Developers Move into Single-Family Rental Homes Sector

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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.

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. Experts believe that number will increase significantly over the next several years.

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,. To serve these renters, leading master-planned community builders are likely to develop new, detached homes for rent, experts forecast.

“ 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.

To learn more about build to rent homes and investment opportunities in your area, contact the 9 Core Realty team today.

 

Build to Rent Investment Market Continues Expansion

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Home builders are going into the single family rental business one nail at a time.  They are building new homes from scratch and either selling them to investors or renting them out and managing them through a subsidiary.

With inventories of foreclosures and short sales at multi-year lows, their timing is perfect.  Single family vacancy rates are down and rents are up.  Now investors find themselves competing for tenants with apartments, hundreds of homes owned by hedge funds, investment properties owned by other small investors and homes designed to be rentals and managed by the builders who built them.

There’s nothing terribly new about building single family homes to be rented out and for years builders rented out a handful of homes they had a hard time selling.  However, the single family rental market, initially a way to create demand for foreclosures and provide needed rental housing, has become the fastest growing rental category.  Some 27 percent of renters now live in single family homes and the number continues to grow. Building homes for rent is growing too.

One option that turns renters into owners is rent-to-own programs that reduce carrying costs on unsold inventory and helps convert more homes to sales.  Some builders have a separate division to handle the rental side of their business, while others prefer to work with customers on a case-by-case basis.

Renters sign a use-and-occupancy agreement that allows them to live in the home until they can refinance it and take the investor out of the equation. In most cases, customers are able to purchase their home after renting for one year. Occasionally it takes two years. Customers can also elect to sign a conventional lease, but they always have the option to buy.

To learn more about the build to rent investment market in your area, contact a member of the 9 Core Realty team!

Build to Rent is the Answer to Housing Shortage

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Our nation must deliver 250,000 homes a year to satisfy need. In 2015 it delivered 112,370. Working people contribute to pension funds, which in turn invest in a range of assets that provide them with an income in old-age. Such savings provide a secure, long-term pool of billions of dollars. Pension funds and other institutional investors are increasingly investing in new housing, delivering high quality, market-rented homes.

Build to rent homes are designed and built specifically for renting. The primary motivation of investors is to keep their buildings fully-occupied with satisfied tenants. That means offering longer tenancies, other flexibilities (to personalize the home for example), good onsite amenities, and good transport links for easy commuting. Blocks of apartments in private ownership usually suffer from patchwork management arrangements. With Build to Rent, everything is integrated. There is one manager for the whole building. Staff are not only from the world of housing but also from hospitality, in recognition that it is a service industry. Ultimately, many investors are seeking to invest at scale and offer consistent standards across different locations so that they can develop into brands that their customers trust and stick with.

As long-term investors, Build to rent providers’ only interest is in creating ‘places’ that thrive. Their investments will gain or lose value depending on their wider environment. They therefore have a huge motivation to ensure that not only their developments work well, but also the neighborhood and services that surround them. They have no motivation or incentive to leave homes empty. The quicker they are let the quicker their pensioners and other investors derive their income

Demographics, a lack of housing supply and lifestyle choices are all creating a need for more rented homes. Without adding to supply, such need simply creates pressure on existing stock, either to switch between tenures, or to accommodate more occupiers. Some communities are hemorrhaging their young talent because there are no obvious housing options for them. Just over half (51%) of private renters are under 35 years of age and 54% have no dependents, and so are unlikely to live in public  housing. Build to Rent is about the mainstream market. Many are investing in Build to Rent, or are contemplating doing so, because it is delivering affordable homes for key workers and other important groups that are critical to their local economies.

To learn more about build to rent homes and the investment market in your area, contact an expert member of the 9 Core Realty team!

Babcock Ranch’s First homes Being Built- Perfect Build to Rent Opportunity

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Master developer Kitson & Partners has announced that Sarasota-based Homes by Towne has started construction of the first residences at Babcock Ranch, a new 18,000-acre eco-centric, solar powered town being developed by Kitson east of Fort Myers off State Road 31 in Charlotte County.

Homes by Towne is building four furnished model homes in Lake Timber, the first neighborhood to be built at Babcock Ranch. Fox Premier Builders, Stock Development, and Florida Lifestyle Homes of Fort Myers are scheduled to begin construction of 12 additional Lake Timber models between now and mid-October. Completed furnished models are expected to be open for viewing in early 2017. Each home at Babcock Ranch is being built to Florida Green Building Coalition Certification standards.

Situated on the banks of its namesake, the Lake Timber neighborhood epitomizes the Town and Country lifestyle Kitson has fashioned at Babcock Ranch. Lake Timber’s choice of custom lakefront, porch home, cottage, town home, and condominium residences with diverse price points will line streetscapes dotted with parks. Lakefront green spaces and pathways, trail head facilities, a dog park, a lakeside fishing dock, an observation deck, and Babcock Ranch’s first town garden will provide opportunities for connecting with nature. Lake Timber’s Lake House neighborhood center includes a lakefront pool, barbecue area and playground.

At the same time, Lake Timber will be close to Babcock’s Downtown District. Phase I of the Downtown District is under construction and expected to be completed by the end of February 2017. Phase I will include completion of Founder’s Square, a lakefront green space, and the town’s first dining, retail, and lifelong learning venues. The Table and Tap Restaurant will offer indoor and outdoor lakefront dining. Curry Creek Outfitters will provide hiking gear and apparel, while Slater’s Goods & Provisions will feature a coffee shop, grab and go items, and an ice cream shop. Woodlea Hall will be Babcock Ranch’s first civic building and home to Kitson & Partners’ development offices and information center. The Babcock Neighborhood School will open in the fall of 2017 and a comprehensive Wellness Center is scheduled for completion in spring 2018.

Babcock Ranch will be a perfect opportunity for the blossoming build to rent market in SWFL.  To learn more about build to rent investment opportunities in Babcock Ranch, contact an expert member of the 9 Core Realty team.

Build to Rent Five Percent of New Home Construction

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One of the hottest specialty markets in home construction is benefiting from the boom in single family rentals that began as a way for entrepreneurs to provide from the flood of foreclosures that has reached 4 million properties since 2007.

However, instead of buying foreclosures and renovating, some home builders are designed and building homes from scratch to be rented out rather than sold, with the builder operating as property manager and well as retaining ownership.

Despite some recent ups and downs, the share of single-family homes built for rent has doubled. According to data from the Census Bureau’s Quarterly Starts and Completions by Purpose and Design, the market share of single-family homes built for rent, as measured on a one-year moving average, stands at 5.1 percent for the third quarter of 2016. This is only slightly lower than the recent peak of 5.35 percent set at the beginning of 2016, and is considerably higher than the 20-year average of 2.7 percent.

With housing starts currently at 861,000 a year, the number of new built-for-rental properties is about 43,911 annually at the current market share. Only 27,000 homes started over the past year, according to the National Association of Home Builders

The built-for-rent share of single-family homes is considerably smaller than the single-family home portion of the rental housing stock, which is 27 percent according to the 2015 American Community Survey. As single-family homes age, they are more likely to transition from the owner-occupied to the rental housing stock.

With demand for single-family rentals on the rise, investors have turned their attention to buying foreclosed residential lots, building rental homes to sell to other investors, renting the homes and providing property management services.

One option that turns renters into owners are rent-to-own programs that reduce carrying costs on unsold inventory and helps convert more homes to sales.

Some builders have a separate division to handle the rental side of their business, while others prefer to work with customers on a case-by-case basis.

Renters sign a use-and-occupancy agreement that allows them to live in the home until they can refinance it and take the builder out of the equation. In most cases, customers are able to purchase their home after renting for one year. Occasionally it takes two years. Customers can also elect to sign a conventional lease, but they always have the option to buy.

To learn more about the build to rent market for new construction, contact a member of the 9 Core Realty team!