Build/develop to rent?

[Kris Reeves]

As I scan commercial and residential property, I regularly find these portfolios for sale. A couple have got my wheels turning, so I thought I'd poll the professional audience. One in particular is a 20+ single story, slab style home development. All homes are on the same street. All of them have stamped concrete floors that look like wide plank hardwood. They are all brick or vinyl siding, so I am sure they are all low maintenance, both inside and out. 100% occupied with a waiting list is the part that really stuck out to me. 

So my question: have any of you ever built strictly with the intent on renting the properties upon completion? This seems like a solid strategy to me, but I would love to hear from you guys. Here are some of the pros and cons that I see:

Pros:

• Property management costs would be lower over the life of ownership due to proximity of homes in portfolio, low maintenance flooring, siding, etc.
• You could build them with more robust systems(HVAC, plumbing, etc) knowing they would always house renters
• Your portfolio would be concentrated as opposed to spread all over a geographical area
• Your exit strategy would be super attractive if you were to sell as a package
• Quicker than purchasing and potentially rehabbing an older property, and accumulating them one by one
• You could sell a percentage of them to recoup a portion of your investment, and rent the rest, which should put you with solid equity from the gate

Cons:

• Entry costs and length of time from start to first months rental income for construction
• Funding the construction, or finding the right lender to fund such a property/development
• Knowing the correct price point of the finished product, or what the community is lacking
• Local zoning or possibly being prohibited to build SFH to rent
• Higher construction costs vs. multifamily(apartments or townhomes)

I know there are many other strategies out there, but as one wanting to accumulate a nice rental portfolio, this seems to be a solid approach. I am curious as to what you guys and gals have to say about it.