Are Build-to-Rents the Industry’s Next Rising Star?

January 17, 2020
Build to rents
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The “build-to-rent” segment is a small share of the housing industry, but it’s turning into quite the cash cow. These builds have the features of a single-family home—kitchen islands, top-notch appliances, hardwood floors—but are run by property managers as rental units. And they pay big compared to the typical rental option of apartment buildings. Tenants tend stay longer in them and pay a higher premium to live in the comfort of a family home without committing to a mortgage. Builders are taking notice of these high returns: One company focusing on build-to-rents has transacted $1 billion worth of single-family rental homes, and the building giant Toll Brothers joined forces with a financial partner to form a $400 million joint venture establishing a build-to-rent developer called BB Living. And as the decade continues, experts expect the sector to continue its march forward as the breakout star of the rental market. 

Sometimes a small niche is growing so rapidly and becoming so important that it cannot be ignored. Whether you choose to abbreviate it BFR, B2R, or choose from a host of other iterations, the “build-to-rent” niche comprises only 5% of homes built, but it is growing rapidly and highlighting some important emerging trends in housing demand. 

Simply put, instead of opting for a standard apartment unit, some renters incline toward more of a single-family residential experience with the benefit of a professionally-managed and amenitized community. One fast-growing developer in this niche, NexMetro, markets their Avilla brand as “Rents like an Apartment. Lives like a home.”

These rental single-family communities typically offer one-, two- and, three-bedroom (and sometimes four-bedroom) attached or detached homes with upscale finishes, high ceilings, and private yards for each unit, a step above what renters can get in an apartment building. Unit appointments and finishes are often higher than in typical apartments, including stainless-steel appliances, quartz countertops, in-unit washers and dryers, and hardwood-style flooring throughout the home.

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