Build-to-Rent Projects are Gaining Popularity

Build-to-rent (BTR) has been a growing trend in real estate for the last several years. As the name suggests, a BTR home is one built for the purpose of renting rather than selling. Detached single-family homes, a neighborhood of row houses, horizontal apartments and duplexes can all be designed, built and managed as BTR communities. 

Compared to last year, the inventory of new BTR homes is expected to double in 2022. Demand is up and the marketplace is reacting to create the desired supply. Given current economic conditions, it is not hard to explain the palpable shift from homeownership to this alternative form of housing. Home prices are at all-time highs and consumers are simultaneously navigating record inflation and rising interest rates.

But aside from today’s challenges, fundamental shifts in consumer behavior and preference help explain why resident demand for this fast-growing class of real estate has true staying power.

Workers are Migrating

Something for Everyone

BTR offers distinct advantages for those at varying ages and stages of life. For the young renter who has outgrown a studio or one-bedroom apartment but is not quite ready to own, choosing to live in a BTR community can help provide the perfect home-like transition.

On the flipside, empty nesters looking to rent can downsize while still maintaining the feel of a single-family home. Amenities like an attached garage, private outdoor space and a real street address are all important selling points for various types of renters. Plus, accommodations are ideal for both long-term renters or those looking for a shorter stay.

Carefree Living

Cutting the grass and shoveling snow are things of the past in a BTR home. These professionally managed communities offer residents freedom from the burdens of property maintenance. Ongoing upkeep to a property’s exterior along with on-call service support to help with inside and outside repairs is an appealing perk for many residents—not to mention eliminating costly out-of-pocket expenses to replace things like roofs and HVAC systems. 

In addition to property maintenance assistance, a BTR neighborhood often takes on the look and feel of a traditional single-story neighborhood. Picturesque, walkable settings with manicured green space accented by lush landscaping are enjoyed by residents along with their pets. Planned social events such as concerts, game nights and food truck visits help nurture relationships between neighbors and further establish a sense of community.

In short, developers and builders are adapting to market demand for the BTR segment, establishing key renter personas and addressing the goals of these renters with communities, neighborhoods, homes and apartments that meet their specific needs.

What this Means for Investors

As an asset class, BTR has been able to prove its worth throughout the past several years. Because BTR projects have been successfully operating over a longer time frame, there is more reliable data for investors to act upon when choosing the right BTR investment. The current housing shortage is causing the demand for rental housing to continue its increase. In an article from The Counselors of Real Estate, it was stated that “the aggregate housing shortage is now over 2 million units.”

With this high demand for rental housing, rental rates have risen consistently—CNBC reported that, “…the rents for single family are growing fast at 4.5% annually now compared with 3% rent growth for multifamily apartments, according to John Burns Real Estate Consulting. There is also much less turnover in single-family rentals, and the rental market is much less volatile than the home sales market.”

How Redwood Fits into the Equation

Redwood’s signature building and property management strategy has always fallen into the category of BTR, even before the term came into popularity. For 30 years, we have been continuously delivering results from our proven formula, no matter where our neighborhood projects are located.

Over the past 30 years, Redwood’s multifaceted development arm successfully completed over 122 development projects across seven states. This included overseeing the development, construction, debt placement, and leasing of the units up to stabilization with a 97% physical occupancy rate across the portfolio as of April, 2022. As of December 2021, Redwood has successfully secured permanent financing on behalf of the owners of over 100 Redwood apartment neighborhoods upon stabilization of each property.

Investing with Redwood is a unique opportunity that allows accredited investors the chance to connect with Redwood and our team to build upon a 30+ year history of successful expansion and the goal of reinventing the apartment home.

We are proud to offer the same level of customer service we offer our residents to the investors we partner with for each apartment neighborhood. Contact the Redwood Investor Relations team by calling 216.360.9441 or filling out a contact form to find out more about Redwood’s upcoming deals.