The build-to-rent model refers to properties that are specifically constructed for long-term rental use rather than for sale. Rather than individual landlords owning rental properties, build-to-rent homes are owned by institutional investors and professionally managed.
The residential rental market is booming and the demand for build-to-rent homes is growing rapidly. There are many reasons behind this trend.
More Flexibility And Less Commitment With Renting
Traditionally, most people aspired to own homes and build equity through homeownership. However, in recent years the demand for single-family rentals, especially build-to-rent homes, has been steadily rising. One of the major reasons for this shift is that renting provides more flexibility and less commitment than owning a home.
Renting does not require large down payments, strict credit score requirements, or 30-year mortgages. Renters have the flexibility to move more easily to a new city or state for a job or lifestyle change. They are not tied down to a property that they must sell before moving on. This flexibility and less commitment attract many younger households who want more mobility. With build-to-rent homes, they can get the benefits of single-family housing with the flexibility of an apartment.
Lower Maintenance And Headaches Without Homeownership Responsibilities
In addition to more flexibility, renting a single-family build-to-rent home frees the renter from many of the responsibilities of homeownership like property taxes, homeowners’ insurance, and maintenance costs. The financial and time burden of repairs, upkeep, and unexpected costs can be exhausting for homeowners. With a build-to-rent property, the landlord or property management company handles all maintenance, repairs, and other homeownership responsibilities.
Renters in build-to-rent homes have the freedom to simply enjoy their home without worrying about the leaking roof, broken water heater, or other hassles that often come with owning a property. This relief from homeownership hassles and responsibilities is attractive to many and helps drive demand for build-to-rent options.
Increase In Single Renters And Childless Couples
Another major factor contributing to the rise in demand for build-to-rent homes is the increasing number of single renters and childless couples. Single individuals and couples without children often do not need or want the space of a large house, but they want more space and a yard, unlike an apartment. Build-to-rent options are appealing as they provide a middle ground between an apartment and a large house.
Singles and couples can rent a build-to-rent home with 2-3 bedrooms and a small yard that suits their needs well while not having the high costs and responsibilities of owning a full-sized house. As singles and couples make up a larger portion of renters, the appeal of build-to-rent homes that meet their specific needs will also rise.
Developers Recognizing The Demand And Building More Inventory
Perhaps the most significant reason for the rise in build-to-rent homes is simply that real estate developers and investors recognize this increasing demand and growth opportunity. As developers see greater interest from both younger renters seeking single-family homes and older households looking to downsize, they are building more inventory to meet this demand.
Some of the largest homebuilders in the U.S. like DR Horton, Lennar, and Toll Brothers are now developing entire neighborhoods specifically for the build-to-rent market. Major investment firms are also getting into the space by purchasing thousands of new homes to add to their build-to-rent portfolios. This increase in available inventory further fuels the demand as more renters have appealing new build-to-rent options to choose from.
To Wrap Up
The build-to-rent market, while still relatively small, is poised for significant growth over the next decade. As long as interest rates remain relatively stable and home prices continue to rise, the flexibility, low-maintenance, and well-suited options of build-to-rent homes should drive more renters into this market. Developers and investors will likely continue increasing available inventory as they see the market’s large potential. Overall, the build-to-rent movement may just be getting started as a powerful new segment of residential real estate.