Usha Investment Group LLC

Building world class communities

How Build to Rent has become a New Cash Cow

What is build-to-rent?

For multi-family real estate investors looking for a profitable investment strategy, investing in Built-to-Rent properties is the best strategy. Build-to-rent properties are specifically designed for renting out rather than selling. They attract longer tenancy agreements and they are professionally managed by either the real estate investor or a reputable property manager.

The Built-to-Rent space is where most investors are currently making more money from. Investors working with multifamily syndication capital raisers can double their investment after five or six successful build-to-rent deals which can take about 30 months. Going by this fact, investing in build-to-rent properties is a superior investment strategy compared to the other conventional investment strategies where investors could wait for up to five years to double their investment capital.

Most investors are only familiar with multifamily value add investment strategy but we are now witnessing a shift to build-to-rent investment options.


Finding the right market for build-to-rent

The build-to-rent model differs from one real estate market to another. For instance, if you were to undertake a build-to-rent project in Phoenix or Dallas, Atlanta, or one of these big cities, there is a high possibility that you will have many bottlenecks in such big cities especially when dealing with architectural plans approval and putting up the necessary infrastructure. Therefore, you will take a lot of time to successfully complete a build-to-rent project in such big cities.

However, if you go to smaller markets, you will likely find fewer restrictions in smaller markets as there is a high demand for affordable homes in the entire country. Secondary markets are the best for build-to-rent investment properties. Land acquisition is also cheaper in secondary markets and authorities will fast-track your architectural designs and entitlement as they want more affordable housing for their growing communities.


Business plan and exit criteria on Built-To- Rent property investments

Investors can invest in build-to-rent properties and decide to either sell them to individual retail buyers or rent the entire property and then sell the entire sub-division to one single buyer. For investors looking to maximize profits, selling them as individual houses is the best strategy. However, for those investors interested in faster property turnover and speed, selling the entire subdivision to a single buyer or as a group of homes is the best thing to do so that they can move to the next project.


How lending works for Built-To-Rent Properties

Lending for build-to-rent properties is slightly different from multi-family value add properties. In the build-to-rent space, you don’t have a fixed rate. Most lenders issue construction loans at different rates depending on the stage of the construction project. Each financing facility is issued to investors on its unique terms and the rate may fluctuate, therefore, making it a moving target.

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