Just like their websites, you typically can’t tell build-to-rent communities from for-sale communities. New single-family rentals feature similar styles, sizes, and, often, amenities. Still, there are some considerations to keep in mind as you weigh what to offer.
Don Walker, managing principal and CFO at John Burns Real Estate Consulting, breaks build-to-rent into four main categories:
• Horizontal apartments or cottage homes on a multifamily parcel: Like for-sale properties, these are most attractive to younger renters with few children. He points to Avilla Grace in Chandler, Ariz., as one example. The three available plans include a one bedroom/one bath; two bedroom/two bath; and three bedroom/two bath, each with Southwest styling and a small private outdoor patio.
• Two-story townhomes or duplexes, typically with garages: Redwood Perrysburg Woodmont Drive in Perrysburg, Ohio, advertises its attached townhome units as two-bedroom, two-bathroom single-story apartments with attached garages.
• Single-family detached: Among Walker’s examples is Vickery Grove in San Antonio, Texas, with four floor plans that include single-level and two-level homes with three to four bedrooms, garages, and private yards.
• Luxury single-family attached or detached: Walker says these are likely rented by young professionals and mature families with income who are looking for size but also convenience. For instance, Cottages Castle Hills in Lewisville, Texas, features three and four bedrooms up to 2,777 square feet.
Styles & Features
Determining the look and amenities of build-to-rent homes requires some of the same legwork as for-sale—paying attention to consumer preferences and demands, as well as emerging trends.
Conducting a market study, such as the services offered by Hunter Housing Economics and John Burns Real Estate, can help you gauge what markets are ripe for single-family build-to-rent, as well as the results you can expect from different types of product offerings.
It starts with understanding what you want to do and what you want to be, Walker says. “First we help with strategy, and then we look at your sites and conduct due diligence to investigate the local demographics using our proprietary demand models to evaluate household growth by age and income. That helps drive product recommendation.”
“It all comes down to understanding our consumers,” says Jacque Petroulakis, executive vice president for NexMetro Communities, which develops luxury build-to-rent communities under the Avilla brand. “We survey consumers on a regular basis. Our changes have evolved in terms of the product, what our homes live and feel like, what’s important to our consumers.
“They’re choosing to rent in their life stage for one reason or another,” Petroulakis continues. “That’s very compelling. They want a place that they’re treating and looking at as a home and not just a rental. It’s important for us to get a sense for their consumer preferences and how their home lives, whether that’s bigger closets, turf in the backyards, or more storage space; we listen to them and try to incorporate as we evolve our home plans.”
When it comes to choosing aesthetics that will be sought-after but not soon dated, Brad Hunter, president and owner of Hunter Housing Economics, advises using the same assumptions as apartment construction and then budget for renovations down the road as properties age in both style and performance.
In addition, it’s important to keep in mind the rental environment when weighing product selections.
“The first thing to worry about is providing a nice-looking home, but at the same time use materials that are resilient so they can withstand the use and minimize the maintenance and turnover costs,” says Walker. “They might be investing in granite countertops, which might cost more up front, but the maintenance will be a lot lower. Same thing with flooring: Instead of carpeting, use laminate flooring that’s beautiful but more resistant to damage.”
Hard-surface flooring also is better for renters who have pets, which are more popular than ever.
Having more space, including a yard, is one of the key drivers of demand for single-family build-to-rent. However, Walker notes, renters don’t want to pay for wasted space, especially since they’re likely going to be there for less time than a buyer. Backyards don’t need to be massive, nor do home offices.
“With for-sale homes, what you’re thinking about is someone going to make the biggest purchase of their life in this spot based on what we’re providing? That’s a big thing to consider, so the details of those projects are different,” says Mitch Rotta, director of new construction for Tricor Contracting. In contrast, “what we’re doing [with build-to-rent] is trying to bridge the gap of a missing segment of housing and product type with something that doesn’t require as much of a commitment. It’s the same style of living without the commitment early on.”
Are Amenities Important?
For-sale projects are often as much about the community amenities as the homes themselves. But does the same hold true with for-rent communities? The answer is that, like a lot of things, it depends; in a lot of cases, they’re not always a must-have.
“The most important amenity in build-to-rent is location,” asserts Dennis Steigerwalt, president of Housing Innovation Alliance.
Location is a chief research strategy for NexMetro, which looks at suburban areas with proximity to freeways, retail, and outdoor living and trails.
Rotta agrees, but not entirely. “More than ever right now, price sensitivity is it,” he says. “I think it’s even stepping over location as price inflation continues to rise and wages can’t keep up.”
There’s a bit of a divide on amenities, Hunter says, noting that larger communities may need them to be comparable to for-sale communities. It will also vary market to market and submarket to submarket, Rotta notes.
According to Walker, some of the decision comes down to price. A full-service build-to-rent model will include a full suite of on-site services and abundant amenities, such as fitness centers, pools, and walking trails. In contrast, a minimal approach does away with most on-site services and community features in exchange for “keeping rents relatively affordable to maximize absorption and occupancy.”
For example, Homestead at Hartness, a gated single-family rental community in Greenville, S.C., includes a saltwater pool, gym, recreation field, fire pits, clubhouse, dog park, community garden, and more. In contrast, Frontera at Pioneer Meadows in Sparks, Nev., limits community amenities to those offered by the municipality, such as bike and walking paths.
NexMetro right-sizes its amenities, focusing on features most needed and most used (such as the ever-increasing demand for dog parks), as well as studying what nearby for-sale and multifamily projects are offering.
Area incomes and demand modeling can help determine what is most necessary in the area in question.
“What you can’t do is take location for granted,” Walker says. “You have to understand your local demographic’s economic situation to make sure the rent is achievable for the product you’re intending to build.”
And space will always be most important. If they’re moving 35 minutes outside the city, they’re going for space and a yard, not a fitness center, Rotta notes. “They need four bedrooms for three kids, not a pool for extra money.
“We need to adjust to what consumers need and what the environment is,” Rotta adds. “Affordability is the issue, and we have to have a way to put that product in play and come together to figure that out rather than looking at it as an us-versus-them scenario.”