Build-to-Rent: An Investor’s New Path

One of the latest trends to hit the real estate investor radar is to build-to-rent. It sounds like a solid plan—indeed, there are many forward-thinking entrepreneurs already riding the wave. 

But what does it actually entail? Do you just look for a plot, engage a building team, and then advertise for a tenant? While this is the process described at its most basic, there are a few more intricacies to understand about the process.

What is Build-to-Rent? And other FAQs…

• Build-to-rent unplugged
• Is build-to-rent an investor’s new path for everyone?

Build-to-rent unplugged

So, let’s define exactly what investing in build-to-rent real estate means.

What is build-to-rent? 

The process differs from a regular rehab or renovation in that the property is built from scratch with the intention of renting it out.

What are the different types of build-to-rent? 

• The simplest kind is a single property suitable for one family and located on its own plot of land. 
• Then you have a duplex, whereby a single building houses two family homes, each with its own entrance. 
• Next up is a townhouse—a single-family home with two (or more) floors and is attached to another property by a side wall. 
• Then there’s a row home, which—as the name suggests—consists of a row of properties, each of which can house a single family. Each is joined to the next by the side wall. 
• Lastly, you have what’s called a small lot home, which is a single-family detached building sitting on a plot of a few hundred square feet, as opposed to a larger area.

What are the advantages of investing in build-to-rent?

There are several, including:

• A new construction usually has far lower maintenance costs—at least for the first few years. Lower running costs equals a higher yield.
• You can usually command a higher rent, thanks to being built for purpose and usually decked out with higher-spec appliances.
• Extra space results in better tenant longevity. Renters typically have more space in such properties/communities than they would in an apartment or condo. This makes the property better future-proofed for growing families and leads to longer rental agreements.

Are there any disadvantages?

Of course, there’s always an associated downside. Regarding build-to-rent investing, these include:

• You’re at the mercy of the housing market. While bricks and mortar are generally a safe investment bet, if there was a market downturn and you needed to sell, then you could be at a disadvantage.
• You’ll be competing against the big players who generally invest, not in one or two build-to-rent communities, but at a huge scale.
• You might have to engage and pay for the services of a property management company, which can eat into your profit margin.
• Such property is less liquid than, say, a fix & flip. While a build-to-rent is likely to bring an ongoing, steady income, rehabbing and then selling on can be an easier cash flow scenario.

Is build-to-rent an investor’s new path for everyone?

There’s a lot to consider before moving into build-to-rent investing. The outlay is generally larger and the ROI lower than fix & flipping or BRRRR. If you’re still keen to go ahead, the following are some of the different ways to start creating a build-to-rent portfolio:

• Using a crowdfunded platform to raise the capital.
• Get your stake money through a bank build-to-rent loan, from a hard money lender, or other private finance provider.
• Invest in a residential real estate investment trust (REIT).
• Invest in a publicly traded property developer.

Build to Rent, BRRRR, Fix & Flip… Get the Best Finance on the Market with BRRRR Loans

What do all types of real estate investing have in common? The number one answer is that they all need to be funded. Whether you’re dipping your toe in the rehabbing game or fancy moving into the build-to-rent market, BRRRR Loans is your go-to financier with probably the best interest rates on the market.

Get more info at https://www.brrrr.com and drop us a line today to see how we can help.