Do you want a low-maintenance rental property that commands higher rents and gives you more cash flow? A build-to-rent investment could be your answer. Keep reading to learn more about these new construction homes, why they’re so popular in 2024, the pros and cons of buying one, and how they compare to other rentals!
Summary:
Build-to-rent investments combine the best parts of single-family rentals and new-construction homes. These investment properties are new construction homes, which are built with the specific purpose of becoming rental properties. Build-to-rent investors enjoy the cost savings and low maintenance of a new home with usually top-of-the-market rent for their area.
The combination of high interest rates and soaring home prices has made homeownership unattainable for many Americans. Although monthly rent is more affordable than a mortgage payment in many areas of the US, many renters want to experience the typical suburban lifestyle while they are unable to buy a home. Build-to-rent, single-family homes fill this need, and demand has risen by 102% since 2019.
After your home is built, it could appraise for more than what you paid for it. This difference in value means instant equity for you, the investor!
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Renting is cheaper than homeownership in many areas of the US, but many renters want to live in a nicer and more private space than that of a typical apartment building. So, they rent a build-to-rent home instead!
Source: https://www.fixr.com/articles/build-to-rent-homes
Millennials now make up the majority of the US workforce. As many struggle with the high costs of homeownership in 2024, they are driving the demand for build-to-rent single-family homes.
Source: https://www.fixr.com/articles/build-to-rent-homes
Today, renters want access to certain amenities that most privately owned, single-family homes don’t have. Build-to-rent communities blend the best of renting and homeownership, giving tenants detached living spaces with shared amenities like pools, gyms, clubhouses, etc.
A build-to-rent community works much like the average neighborhood or homeowners’ association, with the exception that these homes are often owned and managed (and even sold) as a single property. Although each home is detached, renters share amenities, such as pools, gyms, and other recreational spaces. What’s more, community managers often provide opportunities for renters to socialize through hosted events and networking opportunities.
Build-to-rent presents an enormous opportunity for investors in 2024, but like any investing strategy, it’s not for everyone. If you're asking yourself, "Is buying a new build a good investment?" the pros and cons below should help you make your decision.
These build-to-rent advantages create significant cost savings for investors, allowing them to keep more of their cash flow:
Renters want modern floor plans, new appliances, and clean living spaces—an advantage new builds have over existing homes. This makes it easier to not only find tenants but also command higher rents!
These new construction homes have brand-new systems and appliances, which means that you’ll pay less for maintenance and repairs. This will allow you to pay less out of pocket over the first few years and hang on to more of your cash flow.
Many build-to-rent investors benefit from a significant increase in home value between the time they go under contract and the time their homes are appraised.
Older homes tend to bear the brunt of a big insurance spike. Because new homes are built to modern-day code, they aren’t as affected. What’s more, many companies offer certain programs and discounts for new builds!
Builders may be motivated to “buy down” your interest rate to get inventory off their books. This could give you an even lower mortgage payment!
Rent to Retirement has financing options that allow investors to buy new build-to-rent investments for as low as 0% down!
There are many reasons to invest in built-to-rent homes, but don’t overlook the potential drawbacks:
In the past, new construction homes have been more expensive than older homes in the same area. However, this trend has flipped in recent years, and new homes are now cheaper than many existing homes!
If you’re working with a builder, you’ll have to wait to reap the fruits of built-to-rent investing. Don’t want to deal with long project timelines or delays? Rent to Retirement has newly built turnkey rentals that you can rent out for a profit today!
Before you buy a property, you need to make sure it will deliver a solid return. How do build-to-rent investments compare to the average rental property?
Let’s look at two properties in the same market to demonstrate the potential difference in cash flow.
First, let’s break down the numbers for this turnkey, single-family rental:
After debt service and expenses, this property will cash flow $352.50 per month!
Now, let’s check out the numbers on this existing property:
After debt service and expenses, this property will have a negative cash flow of -$406/month.
In this instance, buying a turnkey, build-to-rent home instead of an existing property could produce a $700 swing in monthly cash flow!
Browse cash-flowing turnkey real estate!
Looking to buy a new build as your next investment? Here are three ways to get your hands on a built-to-rent property:
Buying a newly built home directly from a seller is the fastest path to getting your property rented out. When you buy from a turnkey real estate company like Rent to Retirement, there are no long waits, the tenants are already in place, and you have a trusted property manager on board!
Schedule a consultation with our team!
If you plan to build a new construction home and rent it out, you’ll need to work with a builder to bring your vision to life. Keep in mind that this process could involve a lengthy wait time, and the upfront costs may be significant.
A syndication allows you to passively invest in a portfolio of build-to-rent homes. As the properties perform, you’ll receive your share of the profit. You’ll need to be a high-income earner (and an accredited investor), and you won’t control the properties, but you also won’t have to deal with the ins and outs of management!
With less maintenance, fewer repairs, easier cash flow, and the potential for instant equity on day one, it’s easy to see why build-to-rent homes are on the rise. Not to mention, they’re even cheaper than the existing homes in many markets.
Ready to start shopping for a new build? Rent to Retirement has turnkey, build-to-rent homes available in markets across the nation!
Building a rental could be a great investment if you don’t mind a long wait time. If you’d rather buy a property that you can rent out today, consider a newly built home or turnkey rental instead!
The biggest drawbacks of build-to-rent homes are the long wait times for new builds and potentially higher home costs. This isn’t always the case, however, as many built-to-rent homes are cheaper than existing homes in 2024.
Yes, new construction homes typically have lower maintenance and repair costs during the first few years of ownership. Unlike existing homes with many years of wear and tear, build-to-rent homes are equipped with new systems and appliances that require very little upkeep.