The build-to-rent (BTR) home model has been on an upward trajectory for the past few years and it has proven to be one of the fastest-growing sectors in the U.S housing market. The build-to-rent concept remained resilient during the Covid-19 period and it’s destined for huge growth in 2022 and beyond. But what is causing the demand for Build to Rent (BTR) homes to rise?
Let’s find out!
What is Build-to-Rent (BTR) model?
The Build-to-Rent is a new emerging market that is gaining popularity, especially in the private rented sector by delivering professionally managed new homes that are built with a specific purpose of renting them to tenants.
All the Build-to-Rent (BTR) real estate developments project feature community-focused designs, high-quality modern amenities, and higher long-term rental returns. They are specifically designed to appeal to all real estate players including investors, property developers, and intended tenants.
Reasons why the demand for Build-to-Rent has been growing
- Decline in homeownership
The demand for Build-to-Rent (BTR) homes from renters and investors have continued to increase while the market supply is still low. According to the 2021 U.S Census Bureau reports on housing, the number of homeownership has continued to decline, causing an increase in demand for quality rental properties. As a result, rental vacancy rates have gone down while median rent has increased.
- Change of demographic
Another factor that has contributed to the high demand for build-to-rent homes is the eminent change in demographic in our society. There is a high population of Generation Z and Millennials who have a high appetite for renting homes. As they grow older, these tenants will start to plan how they will move to other suburbs or to affordable secondary markets homes where they can own a home of their own and start a family.
Unfortunately, for most of them, their homeownership dream is never realized as they are faced with high student loans together with the prevailing high home prices. Therefore, instead of owning a home, they are forced to continue renting either single-family or multi-family properties instead of homeownership thus, creating the demand for rental properties.
- Ease of financing
Access to affordable financing for developers who are interested in building single-family rental properties in different markets across the US has increased significantly. Both big and small real estate investors are given an equal chance when seeking government-backed financing for build-to-rent housing projects.
Therefore, access to an affordable source of financing is helping push the supply of build-to-rent single-family rental properties into the market where the demand is very high. Investors in build-to-rent properties are also enjoying a higher return on investment (ROI) compared to other real estate property types like apartments and condominiums as the demand for single-family rental properties is very high.
- There are multiple exit strategies
Unlike other real estate investment asset classes like a commercial investment which has fewer exit strategies, the build-to-rent niche has several favorable exit strategies that investors can choose if they fail to achieve their initial investment goals. Real estate investors who invest in single-family build-to-rent homes have a myriad of exit strategies when they finally decide to sell.
They can decide to sell the rental property to other real estate investors who want to expand their portfolio, sell it to the current tenant, or sell it to a real estate investment company that specializes in single-family rental properties.
The build-to-rent (BTR) model will continue to attract more builders, developers, investors, and tenants as the race to meet the increasing house demand will create more opportunities and increase the choice for affordable living.