As you’d expect from us at PPR Capital Management, we work hard to keep up with the latest housing market trends. Lately, we’ve noticed an interesting subsection of single-family rentals gaining popularity among investors as a direct result of the decrease in available housing. There was a shortage of approximately 4 to 7 million homes in the United States in 2024. As a result, the demand for more housing continued to rise.
Interestingly, we’ve seen a significant surge in Build-to-Rent (BTR) developments in an attempt to address the housing shortage. Though these new developments seem promising, it’s important to understand exactly what BTR offers. In this article, we’ll be exploring what BTR is, why it seems to be a favorable investment opportunity among investors, and how it addresses current housing market trends.
What is Build-to-Rent Housing?
BTR increased in popularity following the 2008 global financial crisis. Similar to traditional residential neighborhoods, these communities consist of detached single-family homes or townhomes that are built specifically for renters. They often share amenities such as dog parks, swimming pools, or green spaces.
What Makes BTR Different?
While BTR properties may operate similarly to multifamily assets, there are a few key differences to take into account. Not only are these properties built with the goal of housing long-term residents, but their unique attributes are designed to attract a variety of tenants. For example, BTR communities tend to be developed in suburban locations, allowing for larger unit sizes, higher end amenities, and more spacious units. Whether it’s a young couple ready to start a family or a retiree looking to downsize, BTR allows renters to experience the benefits of suburban living while not having to worry about the extra expenses that come with home ownership.
One of the more impressive differences we’ve found is that BTR units generally have lower repair and maintenance costs. On top of this, the appliances and systems are new, so in the unlikely event that appliances break down, operators can replace broken equipment at virtually no cost for the next few years since most equipment will still be under warranty.
Benefits of Investing BTR Housing
Like any other investment, BTR has unique benefits. For instance, BTRs can have lower vacancy rates. Research shows that BTR properties typically attract tenants who prefer stability and will stay for longer periods, with the median stay being three years.
The makeup of BTR residents seems to be one of the biggest benefits. Residents tend to commit to longer leases and prefer the ease of rental properties, which can lead to consistent and predictable cash flow. Therefore, investors looking to make profitable returns with minimal risk look favorably to BTR housing.
Another benefit is the rising demand for single family rental properties. In the United States, mortgage rates have increased significantly since 2020. This increase in rates can discourage growing families from buying houses, making renting single family homes more desirable for a portion of the U.S. population.
Given the increasing demand for rental properties, modern infrastructure, new appliances, and quality amenities, BTRs have the ability to charge higher rental rates. While initial building costs may be higher, charging higher rents means that those interested in investing can potentially collect more attractive rental yields over time.
Final Thoughts
As many of you know, the housing market is always changing, and we are seeing certain types of housing, such as BTR, gain popularity with investors since it addresses current economic trends, including the housing shortage. With an increase in the number of renters and the demand for more housing, we expect BTR housing to be around for decades to come.
