SINGLE-FAMILY RENTAL INVESTORS TURN TO BUILT-FOR-RENT

Fierce competition for existing homes throughout the single-family rental housing market has pushed a growing number of investors to shift gears and focus on built-to-rent strategies. These include New York-based GTIS Partners, which has sold nearly half of its portfolio and re-invested in newly-built rental homes over the past 24 months, and the REIT American Homes 4 Rent.
National Real Estate Investor’s Beth Mattson-Teig notes that this strategy tends to work best in markets where building and land costs are lower, including AtlantaCharlotte, N.C., Phoenix, and parts of Texas.
Initially, investors found an entry point into new developments by buying up 20 to 30 homes scattered within a new subdivision. Oftentimes, developers were willing to sell at a discount—of 6 to 7 percent—because selling directly to investors eliminated their marketing costs. Homebuilders could also use those sales to kickstart a project and secure financing, or quickly close out a project that was fully developed. “So, it is profitable for the builder, as well as for us,” [says Rob Vahradian, senior managing director and head of U.S. investments at GTIS Partners.]
The next leg of evolution in the SFR market is building an entire community of rentals with 150 to 250 homes concentrated in one location with shared amenities and on-site management similar to that of apartments.

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