With more people working from home due to the COVID-19 pandemic, commuting to work isn’t a primary concern anymore. As a result, the 9-to-5 tribe is free to live wherever they want. This has sparked a growing demand for affordable single-family homes — especially those in less-densely-populated suburban areas.

However, some real estate investors believe that the migration to single-family rental homes was happening before COVID. According to David P. Singleton, CEO of Homes 4 Rent, “The pandemic did not change these trends. It simply shined a spotlight on the value proposition that single-family rental home living offers. Now, more than ever, people value extra living space, private yards, and a sense of neighborhood community.”

Ultimately, the greater demand for single-family homes has inspired forward-thinking real estate investors to invest in building new homes — not for selling them to homebuyers but for generating rental income.

Why Build-to-Rent?

Suburban single-family homes have become more attractive to renters because of the lower population density in suburban areas. Compared to a densely populated apartment complex, living in a single-family home in the suburbs gives renters a greater feeling of space. It also makes social distancing easier. Beyond virus concerns, renters can also lease a larger home in the suburbs — with extra room for an office — for a lot less money. 

Real estate investors are now viewing the rising demand for suburban rental homes as an investment opportunity. These investors are building and buying suburban homes to generate rental income. In making these investments, build-to-rent investors are projecting the following will occur:

  1. The growing demand for buying and renting suburban single-family homes will cause these dwellings to be more scarce; therefore, the cost of purchasing and renting these properties will continue to rise. 
  2. With more people moving to suburban areas, there will be more demand for suburban single-family rental homes.  
  3. Rising home values means fewer people will purchase homes, and more people will want to rent. 
  4. Many renters will not want to move back to the city after COVID-19 subsides, and the popularity of remote working and the demand for suburban homes will continue.  

Recent Statistics on the Build-to-Rent Trend

Data from the U.S. Census Bureau indicates that investors are building and buying new homes in many cases to rent them out instead of selling them to homebuyers. The U.S. Census Bureau reports that new home sales increased by 18.7% in 2020 over the previous year. According to MarketWatch, the rising demand for single-family homes in the United States caused a 9% increase in home values in 2020. These figures suggest that investors are building new homes because there are not enough single-family homes available to satisfy the rising demand for single-family rental properties.

Several large-scale real estate firms have already embraced the build-to-rent movement. Bloomberg claims that corporate investors are now building new construction single-family homes to meet the increased rental market demands. These investors are not building new homes for the purpose of selling them to homebuyers. They are building houses to generate rental income. For example, Lennar Corp recently announced plans to invest $2 billion into new single-family homes for rental purposes. D.R. Horton also plans to double-down on building more single-family rental homes. 

Are You Planning to Embrace the Build-to-Rent Trend?

If you’re thinking about investing in new construction homes to generate rental income, the PointCentral team may be able to increase your chances of success. At PointCentral, we develop smart property automation solutions for enterprise-scale real estate management firms. Our solutions are also excellent for smaller-scale businesses that just have a handful of properties. 

With the PointCentral’s smart property automation platform for single-family properties, managers can easily keep an eye on all aspects of their businesses — including maintenance, operational workflows, leasing, revenue, and more — all from a single dashboard. These features can save property owners time and money while allowing them to achieve unprecedented operational efficiency. 

Want to learn more about PointCentral’s solutions for enterprise-scale single-family rental home management? Contact our team to find out how we can help.

Sources:

https://www.census.gov/construction/nrs/pdf/newressales.pdf

https://www.marketwatch.com/story/big-city-flight-led-to-surging-suburban-home-prices-will-it-outlast-the-pandemic-11613510270

https://www.bloomberg.com/news/articles/2021-02-03/wall-street-s-favorite-suburban-housing-bet-is-getting-crowded

https://www.bloomberg.com/news/articles/2021-01-14/lennar-targets-2-billion-for-major-single-family-rental-push

https://www.bizjournals.com/dallas/news/2020/11/10/dr-horton-build-for-rent.html