Are Entire Build-to-Rent Communities Coming?

January 23, 2019

Investors are shifting their strategies to focus on new development due to an increase in competition from a tight supply of housing inventory in many markets, the National Real Estate Investor reports.

They’re eyeing build-to-rent strategies in markets where building and land costs are lower and where there is more entry-level home building, such as in Atlanta; Charlotte, N.C.; Phoenix; and some areas of Texas.

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“What you’re seeing now is the maturation and scale in the sector, where it is really being viewed as a distinct asset class within the real estate sphere, similar to multifamily or data centers,” says Gary Beasley, CEO and co-founder of Roofstock, a single-family investment property firm.

For example, GTIS Partners, based in New York, is shifting focus. The company started out buying older homes out of foreclosure during the housing crisis and created a portfolio of more than 4,200 single-family homes. Last summer, GTIS sold nearly half of that portfolio and has shifted its strategy to investing entirely in build-to-rent homes. It is acquiring newly built rental homes from homebuilders in various subdivisions in the southern U.S.

“As prices in the housing sector went up, the pricing gap between new homes and older homes became smaller,” Rob Vahradian, senior managing director and head of U.S. investments at GTIS Partners, told the National Real Estate Investor.

Also, he notes newer homes tend to have lower maintenance costs and the ability to tailor the design to renters. They also have higher rent-ability appeal, he says.

Some investors are taking the strategy even further with plans to build entire communities of single-family home rentals with 150 to 250 homes in a small area. The communities would share amenities and on-site management, which would be similar to apartments. AHV Communities is developing two such SFR communities in Austin, Texas, which will include 175 upscale single-family homes of three to four bedrooms.

Source: 
Single-Family Rental Investors Make Bigger Bets on Build-to-Rent Homes,” National Real Estate Investor (Jan. 22, 2019)