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.
