 15,000 to 20,000 rental houses a year.

“Occupancy levels are at a 30-year high,” Don Walker, managing principal and chief financial officer for John Burns Real Estate Consulting, told National Real Estate Investor.

Rental single-family homes in the suburbs are particularly appealing to younger generations. As remote work grows, more households are less tied to a city commute and are looking for space to spread out in home offices but are not yet able to afford homeownership.

Many of the build-to-rent single-family homes tend to be similar to what would appeal to the first-time home market, David Howard, executive director for the National Rental Home Council, told National Real Estate Investor. But housing shortages – just like those occurring in the for-sale market – persist, so investors must also compete for limited supply.

Some investors are partnering with homebuilders to get the production of homes ramped up. “Some of the larger production companies will partner with companies that operate single-family rental houses,” Howard says, noting builders like Lennar and Toll Brothers.

The build-to-rent homes tend to be clustered together in new subdivisions of several dozen homes, which also makes it easier for investors to watch over them. In the past, rental-investor homes tended to be scattered across a community, since many were snatched up in foreclosure during the Great Recession. But today’s single-family build-to-rent homes are in larger, new suburban developments that offer homes for sale by national homebuilders.

Source: “Investors Are Making a Big Bet on Build-to-Rent Single Family Homes,” National Real Estate Investor (Nov. 23, 2020)

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