Developers Enter the World of Single Family Rentals Throughout U.S.

single family rental builders

Build to rent investors are taking advantage of a white-hot rental market due to an increase in renters and constrained homebuying because mortgages are harder to get.  Homebuilders and market experts say also that while families tend to prefer houses, they either can’t come up with the down payment or prefer the flexibility of renting.

Meanwhile, the number of single-family rentals has been soaring. Census figures show that nationwide, nearly 3.9 million additional houses became rentals from 2005-2015. But most of those rental houses are in existing neighborhoods, owned by mom and pop landlords or by investment funds that snatched up foreclosures to create huge portfolios of rental houses.

A lot of people want to buy a single-family home, but for whatever reason, they’re credit challenged. There’s a great deal of demand! Some homebuilders are stepping up to serve that market, with the number of U.S. houses built as rentals doubling from 2007 to 2012, numbers from the National Association of Home Builders show.

Rental house starts represented 3 percent to 6 percent of all single-family starts in the nation since 2007, up from 2 percent to 3 percent in the prior 17 years, the NAHB reported.

But housing consultants argue that homebuilders are missing out on 10 percent of the housing demand, allowing existing homes to serve tenants who prefer rental houses to apartments. Some don’t qualify for a mortgage, he said. Others want the flexibility of being able to move or would rather spend what they earn rather than save for a down payment.

Clearly there is a subset of renters who will pay a premium to rent new. If it works for apartment developers, why has there not been much attempt to build single-family homes for rent? Those days are now ending.

Homebuilders note that new rental house subdivisions have advantages over rental house portfolios amassed by investment funds. While those landlords have hundreds of homes spread throughout a metro area, the builders can cluster their rentals together, making them easier to rent out, maintain and repair. Portfolio landlords will have to pay high bills for each stopped-up toilet, since a plumber has to drive across town to make repairs. You don’t have the efficiency of having the maintenance person on-site and you have newer construction, so there’s less deferred maintenance.

Building new rental houses can’t be done everywhere, builders said. Land and construction costs need to be in line with rents in communities with strong employment.

To learn more about the build to rent market for investors in SWFL contact a member of the 9 Core Realty team today!

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