Housing affordability has been a big problem in the U.S. real estate market as far back as the Great Recession. Signs aren’t pointing to relief, even as economists predict a major market correction in 2023. The fact of the matter is this – the United States needs between four and five million more homes than it has right now.
The housing shortage naturally results in higher prices by the simple nature of supply and demand. Not only that, but housing only grows more expensive. Housing costs outpace income growth in 80% of U.S. markets.
There are big building efforts underway, but the construction sector faces its own challenges to meet profit margins – and that results in “starter” homes and new construction that are not at all cost-friendly to new buyers.
Even real estate investors are feeling the squeeze – watching their calculations and projections more closely, dealing with tighter profit margins, and competing to find suitable investment properties in a market that, in many places, seems to come up empty.
Thankfully, the emerging build-to-rent model addresses these woes for both investors and households desperate for quality housing.
What Is Build to Rent (BTR)?
Here’s a simple way to think about the build-to-rent model. Imagine those big, beautiful new suburban communities teeming with amenities and shiny new construction. Now imagine that, instead of buying those properties, you can rent them.
The idea is that these properties are designed as rentals from the outset – and that benefits investors and residents in some significant ways.
How BTRs Benefit Real Estate Investors
They're designed with investors in mind
Because BTRs are meant to be rented out from the very beginning, they’re designed with the investor in mind. You’ll encounter durable, low-maintenance materials, amenities that discourage turnover, and a general newness that attracts residents and reduces the demands (and cost) of upkeep.
No fighting over inventory
In the housing shortage, most investors had to throw a few elbows. Not only were ideal investment properties tough to come by in existing inventory, but there was competition with other investors and traditional homebuyers, too. With BTRs, you’re not fighting against homebuyers. While other investors are certainly in the picture, BTRs are new construction. That means inventory is always increasing, relieving the pressure to compete.
Vetted locations and community amenities
We can just about guarantee that those building these new BTR communities aren’t doing so willy-nilly. They’ve scouted the perfect locations for new communities, ensuring that they’re in desirable areas. This may include proximity to dining, entertainment, and work, as well as access to great school districts and family-friendly amenities.
That’s not accounting for the amenities that will come with the BTR community itself. This is just another way to reduce turnover and increase attraction.
How BTRs Benefit American Households
Alleviating the housing squeeze
No matter how you slice it, the BTR model is generating new inventory. After all, single-family rentals are also in short supply, as they compete for existing inventory. BTRs give these rentals their own unique space and market. Ultimately, that results in better prices across the board.
Providing the best of suburbia
In the wake of the pandemic, we saw a significant shift in the priorities of American households. They weren’t as interested in expensive, cramped apartments in primary markets. The suburbs were more attractive, with a slower pace, fewer people, and world-class amenities. BTR residents enjoy premium perks that make the lines between homeownership and renting blurry. Renting becomes nearly indistinguishable from homeownership – expect that renting demands less capital and comes with the convenience of property management.
Renting isn’t a last resort. It’s a choice and a good one at that.
More space, more privacy
The exodus to suburbia was also about space. BTRs simply provide more square footage and privacy compared to multifamily housing. In many cases, BTRs may also be gated communities that provided added layers of security and peace of mind. You can expect outdoor space, more square footage, and a layout designed intuitively to meet needs free of frustration.
REI Nation offers BTR single-family residences, and we have a few available for purchase now!
