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Updated over 3 years ago on . Most recent reply

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Lesley Resnick
  • Real Estate Agent
  • Jacksonville, FL
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Why are builders constructing Build to Rent?

Lesley Resnick
  • Real Estate Agent
  • Jacksonville, FL
Posted

I am building new construction. I have built and sold off SFH. I have built some to keep for my own rental portfolio. Everything I have built has been sold or rented before I had the certificate of occupancy. My next build will be affordable townhouses. I am looking down the road and trying to decide what I should build after that. It is unclear if I should build and sell to retail buyer or investors?

In general, retail will pay more and want a higher quality product.

Build to rent is more utilitarian and they generally want a lower price.

It seems that I can make more selling retail than I can with build to rent.  All resources are scarce at this moment, land, labor & capital (I know it's a cliche).  Given that is the case, I can't  "make up the difference in volume".

I get the idea if you are Lennar and Blackstone will buy 100 unit neighborhood before it is built.

What am I missing?

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Jay Hinrichs
#1 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
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Jay Hinrichs
#1 All Forums Contributor
  • Lender
  • Lake Oswego OR Summerlin, NV
Replied
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.   

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JLH Capital Partners

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