Build-to-rent development has emerged over the last year to become one of the hottest new segments of real estate development, with privately held companies as well as the largest publicly traded developers and acquirers of single-family rentals jumping into the market.

Multifamily builders and investors frustrated at high apartment prices and shrinking yields appear to be helping drive the nascent build-to-rent trend.

Lennar, D.R. Horton and KB Homes are among at least a dozen residential builders to get into the business, in some cases selling rentals to the largest publicly-traded single-family rental owners, including Starwood Waypoint Residential Trust.

Industry observers expect an influx of investors into the space in coming years due to the large and rising demand for rental homes by millenial families and others unable or unwilling to assume a home mortgage.

It’s no different that the apartment market, where investors have tried to buy current cash flow, but the cap rates are so low they can get better yield by building new. The same thing is happening now in the single-family market.

For years, home builders ignored the rental market, which makes up 10% of all single-family housing demand with 29% of the nation’s 44.3 million renter households renting a detached single-family dwelling, with another 6% leasing condominiums or townhouses.

These 12.7 million detached home renters have largely been ignored by builders and developers for years as both supply and demand steadily grew over many decades. That’s changing as developers identify and seek to meet rising SFR demand as sales of existing homes shrink the inventory of homes available for rent.

To learn more about build-to-rent homes and investments in sunny SWFL, contact a member of the 9 Core Realty Team!

It was widely deemed a temporary play or even a passing trend: Large-scale investors buying thousands of discounted foreclosed properties during the worst of the housing crash and turning them into single-family rentals. When home prices recovered, they would surely sell them for a hefty profit. The housing market is recovering, albeit more slowly than expected. Foreclosure volume is way down and home prices are way up, but these investors are not selling. They are buying more, and now they are buying new.

Real estate investment experts feel the institutional capital is still looking at this very carefully, because there’s a belief, and many support that belief, that it is a long-term hold and there’s yield and there’s appreciation to be had. But the real challenge for capital now, for the institutional capital sources, is that the massive low-lying fruit is gone.

That fruit, cheap foreclosures, offered investors a relatively low-risk play, because they could buy homes at well below the cost of replacement, and not only would they see rental revenue but also property price appreciation. As this new interest develops, however, builders are starting to offer institutional buyers bulk discounts. Not only does it help builders grow revenue, but it gets them closer to normal levels of production, which has been a real struggle thus far.

One of the big criticisms of the single-family rental world is that they’re all kind of one-offs in unique locations with unique amenities. The scalability of the management is what gets it complicated. This makes it much more like an apartment community in that it’s all together and can be managed by a single entity.

In many of the nation’s actively selling, master-planned communities, which don’t build homes just for rent, there are a significant number of renters anyway. Research shows that these renters live in detached homes primarily because that is the preferred lifestyle. Most of them did not even consider renting an apartment either because of necessity, flexibility or choice.

The nation’s homeownership rate, which continues to fall, is now at the lowest in a half a century. While home sales are improving, both homeowners and renters are feeling less confident about the housing market now than they were even at the beginning of this year, according to Zillow. Fewer overall say now is a good time to buy.

To learn more about the market for new construction single family rentals in Southwest Florida, give the 9 Core Realty team a call today!

After the global financial crash, it seemed like the housing market would take years to work through its inventory of unwanted single-family houses—and it did. Investors bought hundreds of thousands of houses at low prices, often out of foreclosure, and put these homes out to rent. Now, however, there are far fewer homes available for sale, and many developers are turning to new construction to create new rental housing.

The nation’s largest home builder, Lennar, opened its latest community of new, single-family, detached homes, in March, in Sparks, Nevada. The 80 new houses at Frontera at Pioneer Meadows are available to rent, starting at $1,499 a month for a 1,210-sq.-ft. home and rising to $1,999 for 2,182 sq. ft., according to data from ApartmentGuide. “Customers are now able to benefit from Lennar’s superior homes and experience a convenient rental lifestyle,” according to Lennar.

Overall, home builders are not building many new, single-family homes. In June, home builders started construction on new, one-unit residences at a rate of 687,000 a year. Just to compare, from the mid-1990s until the housing crash, home builders never started construction fewer than a million new single-family homes a year, according to data from the U.S. Census.

The number of single-family homes intentionally built to be rental housing is still a tiny fraction of the home building overall, but it is growing quickly from effectively zero to become a new sector of the market for new development. “Last year, approximately 25,000 detached homes were built for rent. We believe that number will increase significantly over the next several years,” according to “A New Opportunity to Build Detached Homes for Rent,” a report from John Burns Real Estate Consulting, based in Irvine, Calif.

Currently, one-in-10 households live in single-family rental housing – that’s 12.7 million of the total 120 million households now living in the U.S., according to Burns. To serve these renters, leading master-planned community builders are likely to develop new, detached homes for rent, Burns forecasts.

“Strong housing demand combined with continued tight supply should boost house prices by over 4 percent this year,” according to the economists at Freddie Mac. Eventually, home builders will start to increase the supply of single-family homes overall. But for now supply is expected to remain on the tight side.

“Home sales are on track for the best year since 2007,” say the economists at Freddie Mac. “We expect the economy to post a stronger second half, especially in the housing sector.”

That will continue to support home price appreciation for investors in single-family homes. At the same time, a strengthening economy will support demand for single-family rental housing. “Landlords will have the ability to keep pushing rental rates over the next four years while realizing steady appreciation on their underlying asset [the house],” according to Burns.

To learn more about new construction rentals, contact an expert member of the 9 Core Realty Team!

Hidden Harbor is a waterfront estate community under development in South Fort Myers. With just 71 homes in this 54-acre development, Hidden Harbor offers fine luxury living in a natural and peaceful setting. The developer of the Hidden Harbor community is Stock Development.
Private floating docks with gulf access via the Ten Mile Canal will be available for fifty-three of the homes at Hidden Harbor. Hidden Harbor can accommodate boats up to 26 ft. Estero Bay is is located two miles from Hidden Harbor and offers easy access to Lovers Key State Park and Fort Myers Beach.
Amenities at Hidden Harbor include a waterfront clubhouse that is located at the entrance to the harbor and within walking distance of all the homes in the community. The clubhouse features a fitness center, lounge area and community kitchen. Other amenities at the clubhouse include a resort-style swimming pool, fire pit, grill area, sun deck and kayak launch.

Hidden Harbor is located in South Fort Myers off US 41, south of Alico Road. Hidden Harbor is located between The Harborage and Emerson Square. This location has direct frontage on the Ten Mile Canal that leads to Estero Bay and the open waters of the Gulf.
To learn more about purchasing a Florida land lot in Hidden Harbor, contact a member of the 9 Core Realty team today!