Move over, apartments. Build-to-rents are the future of multifamily, according to Bruce McNeilage, the CEO of Kinloch Partners. They provide all of the amenities of a single-family home with the flexibility of renting. The concept of build-to-rents is nothing new, but McNeilage says that builders can push these high-return projects even further than the lone scattered build-to-rent here and there: He envisions entire communities made up of them that will attract swaths of Millennials. And for landlords, build-to-rents provide a unique opportunity due to their rent-to-buy potential. Unlike an apartment building, if a landlord wants to move on from a property, they can more easily walk away.
Real estate investors are always looking for the next big thing. In the near future, I predict that that could be full neighborhoods with nothing but build-to-rent single-family homes, as investors like me are finding yields that are 100 to 200 basis points higher than traditional single-family homes or multifamily rental properties.
Build-to-rent single-family home neighborhoods, often with more than 100 homes, are built from the ground up, feature many of the same amenities as new, high-end apartment complexes and are built specifically to be occupied by renter. Typically, when people think of single-family rentals, they picture a portfolio of houses sprinkled throughout multiple neighborhoods, where some families rent and some own. When they think of multifamily rental communities, it's usually in the context of a large apartment building.
As an active real estate investor since 2005, I've had success in both traditional single-family homes and traditional apartment buildings. I started with a $9,800 investment in a single-family home in Nashville, and eventually bought and sold more than 300 single-family homes throughout the Southeast. I've also bought and sold seven apartment complexes, the largest being 162 units.