Built-To-Rent-Housing Red-Hot As Investors Aggressively Jump in

Ten years ago during the market's downturn, investors purchased millions of homes then under distress and made the decision to turn them into rental properties of their very own. It was the beginning of a large transformation that saw the mom-and-pop market of single-family rentals morph into a very officially managed and streamlined form of housing category.

During its depressing peak in 2009, there were about 49% of homes on the market that were distressed or being short sold, compared to only 2% of home sales today. The homes that exist for sale in the current market are of the higher-priced category, and so investors have switched up their strategy to something a bit unexpected during earlier days: buying properties brand-new.

Just this week, reported on a Tampa, Florida – based builder, ERC Homebuilders, that is in the process of launching a soft IPO, hoping to raise $100 million to build more than 1,000 rental homes there. Their business model will offer investors private shares using Regulation A+, a type of investment crowdfunding that now allows smaller companies to raise limited funds from just about anyone out there in the general public.

Both accredited and non-accredited investors can get in on the action, and the homes in question will be sold in build to many larger-scale investors. The act of putting a higher number of homes in one location makes the task of managing the properties much simpler, and far less costly.

There is now a demand for rentals that are positioning these institutions to want a much greater level of inventory of the product, and they have now realized that a property that is brand new carries with it much less speculation and risk. Renters actually prefer to have the ability to comfortably raise a family or live in a single-family home versus an apartment complex, or building. Lennar is the nation's largest homebuilder by revenue and has been conducting an extreme experiment with a build-to-rent community in Sparks, Nevada.

After seeing success with their current business model, they will expand soon to Florida where they will sell homes in bulk on land with no lease-up risk and under the ownership of third parties. According to the Association of Home Builders, 37,000 homes were built as rentals during 2017. That number grew heftily to 43,000 last year, and since they do not include homes that go directly under sale to investors, the stats are probably even higher.

Michael Finch is executive VP at SVN/SFRhub Advisors, which is a new commercial brokerage in the red-hot Phoenix market which is very honed in on single-family rental and build-to-rent investment opportunities. They are currently working with clients who are aggressively seeking to acquire 5-6,000 homes during the next two years.

One of the prime reasons for this massive growth period is the millennial generation's transition into marriage and the rungs of building a family, with many of them not having the means to acquire a home. For investors, being able to acquire all of the homes in the same city gives them the ability to have a bit more control over some of the repair issues that begin to pop up after a decade or so of occupancy.

One of the only true expenses there are for landlords of this type is the landscaping, and being in Arizona makes that task even easier to fulfill. There is much less turnover overall within the single-family rental market, and it is much less sensitive to economic ups and downs than the regular home sales arena.

Many investment groups are noticing the shift that is taking place even with some young professionals loving the workout rooms, clubhouses, and pools luxury apartments offer. Even if you are renting a home that is not your own in its entirety, the practicality factor for a family becomes incredibly appealing to many.

If you find yourself in a position where renting is more appealing, you are not alone. Whether it's time to downsize or you are entering a city where your next dream home is in short supply, you may have the need for someone to quickly purchase a property. The professionals at Dorrmat will provide a free home valuation assessment from a licensed professional, under any condition or price range, and attempt to get you paid within just 48 hours!