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!