Build-to-rent communities (also known as build-for-rent or B2R homes) aren’t new, but their popularity has escalated since the 2008 financial crisis. As the percentage of renters continues to increase due to competitive housing markets, elevated interest rates, and high student loan debt, build-to-rent homes offer an excellent alternative to apartments. Designed specifically with long-term renters in mind, these homes combine the flexibility of renting with the comfort and community of living in a residential neighborhood.

Most B2R houses look like traditional, suburban-style, single-family homes. Other homes have smaller floor plans in more condensed communities, such as duplexes, horizontal apartments, or row homes. In many cases, a large company will develop and maintain an entire set of build-for-rent homes, giving the neighborhood a cohesive look and consistent management.

Living in a build-to-rent home may appeal to tenants because such homes tend to be relatively new and have modern amenities. Many B2R homes offer a sense of community through shared recreational spaces like a park or pool. Renters get to enjoy the extra indoor and outdoor space of a house without the maintenance hassles and daunting up-front financial commitment of homeownership. However, build-to-rent homes are generally smaller than traditional ones and allow little customization.

So, what should landlords know about the build-to-rent trend? Here are some pros and cons to consider regarding build-to-rent investments.

Pros:

• Tenants will be willing to pay higher rent.
• You’ll have a lower turnover rate.
• With a set of homes, you can capitalize on economies of scale during the property’s developmental and management phases.
• Current demand should make well-placed, economical units easy to fill.

Cons:

• There’s a substantial initial investment.
• Competing with large developers may prove strenuous.
• Some areas may be saturated with B2R neighborhoods.

As with any potential investment, deciding to take on a build-to-rent project will require research, budgeting, and goal setting. However, flexible construction options will attract tenants looking for the comforts of a house without down payments and upkeep. Build-to-rent homes can be an excellent opportunity for landlords to meet a need while earning a high return on their investment.

About Rentals America

Rentals America provides full-service property management for residential rental properties. Our team is completely dedicated to property management, and we’re here to help landlords navigate the rental market.