New ConstructionRental

Build for Rent: Developing a Winning BTR Strategy for Single Family Rentals

The build-to-rent (BTR) market is growing rapidly, as more and more investors are looking for ways to capitalize on the strong demand for single-family rentals.

The demand for single-family rentals is strong. According to a recent study by the National Multifamily Housing Council, the demand for single-family rentals is expected to grow by 1.5 million units between 2020 and 2025.

The National Association of Home Builders (NAHB) “Eye on Housing” report shows 68,000 new build for rent construction starts between Q3 2021 and Q3 2022—an increase of 42% year over year.

High-Demand Single-Family Markets for Build to Rent Homes

Location has proven to be crucial when it comes to build for rent homes. Building rental properties in cities that already have a high demand for single-family rentals is always a great place to start.

First, you need to choose the right location. BTR homes are most successful in areas with high demand for rental housing.

Some of the top building for rent markets include:

• Phoenix, AZ
• Houston, TX
• Dallas, TX
• Las Vegas, NV
• Minneapolis, MN

Some of the best markets for building rental homes include:

• Major metropolitan areas. Major cities tend to have a high demand for rental housing, as they attract people from all over the country who are looking for work or a change of scenery.
• College towns. College towns are another great market for BTR homes, as they are home to many young people (both students and recent graduates) who are looking for affordable housing.
• Military towns. Military towns are also a good market for BTR homes, as they attract families who are looking for a stable place to live while their loved ones are serving in the military.

Several markets are particularly well-suited for build to rent investment properties. These markets typically have strong demand for single-family rentals, as well as favorable demographics and economic conditions.

Millennials Are Pushing Build to Rent Growth

The single-family build to rent boom accelerated during of the pandemic. Millennials—specifically older ones—traded in larger cities for the suburbs. The rise of flexible work options, the desire for more space, and skyrocketing home prices fueled the insatiable demand for single-family build-to-rent housing across the country.

Millennials have been the largest generation in the U.S. since 2019, with around 72.1 million individuals born between 1981 and 1996, according to Pew Research Center. Most millennials, still saddled with student loan debt, couldn’t afford to purchase a home with rising mortgage rates, making renting a more favorable option.

Rising interest rates since the pandemic have created more opportunities for single-family build to rent homes. New BTR developments have filled up quickly over the past couple years, and at higher-than-expected rents, creating more profitability for the market.

March 2023 marks the 14th month of slowing rent growth, but still the eighth month in a row rent increased for zero-to-two-bedroom properties. In March 2023, median rent across the top 50 metros for zero-to-two-bedroom properties was up 2.5% YOY.

The Build for Rent Financing You Need

Economic strength and growth, coupled with low supply and high demand, make cities like Phoenix, Dallas, and Minneapolis ripe for build to rent development and prime for investors who want to capitalize on the build to rent strategy.

Having the right strategy is only half of the equation. Working with the right lender is the other half. Lima One Capital is the nation’s premier lender for real estate investors, and we offer loan programs other lenders in our space can’t compete with.

Lima One offers some of the most competitive loans designed to help investors be successful. Whether you’re interested in build to rent financing or new construction loans, Lima One has the financing options you’re looking for.

Regardless of your construction investment strategy, Lima One is the lender you can count on. Contact us today to discuss your next deal, or if you have a deal in hand, accelerate the process by applying now.