The built-for-rent market currently makes up just 5% of homes built, but it is expanding rapidly, according to Brad Hunter, Managing Director at RCLCO on Forbes. The draw for many renters is the single-family living experience with the professional management and amenities of an apartment complex.
Built-for-rent tends to be “stickier” according to Hunter, as renters view them as more long term decisions than traditional apartments. Most of these renters, Hunter notes are younger households who are not yet prepared to buy a home.
“Millennials are finally starting to have kids, and that is driving some sudden shifts in housing demand,” Hunter said. “Rental homes and townhomes appeal to many of the older Millennials who have children because they can have a yard and more interior space.”
With many potential homebuyers—notably millennials—opting to delay purchasing and instead renting longer due to affordability and inventory concerns, the single-family rental investment market is poised for continued growth. On March 24-25, 2020, the Five Star Single-Family Rental Summit will unfold at the Four Seasons Resort & Club at Las Colinas in Dallas, bringing together industry experts for focused discussions on the future potential of this sector.
According to a report from Realtor.com, investors are using the popularity of single-family rental to their advantage. Real estate investors purchased 7.7% of all homes in Q2 2019, up 0.6% year-over-year, the most speculation the market has seen since 2013. As this segment of the industry grows, investors need to adapt to a changing market.
“RCLCO is anticipating strong growth in the B2R business,” Hunter adds. “And remember: it is a counter-cyclical business, as more people tend to rent during recessions. That is a point that is not lost on investors and developers who are getting nervous about the business cycle.”