Top 5 Build-to-Rent Markets for Cash Flow & Appreciation in 2023

Investing in real estate isn't something that involves using just one strategy. The best strategy for you depends on the type of investor you are and the current market dynamics. In 2023, build to rent (BTR) is quickly becoming the most effective investment strategy for beginners and experienced investors alike.

BTR gives investors the opportunity to purchase new-construction properties below market value in growing locations. There are many advantages associated with using BTR to grow your investment portfolio, which include hardly any maintenance, builder warranties, substantial appreciation in growing markets, the ability to attract high-quality tenants, and more financing options.  We’ve started using a unique portfolio lender that finances new construction rentals with as little as 5% down, with no PMI (private mortgage insurance) costs. It is creative financing options like this that has allowed us to expand our portfolio quickly in the BTR space, obtaining more properties with less capital down.

Now that the market is slowing down, many builders have a surplus of builds they began last year in anticipation the market would continue without slowing down.  At the same time, rising interest rates has slowed down institutional buying in the BTR space nationwide. This unique combination of factors allows the individual investor the timely opportunity to purchase new-construction rentals below market value in some of the best markets throughout the U.S. If you know the right markets to look in, you'll have access to inventory that wasn't available a year ago, when it was a red-hot seller's market.

Many of these new-construction properties are available with immediate equity and appreciate quickly if you are in the correct market. This allows you to be able to access equity quicker than you otherwise would during different market conditions, or when you’re not investing in the ideal market.

The best BTR markets are ones that are popular among new residents searching for a place to live. If you own or invest in a property that has low vacancies, it's easier to maintain a consistent cash flow. When the property is in a hot market, it will steadily appreciate while you hold on to it.

Before you invest in build-to-rent properties, you should know more about the top markets that will help you benefit from cash flow and appreciation. Here is an in-depth look at five markets to consider.

National Data for Comparison

• Population growth over past five years: 2.36% increase
• Average home appreciation over past five years:  31.65% increase
• Median home price (as of April 2023):  $436,800
• Average rent for single-family home (as of March 2023): - $2,330 per month
• Median household income(as of 2021):  $70,784 per year
• Unemployment rate (as of June 2023):- 3.6%
• Average inventory supply (as of June 2023):- Around 614,000
• Price per square foot (as of June 2023):  $225

1. Lehigh Acres, Florida

Lehigh Acres is a premier market in Florida that's known for its picturesque lakes and sprawling golf courses. It also has proximity to numerous sandy beaches along the Gulf of Mexico.

The median price for single-family homes in Lehigh Acres is $369,000, which is well below the national average of nearly $437,000. Over the past five years, home values have increased by more than 106%, which is well above the national average. These numbers indicate that property investments in this area should pay off quickly.

There are currently more than 4,000 homes for sale in Lehigh Acres.. Since properties continue to appreciate in value, this location is a great spot for making BTR investments. Keep in mind that the unemployment rate in this area is just 3.1%. When you want to build residential real estate in Lehigh Acres, the average price per square foot is around $214 as of April 2023, which is just below the national average. 

2. Huntsville, Alabama

Huntsville is a large city in the Appalachian area of northern Alabama. Itspopulation is currently just under 221,000, which makes it the most populous city in the state. Over the past five years, the population has grown by around 6.25%, which is substantially larger growth in comparison to national population growth rates.

The increase in people choosing to move to Huntsville is driven by the affordable home prices and strong economy. Companies like Target, Boeing, and Northrop Grumman call the city home, which keeps unemployment rates low and makes the city more appealing to young professionals searching for a job and a place to settle down. As of May 2023, the unemployment rate in Huntsville is 1.6%, which is tied for the lowest rate in the country.

When looking specifically at housing, the median home price is right around $420,000, which is slightly below the national average. Over the past five years, home values have risen by nearly 42%. Keep in mind that the national average is just 31%.

The median listing price per square foot is $171, which means that building a home in this city shouldn't be too expensive. There are around 1,200 homes for sale in the area. The inventory buyers have access to is at its lowest in more than a year, which is part of the reason why home values have been increasing. 

3. San Antonio, Texas

San Antonio is a highly popular city that's home to the University of Texas at San Antonio and many exciting attractions that residents and tourists alike love to visit. The popularity of San Antonio is relatively recent, which is why property investors are able to make high returns when it comes to appreciation. 

The city has a population of right around 1.48 million. Over the past five years, population growth has been 5.64%, which far exceeds the national population growth of 2.36%. When you're investing in BTR properties, choosing a location with high population growth is highly recommended.

The median listing price for a single-family home in San Antonio is around $315,000, which is much more affordable than the home values found in most other big cities. Despite this affordability, homes were priced at an average of $225,000 in July 2018, which means that prices have increased by 40% over the past five years. This is another number that's better than the national rate.

There are currently around 10,000 homes on the market in San Antonio, which is the lowest inventory has been since February 2022. As for the unemployment rate, as of May 2023, it's just 3.8%. There are numerous companies withheadquarters in San Antonio, including AT&T, Rackspace Technology, and USAA.

 If you want to build a home in San Antonio, the cost of doing so is around $177 per square foot as of April 2023, which isn't that expensive in comparison to other cities across the U.S. 

4. Rockport, Indiana

Rockport is a quaint city that's home to just under 2,000 people. Despite the small size, Rockport is a great destination for investors because of its affordable home values and proximity to larger cities like Evansville and Louisville. Many people who work in Evansville are choosing to live in smaller cities like Rockport.

In April 2023, the price of a home in Rockport was around $319,000, which makes for a 167% increase in comparison to the median home values in April 2018. Home values are still well below national rates, which shows that there's room to grow.

There are only 31 homes on sale at the moment. As long as supply continues to outstrip demand, home values should increase at a steady rate. You can build a home in Rockport for just $83 per square foot, as of April 2023, which makes it easy to build properties and rent them out for a high return.

The unemployment rate for this area is around 2.6%, which means that people who come to Rockport are generally able to find jobs and will want to search for homes or apartments to rent. 

5. Columbia, South Carolina

As the capital city of South Carolina, Columbia has long been a favorite among real estate investors. The people who live there have easy access to exciting destinations like the Columbia Museum of Art and the Riverbanks Zoo & Garden. This place is also home to the University of South Carolina, which is one reason why this is a good place to invest.

Columbia has a population of right around 138,000. Since 2018, the city's population has grown by 2.07%, which is similar to the U.S. average. Even though Columbia is considered to be a large city, homes in the area cost a median of$265,000 and have a median price per square foot of around $145, which shows that you can build real estate at a relatively affordable cost.

When looking specifically at rent, the average price for a one-bedroom apartment or home was just under $850 in July 2021. Two years later, the average rent is $1,132, which indicates that investors who own rental properties are building high cash flows on the properties they invest in.

Home values have appreciated by around 70% over the past five years. One reason why home values have increased recently is because inventory has dropped off considerably. In December 2022, there were more than 5,800 homes on the market. Between 2018 and the end of 2022, inventory had never dipped below 5,500 homes in a single month. As of April 2023, there are only 1,954 homes on the market, which gives investors a unique opportunity to help meet demand with a BTR approach.

The unemployment rate in Columbia was 2.50% as of May 2023. It's often well below the national average. Companies like Amazon, Walmart, and Blue Cross Blue Shield have headquarters in this city, which is a major reason why the unemployment rate is so low and home values continue to rise. More job opportunities mean more demand for housing.

Conclusion

BTR is a great investment option in 2023. You can use it to maximize cash flow, appreciation, and equity, especially in these five markets. Adding the right investments to your portfolio can set you up perfectly for long-term success. 

Make better use of the BTR strategy with appealing financing options that allow you to put less money down compared to traditional loans that stretches your capital further and creates a higher ROI.  Investing in the right BTR market will give you the opportunity to BRRRR new construction within just a few years of property ownership and ultimately scale quicker and achieve the infinite returns we are all chasing in real estate investing.