The build-to-rent (BTR) model has gained momentum over the past several years for good reason. This strategy, which builds new properties with the explicit intention to rent them out rather than sell them to homebuyers, helps bridge the affordability gap between would-be homebuyers and new construction.
As construction costs grow, the price point of “starter” homes increases. In our current economy, new homes no longer cater to the needs of first-time homebuyers. Instead, their cost demands buyers pony up the kind of money you rarely see without existing equity.
The grave lack of inventory only makes real estate more expensive. We’re reportedly short millions of homes, with 39% fewer properties for sale now than pre-pandemic.
Believe it or not, BTRs actively work to address these problems, all while bringing big advantages to the table for real estate investors and their rental residents.
How Do BTRs Address Housing Shortages?
Increased Housing Supply – BTR developments specifically focus on building rental units, which helps improve the overall housing supply in areas with high demand. The fact that these properties are attractive and new only helps, as would-be homebuyers can be content to rent a desirable property. This takes some pressure off housing demand.
Faster Construction Timelines – BTRs often involve purpose-built construction, a shorter process than traditional for-sale housing projects. By streamlining the construction process and reducing potential delays associated with individual home sales, BTR developments bring new rental units to the market more quickly.
Efficient Land Utilization – By optimizing land use with planned BTR communities, the number of units is maximized while still retaining quality. These communities are efficient with how they use land, developing not just a sea of rental houses but attractive amenities and community planning.
Repurposing Underutilized Assets – In some cases, BTR developments involve repurposing existing buildings or converting non-residential properties into rental units. This adaptive reuse approach converts underutilized or vacant structures into habitable housing, effectively increasing the available inventory without significant new construction. This is particularly helpful in markets where land availability is limited.
Long-Term Rental Commitments – BTR properties are typically designed for long-term renting, with investors and developers aiming for stable and continuous occupancy. BTRs help reduce turnover rates and maintain a more consistent housing supply over time by providing new, low-maintenance rental housing with extended lease terms.
Advantages That BTRs Offer Real Estate Investors
Steady Cash Flow
Build-to-rent properties provide investors with a consistent and predictable rental income stream. As the properties are purpose-built for renting, they are often in high demand and attract long-term residents, ensuring reliable cash flow – a real estate investor’s bread and butter!
Reduced Vacancy Rates
By targeting the rental market specifically, build-to-rent properties can address the growing demand for rental housing without cutting into the traditional market inventory. With well-designed amenities, convenient locations, and professional property management, these properties tend to have lower vacancy rates than conventional rental properties.
Lower Maintenance Costs
Newly constructed build-to-rent properties require less maintenance and repair work in the initial years. They’re new, up to code, and designed with durability in mind. This can reduce ongoing maintenance expenses for investors, making it more cost-effective in the long run.
Economies of Scale
When investors develop or acquire multiple build-to-rent properties, they can benefit from economies of scale. By managing a portfolio of properties, investors can streamline operations, negotiate better deals with suppliers, and leverage their purchasing power to reduce costs. Owning multiple properties scales cash flow and builds wealth more quickly!
Advantages That BTRS Offer Residents
High-Quality Homes & Amenities
Build-to-rent properties are constructed with modern designs and amenities, offering renters high-quality living spaces. These properties often come with ergonomic floor plans, contemporary fixtures, and a range of amenities such as gyms, community spaces, and landscaped areas that may include playgrounds, pools, and dog parks.
For many, BTRs offer than same experience as buying a property in a pricey neighborhood with a steep HOA fee!
Professional Property Management
Build-to-rent properties are managed by professional property management companies. This ensures that renters receive prompt and effective maintenance services, better customer service, and a well-maintained living environment. It’s more reliable than renting from “some guy” who offers you the landlord special.
Satisfy the Homebuyer Itch
Though BTR residents won’t build their own equity as they would as a property owner, BTRs offer an experience almost identical to someone buying a newly constructed home. The image of the dingy, unsafe rental property is dead. In its place are bright, new rental properties that offer everything homeownership does – without the upfront cost and with the benefit of professional management.
BTRs are another strategy and tool for investors to build wealth. The added benefit of creating stellar housing options and increasing inventory in a squeezed market is icing on the cake!
Along with recently renovated properties, REI Nation provides turnkey build-to-rent properties as well. As us about our available BTR properties!
