Why are builders constructing Build to Rent?
Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes
Why are builders constructing Build to Rent?
Most Popular Reply
Jay HinrichsBusiness Member
Real Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votesOriginally posted by @Lesley Resnick:
Originally posted by @Waylon Zook:
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
In full disclosure, I had to look up PITA buyer. I thought it was a typo for PITI. I have learned something new. lol
I am building identical buildings. There will only be 2 models in the 18 unit build.
I see your point, if I had only one buyer for build to rent. I am just not sure how many organizations are looking for a $4m build to rent townhouse community. If anyone is out there, feel free to PM me! I have seen a lot more of the , "I want one build to rent and I will only pay 75% of retail, so I can BRRR the house." That is a scenario I would like to avoid.
You make a good point on the warranty claims.
I would talk to Roofstock this is where they are very strong.. I can give you a referral to one of the head of marketing for them if you like. I know they were interested in some new builds we are doing in the Orlando area.
there is only a handful of markets were new builds make sense for rentals .. in other markets land and permits are too high to make anything but MF construction non viable.
13 Replies
- Member since 2021 · 17 posts · 17 votes4y
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
- 4yJason H.Pro MemberRental Property Investor · Pittsburgh | Chicago · Member since 2016 · 115 posts · 54 votes
@Lesley Resnick. Have you considered build-to-short-term-rent?
- Investor · Statewide, MO · Member since 2011 · 814 posts · 425 votes4y
@Waylon Zook brings a great reason why. I agree, some retail buyers can be a lot more & headache than selling to an investor. Skipping commissions can also swing the net sales amount closer to what a retail sale would bring. The build to rents we have done have all been in what I'd describe as the upper middle segment of housing, 4/2/3's, 3/2/3's in good areas, etc and have worked out nicely.
Another benefit of selling build to rent vs. retail is that if the units are presold before breaking ground, the buyer (at least in my market) is ultimately funding the build from the start, compared to (retail) the builder funding it out of the gate, covering carrying costs and then having to collect profits at the end and often fronting other money.
@Lesley Resnick - the ones you build and place into service - what sort of homes are they? Are you acting as the GC or farming that function out? Good to hear there's some people in the room actively doing this with some volume.... I can't seem to find too many people / operators in a somewhat similar spot...
We generally get 2 year leases on anything (that's new) we rent out / manage that's new and have solid demand. Our model has been exclusively SFRs. Lately we've gone with 4/2.5/3's where possible.
Ed
- Member since 2020 · 137 posts · 158 votes4y
I’ve built and sold directly to first key homes as well as rented for a year and then sold to FK. They pay significantly more than retail buyers in my market. They won’t buy multi family which is all I’m building now.
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @Waylon Zook:
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
In full disclosure, I had to look up PITA buyer. I thought it was a typo for PITI. I have learned something new. lol
I am building identical buildings. There will only be 2 models in the 18 unit build.
I see your point, if I had only one buyer for build to rent. I am just not sure how many organizations are looking for a $4m build to rent townhouse community. If anyone is out there, feel free to PM me! I have seen a lot more of the , "I want one build to rent and I will only pay 75% of retail, so I can BRRR the house." That is a scenario I would like to avoid.
You make a good point on the warranty claims.
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @Jason H.:
@Lesley Resnick. Have you considered build-to-short-term-rent?
That is an interesting thought. I have not considered it. The challenge is that most of the legal short terms rentals are in historic district in Jacksonville and that is potentially another hassle and the land is limited and expensive.
What would such a house look like? There are zoning limitations on houses with multiple kitchens unless they are in a multifamily zoning district
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @Ed O.:
@Waylon Zook brings a great reason why. I agree, some retail buyers can be a lot more & headache than selling to an investor. Skipping commissions can also swing the net sales amount closer to what a retail sale would bring. The build to rents we have done have all been in what I'd describe as the upper middle segment of housing, 4/2/3's, 3/2/3's in good areas, etc and have worked out nicely.
Another benefit of selling build to rent vs. retail is that if the units are presold before breaking ground, the buyer (at least in my market) is ultimately funding the build from the start, compared to (retail) the builder funding it out of the gate, covering carrying costs and then having to collect profits at the end and often fronting other money.
@Lesley Resnick - the ones you build and place into service - what sort of homes are they? Are you acting as the GC or farming that function out? Good to hear there's some people in the room actively doing this with some volume.... I can't seem to find too many people / operators in a somewhat similar spot...
We generally get 2 year leases on anything (that's new) we rent out / manage that's new and have solid demand. Our model has been exclusively SFRs. Lately we've gone with 4/2.5/3's where possible.
Ed
I would challange the idea that Investors are less diffiult than retail. lol I work with a lof of investors that are every bit as diffciult. However, if there are fewer of them, it would be better. I list my own on MLS, so my commision exposure is less, but I see where you are going.
Everything I have built has been sold or rented before I had a certificate of occupancy. Pre-selling is a great idea, it is more difficult since it requires vision and paticiene on the part of the investor.
I would be interested in hearing how the buyer is funding the build? I could see a buyer putting up a deposit, but could you get enough to move the needle? Even with 20% down, that does not get you very far. At least in Florida, using the deposits to build requres an additonal contract and lawyer or there could be signifiant risk.
We are opportimnistic in building. The land is our gateing factor. I have done a 4/2 1250sq ft no garage in an opportunity zone. I have build a 2000 sq foot upmarket house. I have build an under 180k 3/2 garage in a great spot in a C neighborhood. My current builds are 1 sfh in the same up market neighborhood and an 18 unit townhouse community in a decent area.
I do it all. My husband has a GC license and we have our own crews for most of the work, we sub the rest. Our single biggest challange at this moment is capital and evertything taskes so L O N G these days, the city, trusses, windows, etc.
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @James York:
I’ve built and sold directly to first key homes as well as rented for a year and then sold to FK. They pay significantly more than retail buyers in my market. They won’t buy multi family which is all I’m building now.
I have not done multi family. Seems like there would be a whole new set of hassle with the city and the building codes,sprinklers, firewalls parking. elevators.
I looked up Key Homes, they buy in Jacksonville. I am going to reach out to them.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Lesley Resnick:
Originally posted by @Waylon Zook:
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
In full disclosure, I had to look up PITA buyer. I thought it was a typo for PITI. I have learned something new. lol
I am building identical buildings. There will only be 2 models in the 18 unit build.
I see your point, if I had only one buyer for build to rent. I am just not sure how many organizations are looking for a $4m build to rent townhouse community. If anyone is out there, feel free to PM me! I have seen a lot more of the , "I want one build to rent and I will only pay 75% of retail, so I can BRRR the house." That is a scenario I would like to avoid.
You make a good point on the warranty claims.
I would talk to Roofstock this is where they are very strong.. I can give you a referral to one of the head of marketing for them if you like. I know they were interested in some new builds we are doing in the Orlando area.
there is only a handful of markets were new builds make sense for rentals .. in other markets land and permits are too high to make anything but MF construction non viable.
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @Jay Hinrichs:
Originally posted by @Lesley Resnick:
Originally posted by @Waylon Zook:
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
In full disclosure, I had to look up PITA buyer. I thought it was a typo for PITI. I have learned something new. lol
I am building identical buildings. There will only be 2 models in the 18 unit build.
I see your point, if I had only one buyer for build to rent. I am just not sure how many organizations are looking for a $4m build to rent townhouse community. If anyone is out there, feel free to PM me! I have seen a lot more of the , "I want one build to rent and I will only pay 75% of retail, so I can BRRR the house." That is a scenario I would like to avoid.
You make a good point on the warranty claims.
I would talk to Roofstock this is where they are very strong.. I can give you a referral to one of the head of marketing for them if you like. I know they were interested in some new builds we are doing in the Orlando area.
there is only a handful of markets were new builds make sense for rentals .. in other markets land and permits are too high to make anything but MF construction non viable.
I tried Roofstock and they were a nightmare to deal with for an existing home. They could not get out of their own way. I don't know how they are doing now. From the time I started working with them until I pulled my house they lost about a 1/3 of their listing in Jacksonville. Some may have been sold, but a lot just disappeared from their site.
There are a number of other companies doing build to rent here, but they are mostly turnkey and keep the property management piece, which changes the numbers.
- 4yJay HinrichsBusiness MemberReal Estate Consultant · Summerlin, NV · Member since 2014 · 45k+ posts · 66k+ votes
Originally posted by @Lesley Resnick:
Originally posted by @Jay Hinrichs:
Originally posted by @Lesley Resnick:
Originally posted by @Waylon Zook:
@Lesley Resnick i agree that retail should have a higher sales price but I think the advantage to selling to one buyer would be less differences in the houses resulting in economies of scale.
All it takes is a pita buyer to really cause you to lose money. I guess you need to make the decision as to how much less you are willing to sell for to save on hassle and time of dealing with multiple buyers.
I would also suspect that there is a good chance you will have less warranty call backs with investors.
In full disclosure, I had to look up PITA buyer. I thought it was a typo for PITI. I have learned something new. lol
I am building identical buildings. There will only be 2 models in the 18 unit build.
I see your point, if I had only one buyer for build to rent. I am just not sure how many organizations are looking for a $4m build to rent townhouse community. If anyone is out there, feel free to PM me! I have seen a lot more of the , "I want one build to rent and I will only pay 75% of retail, so I can BRRR the house." That is a scenario I would like to avoid.
You make a good point on the warranty claims.
I would talk to Roofstock this is where they are very strong.. I can give you a referral to one of the head of marketing for them if you like. I know they were interested in some new builds we are doing in the Orlando area.
there is only a handful of markets were new builds make sense for rentals .. in other markets land and permits are too high to make anything but MF construction non viable.
I tried Roofstock and they were a nightmare to deal with for an existing home. They could not get out of their own way. I don't know how they are doing now. From the time I started working with them until I pulled my house they lost about a 1/3 of their listing in Jacksonville. Some may have been sold, but a lot just disappeared from their site.
There are a number of other companies doing build to rent here, but they are mostly turnkey and keep the property management piece, which changes the numbers.
i have seen that with the one off resales.. but the bigger package deals are really their wheelhouse. just trying to help I dont have a dog in the hunt as it were.
- 4yJason H.Pro MemberRental Property Investor · Pittsburgh | Chicago · Member since 2016 · 115 posts · 54 votes
Originally posted by@Lesley Resnick:
Originally posted by @Jason H.:
@Lesley Resnick. Have you considered build-to-short-term-rent?
That is an interesting thought. I have not considered it. The challenge is that most of the legal short terms rentals are in historic district in Jacksonville and that is potentially another hassle and the land is limited and expensive.
What would such a house look like? There are zoning limitations on houses with multiple kitchens unless they are in a multifamily zoning district
Yes, the answer would be dependent on where you live and if you were looking to build/develop close to home, as opposed to developing in a true vacation destination.
The properties themselves would look no different than any other single family, unless you were building a SFR with an ADU/carriage house (then you might have two kitchens)
- Real Estate Agent · Jacksonville, FL · Member since 2015 · 1k+ posts · 1k+ votes4y
Originally posted by @Jason H.:
Originally posted by@Lesley Resnick:
Originally posted by @Jason H.:
@Lesley Resnick. Have you considered build-to-short-term-rent?
That is an interesting thought. I have not considered it. The challenge is that most of the legal short terms rentals are in historic district in Jacksonville and that is potentially another hassle and the land is limited and expensive.
What would such a house look like? There are zoning limitations on houses with multiple kitchens unless they are in a multifamily zoning district
Yes, the answer would be dependent on where you live and if you were looking to build/develop close to home, as opposed to developing in a true vacation destination.
The properties themselves would look no different than any other single family, unless you were building a SFR with an ADU/carriage house (then you might have two kitchens)
ADU, ah! What a great idea. Jacksonville zoning does not allow it. The city has a huge landmass and there are still large tracks that have not been developed. Some of the more interesting properties are in the historic districts and anything goes as long as it old. This has led the city to allow a very conservative zoning structure to exist. I expect as the affordable housing crisis continues, it will change.
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