Why are build-for-Rent Homes Hot in 2024?
Build-for-rent, also known as Build-to-rent homes, are dwellings built specifically for the purpose of renting out. In 2024, this type of real estate is attracting many enthusiastic investors who want to capitalize on the growing trend of millennials choosing BTR communities as “graduations” from apartments.
Will Dickson, President of Marketplace Homes, is a firm believer in the value of BTR Homes:
“Build-to-rent simultaneously addresses numerous issues in the housing market. It helps increase supply in a market where shortages are near historic proportions, and it affords residents the flexibility, amenities, schools, safety and community that their families require. Although in its infancy, we’ve seen firsthand how this asset class can positively affect families and communities,” says Will.
Source: Yardi Matrix
What are Build-for-Rent Homes?
Build-for-rent homes are multifamily townhouses or single-family houses built for the express purpose of renting to tenants. They are also known as build-to-rent or BFR homes and are growing in popularity in recent months.
Build-for-rent communities increase housing inventory for people who can’t or don’t want to buy for various reasons. In today’s real estate market, BFR is having a moment as the rental market is hot, affordability is a big concern regarding homebuying, and more people prefer the quality and convenience of new builds in light of increasing rental prices.
Source: Eyeonhousing.org
Why are BFR homes rising in popularity?
In 2024, build-for-rent homes are doing well, mainly due to an ongoing housing shortage. Therefore, investment management firms across the United States are raising billions to go toward BTR (Source: Housingwire). According to the National Association of Home builders’ analysis of data from the Census Bureau, there were around 22,000 single-family build-for-rent starts in the last four months of 2023 (Source: Quarterly Starts and Completions by Purpose and Design.)
When existing homeowners are in lock-in effect, the only way to produce more inventory is to build more homes. For reference, check out this graph that shows the amount of inventory this year compared to previous markets:
With higher interest rates pricing more buyers out of buying homes, rentals are in high demand. Build-to-rent homes provide an inventory of single-family rentals in high demand as owners of resale homes are more reluctant to list their homes on the market. Therefore, it’s highly probable to see more build-to-rent communities in development in the coming months to meet housing market demands.
What do build-for-rent communities look like?
Build-for-rent communities usually consist of townhouses, duplexes, or single-family rentals built simultaneously or in phases. These communities often share amenities like a community center, park, fitness center, or pool to add value.
The homes themselves are designed to be rentals, so they are uniform in design and material selection. These often include more durable materials like luxury vinyl that can last for years. New BFR communities have modern layouts and are easy to market since all units have similar floor plans, appliances, and features.
Why is build-for-rent so popular in 2024?
The build-for-rent model has gained popularity in recent years due to several factors. First, it provides a solution to the increasing demand for rental housing due to more people being priced out of buying a home. There are also, as always, residents who prefer the flexibility of renting rather than buying a home.
Second, real estate developers and investors can generate a stable and long-term income stream through rental properties. Having an entire lot of rental homes in one area instead of various units of different styles and ages in other locations also expedites maintenance requests. It makes it easier for tenants to get excellent service.
Source: Urban Institute
What are the benefits of a BFR home?
Build-to-rent properties offer a variety of benefits to residents and investors who are willing to put their money into BTR properties.
Benefits for Residents
Build-for-rent homes have several benefits for residents. First, BTR communities contain new homes that are less likely to need frequent upkeep and maintenance calls. These neighborhoods usually belong to a single owner, so units are easier to manage and are more likely to get responsive service.
Residents also enjoy amenities like swimming pools, tot lots, dog parks, and other community amenities that residents enjoy. Renters also enjoy a lifestyle free from the commitment and responsibilities of homeownership. As home prices remain high, rent housing offers an affordable alternative to buying — great for when one is unsure if they want to plant roots in the area. The shared amenities and a sense of community can also increase the renters’ quality of life.
Benefits for Real Estate Investors
For real estate investors, owning a BFR community can provide long-term real estate investment income in the most convenient setting. Also, when an entire community is placed under one property management service, investors don’t have to do anything to stay on top of routine tasks like rent collection.
Instead of driving around town to answer service calls or follow up on a property for move-ins or move-outs, all the homes are in one place. Overall, this setup optimizes occupancy and reduces tenant turnover.
It could also be an opportunity for multiple investors to crowdsource to make investing in a large development accessible for individuals of different income capacities. The usual benefits like passive income and the ongoing trend of appreciation over time still apply.
BTR Developments are only becoming more popular in 2024.
Overall, BFR rental communities are an alternative housing option that addresses the growing demand for single-family home rental properties. Offering a range of benefits to both developers and tenants, they are only becoming more popular. Marketplace Homes is excited about this trend that provides perks to simplify the rental experience for all parties.
If you are a real estate pro interested in BFR or a renter who wants to become a homeowner, Marketplace Homes can help. We are an integrated brokerage that assists with various real estate services, including property management, long-term rental management, buying and selling homes, portfolio management, and much more.
Alicia Persson is a Content Strategist SEO writer at Marketplace Homes, utilizing previous years of experience on real estate teams that specialized in investments and property management. Before she joined Marketplace Homes, she was also a freelance writer for 7 years, leading to a specialization in real estate and home living content for boutique digital marketing agencies. During her writing years, she learned the basics of SEO and gained experience writing for many different clients, making her versatile at creating diverse content.
She is a proud University of Virginia master’s graduate and enjoyed her undergraduate years at the University of Mary Washington. When Alicia is not writing, she plays keytar and sings in a local 90’s rock cover band, or she spends time with her amazing family.