While so much of the real estate market may seem to be uncertain, one thing is shockingly clear: the build-to-rent revolution has begun. You know the drill. These are master-planned communities designed for renters from the ground-up.They’re another type of single-family rental, designed to meet housing demands in an increasingly expensive real estate market.
Today we're sharing key statistics investors should consider about both single-family rentals and build-to-rent.
With big capital behind the BTR industry and the expectation of massive growth in BTR units and communities, investors would do well to follow the money. One of the big reasons to feel confident in this model is that, while new, it is built on the time-tested SFR formula…with a twist. With so much attention, money, and energy behind this emerging model, expect big moves in the real estate world as we know it.
This is higher than the median household income of SFR households, which comes in at $50,000. Although this varies between markets (as costs of living can vary widely), a higher median income suggests better, more stable employment and reliable income. For property owners, this leads towards reliable rent payments and reduced turnover.
The pandemic greatly increased demand for single-family rentals, both the traditional sort and the BTR variety. There are three primary reasons renters favor SFRs and BTRs over apartment living: increased space, greater privacy, and a family-friendly environment. Between that, rising real estate costs, and a national employment market, households are more likely than ever to prefer the renter lifestyle.
One of BTR’s big benefits is that they’re master-planned. That means that builders ensure consistency in layout, quality, construction materials and, yes…energy-efficiency. Owners can expect a more even standard in terms of ongoing expenses and maintenance needs on top of being able to prioritize and offer features that renter households will pay a premium for.
Unsurprisingly, single-family rentals are most concentrated in the suburbs
One of the distinct issues facing the BTR movement is that of land acquisition. More suburban areas in secondary and tertiary markets will have more available land for development.
For example, you could easily find a place to build in the sprawl of Houston, TX, but the dense Los Angeles market would have you struggling to find a plot of land to call your own. With that said, you will find BTRs in both urban and suburban spaces. SFRs just tend to trend suburban as they appeal to families that want to put down roots in a safe area with plenty of nearby amenities.
That might not seem like a big number compared to the number of units needed in the next decade, but the number of BTRs under construction has more than doubled over the past year. In 2021, we saw the construction of just over 6,700 BTR units. In 2020, it was just below 5,000. The momentum in the BTR movement is growing for sure!
According to a RentCafe survey, 78% of 3,300 renters said they’d like to live in some form of a BTR community. This isn’t all that surprising considering RentCafe also reported a tripling in searches for “homes for rent” between 2020 and 2021. This only emphasizes the rising interest in single-family rentals to better meet lifestyle preferences and priorities where apartments fall short and homebuying grows increasingly inaccessible.
Overall, SFRs have a better occupancy rate than apartments by 2%. Not only does this demonstrate an edge over demand, but we also know that SFRs/BTRs experience lower turnover rates – they attract more families and established households that are willing to renew for years. For owners, this saves considerably in time and money put into dealing with vacancies and the many tasks that come with it.
Check out our recommended reading for the week:
- Why Millennials Are Leaning Heavily Toward New Builds (Builder)
- What millennials want is on every BTR investor's mind.
- Why should you care? The tagline says it all: "Not only do they want to buy new houses, they are likely to recommend the process to their friends."
- 16 Million Homes Are Lying Empty And These States Are The Vacancy Hot Spots (Forbes)
- The housing shortage IS real, but you'll feel it more or less depending on which market you're in.
- Why should you care? Every investor is paying attention to supply. Be one of them.
- Talking Headways Podcast: Real Talk on Development and Climate Action (StreetsBlog USA)
- It's called transit-oriented development, and it's a biggie.
- Why should you care? BTR wants to be on the ride side on this one.