Build for rent is defying the odds, growing and evolving at an incredible pace. Since the 1980s, 10,000 build for rent homes have been produced and in the mid-2000s, production peaked at 45,000 units in just 12 months. Do you know who the big players in this segment are? Keep reading below.
Despite housing shortages driving up home prices, built-for-rent housing continues
to grow and evolve. Matt and Sam Blank always wanted to go into business together, and the housing bust in 2008 provided a once-in-a-generation opportunity for the two brothers to do so. They quit their jobs in New York and moved to Phoenix, Arizona. The plan was to buy houses out of foreclosure at bargain prices with their own money.
The only problem: private equity firms like Blackstone with bottomless access to capital had the same idea. “In about a period of two weeks they put us out of business,” Matt said. To salvage their business—and their pride—the brothers shifted gears. Instead of buying houses and renting them, they decided to build houses and rent them. And not just one house here and there, but whole communities of more than 100 single-family homes where every unit is a rental.
The Blank brothers’ company, BB Living, is one of a handful of home builders creating entire single-family rental neighborhoods—complete with all the amenities of a large apartment complex—to take advantage of growing demand from renters who want a single-family house without the responsibilities or risks of homeownership.
“We’re like a country club or apartment environment, where you have a community that has a social component to it as the centerpiece,” said Mark Wolf of AHV Communities, which has produced four built-for-rent communities in Texas. “The dog park, the fitness center, the pools, the clubhouse with the maintenance and management team daily.
That’s the difference.” Built-for-rent single-family houses are nothing new. Since the early 1980s, there have been at least 10,000 built-for-rent houses produced over any given 12-month rolling period, according to data from John Burns Real Estate Consulting. In the mid-2000s, built-for-rent production peaked at 45,000 units over a 12-month rolling period. Since the housing bust, built-for-rent production has steadily risen.
What’s different today is that entire communities of single-family homes are being built with the intent of renting them. They come with anywhere between 100 and 250 units, with three or four different floorplans available. The amenities vary by community and builder, but some including AHV Communities load up their communities with everything expected from an apartment complex.
After the fiscal crisis, the government-sponsored mortgage facilitators Fannie Mae, Freddie Mac, and Ginnie Mae implemented strict new standards for mortgage lending that made it much harder to get a mortgage, particularly if the prospective homeowner had poor credit or excessive amounts of debt.
This led many in the real estate industry to predict that single-family rental units would become common among Generation Xers who had good incomes but poor credit because of the financial collapse. NexMetro president Josh Hartmann was among them. His company produced a built-for-rent community in Tucson, Arizona, to test the waters, and the results surprised the fledgling company. “What we realized is we were getting a totally different demographic than [we expected],” Hartmann said. “We were getting millennials with high income and good credit scores, a younger demographic. It wasn’t that they couldn’t buy a home. It’s that they didn’t want to buy a home.”