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Should You Invest in Build-to-Rent Properties?

Fewer foreclosures are available along the Emerald Coast. We have a lower inventory of existing single family homes for sale, too. For landlords looking to buy properties to refurbish and rent, the search has become more difficult as the housing market has recovered. This isn’t unique to our part of Florida, though. It’s a challenge across the country, and as a result investors are becoming much more creative.

Instead of buying existing homes, some landlords are building new homes to rent.

Build-to-Rent Properties

The majority of landlords looking for newly built homes to rent or building new homes themselves are fairly big names. American Homes 4 Rent is currently buying lots and new houses. U.S. Colony Starwood Homes plans to buy 600 newly built homes over the next year. AHV Communities LLC wants to buy entire neighborhoods. Some of these companies are offering apartment-like amenities and additional perks like lawn service.

For landlords with fewer properties and less capital, the ability to follow suit is less about whether it will work and more about means and opportunity. Are there builders in the area that you know? Do you have home construction experience? Do you already own some undeveloped lots? Build-to-rent isn’t an option for every landlord but it doesn’t have to be.

The Benefits of Build-to-Rent

Buying an existing home to rent or building a new one are, first and foremost, business decisions. It’s only something to consider if it means good business and financial sense and fits your short and long-term goals as an investor. There are benefits to investing in new properties:

● Newer homes generate higher rents, typically between five and eight percent more than an existing home.

● New homes require less maintenance and repairs. Many come with a one year warranty from the builder.

● New homes are more competitive. You’ll likely have more potential tenants to choose from.

● Because they’re built to current building codes and standards, insurance is typically lower for new homes.

A lot of renters would love a new single family home instead of an apartment or condo but don’t feel like buying is an option for them. Renting a new home, as long as the rent is right for both the property and the market, is appealing to people.

Things to Consider In Your Decision

If the idea of building to rent or buying brand new properties appeals to you, there are a few things to consider in your decision.

● Are you a builder or do you have a working relationship with builders right now?

● Do you have a plan if the rental market stalls or drops while you own these homes?

● Do you want properties you can easily sell in the future?

● Will the homes you purchase/build be part of your investment/rental portfolio long-term?

● Are there new developments going up or being planned that you’d like to have homes in?

Of course, these aren’t the only questions to consider. You also need to think about financing, taxes, insurance, and all of the additional costs of new properties, especially if they remain vacant for any amount of time.

Whether you’re renting existing homes, condos, or you’re building new homes for potential renters, it’s important to work with a property management company who can keep you legal, help you find tenants, and make sure your properties are maintained and safe. Here at ERA American Real Estate, we can help you with all of that and let you know how the rental market on the Emerald Coast is doing, so you can make good business decisions.

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