Investors bet on build-to-rent homes

Investors are eyeing a new build-to-rent strategy amid increased competition that’s arisen from a tight supply of older housing inventory in many markets, the National Real Estate Investor reports.

They want to invest in markets such as Atlanta; Charlotte, North Carolina; Phoenix; and Texas, where building and land costs are lower, and where there is more entry-level home building, the report said.

“What you’re seeing now is the maturation and scale in the sector, where it is really being viewed as a distinct asset class within the real estate sphere, similar to multifamily or data centers,” Gary Beasley, CEO and co-founder of Roofstock, a single-family investment property firm, told the publication.

Investment firm GTIS Partners for example, is shifting its focus. The company traditionally buys older homes at foreclosure auctions and revamps these for rent or sale. It created a portfolio of more than 4,200 single-family rental homes. However, it sold almost half of that portfolio last year, and has now shifted its focus to buying brand new, build-to-rent homes instead. It’s currently snapping up newly built rental homes in various parts of the southern U.S.

“As prices in the housing sector went up, the pricing gap between new homes and older homes became smaller,” Rob Vahradian, senior managing director and head of U.S. investments at GTIS Partners, told the National Real Estate Investor.

Vahradian said that new homes also tend to have lower maintenance costs, plus there is more scope to tailor the homes to the requirements of renters.

Some investors are taking the strategy even further with plans to build entire communities of single-family home rentals with 150 to 250 homes in a small area. The communities would share amenities and on-site management, which would be similar to apartments. AHV Communities is developing two such SFR communities in Austin, Texas, which will include 175 upscale single-family homes of three to four bedrooms.

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