A Guide To Build-To-Rent Homes

The rental market is massive in today’s age. When people aren’t buying properties, they are renting them. And many more people seem to be renting at the moment than buying. Therefore, this market needs many options, one of which is build-to-rent homes.

These special long-term rental properties offer residents a wide range of amenities and features. Whether you’re looking to stay in one or invest in one, you can find out all about them in this guide:

What is a build-to-rent home?

A build-to-rent (BTR) home is a type of model in the real estate industry where an investor will purchase a detached property built specifically to lease out as a long-term rental. You will often find that a large corporation or company will purchase a build-to-rent home rather than just one person, however it isn’t always the case. 

Developers will find a neighbor and build many of these properties in the same area. They don’t always have to be your typical home, and they can vary from a small apartment to a multi-family structure. They also offer more services and a higher level of luxury that people won’t get out of a standard long-term rental. They are better maintained, managed and have better aesthetic features. 

Examples of build-to-rent homes

As we’ve mentioned, there isn’t just one type of build-to-rent property. They can come in various shapes, sizes, designs, and prices. Here are the most common build-to-rent homes you’ll find on the market:

• Single-family homes: These are free-standing residential units designed for a single family to live in. There are no shared walls, and you will have your own land when living in one of these properties.
• Duplexes: A duplex is a multi-family home where two units share the same building. The floor plan can vary based on how the property was built, but there will always be two units sharing a wall with each other.
• Row homes: These homes are similar in shape and size to a single-family unit, however they are all built next to each other, and you will share a wall with another row home. These are most commonly found in urban areas.
• Small lot homes: This is the same as a single-family home in the way that you don’t have any shared walls. However, they are built on a much smaller scale, and most will only reach around 600-700 square feet in diameter.

The rise in popularity of build-to-rent homes

Build-to-rent homes started to rise in popularity not long after the 2007 housing market crash. Since many properties went into foreclosure, it allowed investors to purchase them and turn them into buy-to-rent homes. These purchased properties were either knocked down and rebuilt or completely renovated to provide the market with more long-term rentals. 

This idea continues attracting investors, and more build-to-rent homes are popping up yearly. But why are they still so popular? Here are a few reasons:

Residents get more out of their rent

Build-to-rent homes aren’t like your typical long-term rental. Landlords provide their residents with much more than you would from other typical rental properties. For example, other landlords may ask their residents to pay for any maintenance and repair costs, which means they actually end up spending more each month. 

You don’t have to worry about these costs when you pay rent for a build-to-rent property. The landlord is offering you a more luxurious and seamless living experience, so all those additional costs, including taxes and insurance, are included in the rent. That means you get much more value and know how much you’ll spend on your monthly rent. 

Better living spaces

If you decide to purchase a home, you must figure out what amenities you’ll have and purchase them yourself. You also have to take care of any maintenance and repairs, which can make things much more stressful.

However, in a build-to-rent home, you are offered so many amenities that are already there, and you don’t have to worry about maintaining them. You’ll be met with a nicely-mowed lawn regularly, well-painted walls, and things like electricity and WiFi. Many fantastic amenities make living in the property more enjoyable.

Tight-knit community

While you can live in close quarters with a community by staying in an apartment complex, these don’t always give you the free space and privacy you need. Since build-to-rent homes are typically larger with more of your own space, you can live freely but still have access to a tight-knit community who have the same living standards and is managed by the same company or landlord as you. 
 

Drawbacks of build-to-rent homes

While there are many fantastic reasons why you should invest in or live in a build-to-rent home, nothing is perfect. It does come with a few drawbacks that you may want to consider before you sign a contract and move into one:

You cannot personalize the property

The great thing about owning a property is that you can refurbish it and renovate it to make it your own. However, when you live in a build-to-rent home, there is a restriction for making significant changes. 

For example, if you don’t like the pattern or color of the wallpaper, you might have to just deal with it. There is a chance you can ask the landlord to paint the walls, but the chances are there are multiple investors, and they may not be okay with it. So, if you are going to move into a build-to-rent home, make sure you are happy with everything about it first.

Higher rental costs

While we mentioned that you would get more out of your rent because you don’t have to pay for additional maintenance fees and taxes, this, unfortunately, means that you will have more expensive monthly rent. There are also many luxury facilities and amenities that you have to factor into the cost.

This may not be such an issue for people who have the funds and are willing to spend a little extra, but it isn’t always a viable option for those who are on a budget. 

Limited choices

So, although we mentioned there are different types of build-to-rent homes, such as single-family units and duplexes, your choices regarding style are fairly limited. Most of these properties are built with a modern design and interior, so if you are looking for something with a more traditional charm, you won’t find much on offer. 

We have also mentioned how it is hard to remodel or redesign any home elements, so you are stuck with how it is built. Therefore, it is perfect for people who like a modern aesthetic but not so great for those who want a more historical touch. 

Why you should invest in a build-to-rent home

We’ve spoken about the pros and cons of living in a build-to-rent home, but what if you want to become an investor? There are many great reasons why you should do so, and here are some of them:

Extra passive income

Most of the time, you don’t have to worry about taking on the duties of a landlord for a build-to-rent property when you’re an investor. Therefore, you simply put your money into the home and receive passive income if it is successful. You can focus on a regular 9-5 job or other projects without stressing about managing the property.

Higher tenant retention
 

When you manage a short-term property, you must put a lot more work into it due to the high tenant turnover. You must constantly clean, maintain, and contact the people staying on the property. However, build-to-rent homes are designed for long-term stays, which means you can feel more secure about your income without worrying about constant bookings and cleaning.

Safe investment

Getting into investments is a risky game, and you never know if your investment will end up worth it. However, the build-to-rent market is incredibly strong and is trusted among many communities. It can still seem like a bit of a gamble, but you will experience much less risk, and it is a safer investment than many others.

Can you invest in a build-to-rent property without building one?

Yes, you can invest in build-to-rent homes without actually having to build one yourself. Since large companies mostly purchase them, they will do the actual building. Instead, you can buy stock in a residential real estate investment trust (REIT). These corporations are what acquire and develop the properties and rent them out. Therefore, you may want to find a trustworthy company and see how to get the most out of investing in them.

Final thoughts

There are many factors to consider when considering build-to-rent properties and whether you should live or invest in one. Luckily, software like Hospiria makes things a whole lot easier. This property rental software can help investors and residents, ensuring everything is maintained and managed. You can find out more by talking to an expert or requesting a free trial today.