Multifamily has been the main segment of the rental market for quite some time, but in recent years, the single-family build-to-rent (B2R) segment has been seeing increasing levels of success. Citing real estate data platform Yardi Matrix’s VP Jeff Adler, Multi-Housing News reports the single-family segment of the rental market is really beginning to take off, while multifamily construction is cooling down. In fact, about 12% of all new single-family construction has been for B2R homes. Additionally, rents in the B2R sector are up. As of September 2023, B2R rents were up by 14.1%, while multifamily rents were up by 10% year-over-year.
However, not all build-to-rent communities are successful, and there are certain measures builders can take to improve their chances of having a profitable B2R community. According to Adler, the most important thing is to build in areas that have the demographics B2R properties typically attract—usually young working adults—and to find the right plot of land to build on.
The key, he stressed, is “further out,” because to make the numbers work, land must be relatively inexpensive.
“It is on the fringes (that) you have to look at land use in the highest and best value…But those areas are growing rapidly, so it doesn’t take a lot to think, well, within five or 10 years, that section will (no longer) be on the fringe…That’s where my head is at…It’s great to see innovation in meeting consumer needs…It’s a very positive development.”
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