Build-To-Rent Single Family Homes:

Regular Land Development Realities readers know that I am on an investment hunt right now and one of the recent trends that has emerged in the current real estate market is building and renting single family homes. As a rule I am not much on “trends” because trends are just that - temporary. But when a trend has staying power it doesn’t go out of style and becomes a more lasting factor in a marketplace.

Right now single family homes are out of reach for many buyers. Even though interest rates are low, steep down payments to get a loan and stratospheric home prices are keeping many potential buyers in the rental pool. That and an aging population willing to sell for top dollar and downsize. There are other economic factors like inflation that also tie in.

I don’t see this changing anytime in the near future, so what is now a trend actually appears to have the legs to endure over time and that makes it of interest to folks like us that develop land, or are on the home construction side. It also creates focused interest from multi-family investors, who are now seeing that building and renting single family homes can be very profitable. These investors have looked at the risk adjusted annual returns and many have started investing in the single family home rental market. Why? Because they are enjoying top-tier investment returns.

Corporate national builders have also followed suit and since they are fairly good at demographic and social trends, I think that’s worth remembering. We also shouldn’t overlook big investment firms that are adding single family rentals into their investment portfolios. When these things happen, land developers and those in construction should pay close attention, since it can mean opportunity!

If the SF build-to-rent opportunity is here, how do we attack it?

Like a lot of things in life, it depends. Land developers can think of project layouts that would attract SF home build-to-rent contractors and investors while builders can use architectural designs and cost structures that would appeal to rental investors across the spectrum. The investor pool includes - individual investors, private syndication groups, crowd funds, corporate and big investment firms. That’s the whole universe but for the average real estate developer, how can it be made more of a bullseye?

One thought is Tiny Home build-to-rent homes and communities.

Tiny home build-to-rent communities:

It doesn’t have to be tiny homes, that’s just my particular interest right now. I like the tiny home concept for here in Florida because there are still a huge number of snowbirds that occupy the state in the winter and then go to their main homes in other states when it gets too hot and humid here in the summer. The tiny home concept really has taken off in SW Florida since not only are there folks downsizing like everywhere else, but also a significant number of developers that have designed communities that appeal to part time residents and to investors that are looking for permanent tenants. Also those targeting the Air B&B segment of the vacation market.

I have spoken with the President of a quality tiny home company and through our discussions I have outlined a dvelopment strategy that attempts to appeal to a broad market.

This includes:

Larger lots than typical (1/4 acre).

Homes on foundations or pad set. In other words, anchored.
Detached storage shed(s).
Wrap around porches with bench storage.
Covered parking.
Common ammenities.
HOA and CC&R’s.

My previous artcile on tiny home communities is located here for more details: Tiny Home Communities — Land Development Realities

Picking your single family build-to-rent market:

Whatever the target market would be, it might be worth it to investigate single family build-to-rent. This is fast becoming a hot sector in the real estate market and demand seems to be there not only right now, but for the forseeable future. Just remember that you have to find the lots or develop the land first and it should be situated in the right area. Good luck and stay safe!

Contact me at: ldr@landdevelopmentrealities.com