🏠 Single-Family Build-to-Rent (BTR)- 🔮The Future of Single Family Homes

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Okay, on to this week's trend breakdown.

Here’s what you will learn in today’s email:

• How can you invest in build-for-rent homes?

• What is driving this trend?

• Who are the top developers in the space?

• How does it compare to other asset classes?

• And more!

👉 Problem

America has a major housing shortage that has driven up the cost of owning and renting a home.

⚡ Big Idea

The housing shortage and affordability can be eased by building more single family homes and communities for renters.

📊 Charts and Data

Since the Great Recession in 2008, housing supply has fallen into a large deficit. 

Affordability has also fallen to historic lows.

🔥 Opportunities

Stabilized sales have indicated that institutional investors are now treating the single family rental product similar to Class A Multifamily.

Provide Purpose Built Housing for Renters 

Opportunities exist to create communities with on-site property management and upscale amenities.

• Avilla Homes is renting luxury homes with smart tech, even charging a mandatory "technology fee" for keyless locks, doorbell, cameras, and thermostat.

• BB Living provides larger 3-4 bedroom homes in gated communities located in good school districts.

Use Prop Tech to Achieve Greater Returns

New tools in property management, utility management, payment and service portals, etc. are giving investors the ability to acquire and operate residential rentals at scale, with NOI on par with multifamily

Invest directly in crowd equity deals

Equity crowdfund platforms offer investors the ability to directly participate in build-to-rent development deals

• ArborCrowd - $61.65M development for 163 unit build-to-rent community located in Colorado Springs, CO.

• Yieldstreet - $33M rental community development with 142 single family rental homes on 38.5 acres in Savannah, GA.

Invest in REITs for exposure to the space

American Homes 4 Rent (AMH) and Invitation Homes (INVH) are two single-family home rental REITs that are also invested in build-to-rent. 

💼 Case Studies

• NexMetro formed the Avilla brand to meet demands of the luxury rental market, with high quality homes, on-site property management, and flexible leasing.

• Research paper with 4 case studies from Phoenix, Tucson, Oklahoma City, and Fresno highlighting project costs and estimated returns.

• AHV has seen high demand for their single family rental luxury homes in San Antonio, TX.

🤝 Players

Developers

The Dinerstein Companies - Launched Inspire Homes brand, gated community complexes in Florida and Texas

Tricon Residential - Over 3k units in the Sun Belt region, with 23 communities

NexMetro - Created Avilla brand luxury rental home communities

BB Living - pioneer in build-to-rent - has partnered with Toll Brothers and Hillwood Communities

American Homes 4 Rent  - founded by B. Wayne Hughes, also founder of Public Storage, owns over 50,000 rental homes

Invitation Homes - formed with Blackstone in 2012, now one of the largest rental home owners in the US

✨ Predictions

• Sustainable communities

  • Casa by Moda in the UK has focused on providing future proof sustainable homes for residents and investors

• Branded communities

  • Taylor Morrison introduced Yardly, a branded home community with attractive amenities.

• More institutional capital funding builders and developers.

  • Toll Brothers invested $60M in BB Living rental communities

  • JPMorgan and Haven Realty are investing $1B in build-to-rent

⚠️ Risks

• Construction risk - Build-to-rent developments require significant capital investment with risk of cost overruns and delays

• Financing risk - Finding the right lender for this product type at an attractive interest rate can be challenging

• Zoning and entitlement risk - Important to consider density needed for a successful development and what local communities are willing to approve

✅  Key Takeaways 

• The housing shortage has caused a high demand for single family rental homes

• Advances in property technology have led to the profitability and scalability of build-to-rent single family homes.

• Institutional investors have poured into the space, finding that single family home rental communities have high demand, provide stable and diverse stream of cash flow, with returns on par with multifamily.

🔗 Additional Resources

RCL Research - Build-to-Rent Single Family Rental Boom

Cushman Wakefield Report - Build-to-Rent Insights

Build to Rent Case Study MIT Research

NorthMarq Single Family Built to Rent Report

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