Build-to-Rent (BTR) has emerged as a popular acquisition model in the single-family rental market. According to the article BTR is Proving It’s Built to Last, the lack of homes for sale combined with a growing demand for SFRs has captured the attention of investors in the institutional space looking for new potential investment opportunities. We delve into the article’s report with these top 5 key takeaways: 

1. Addressing the Housing Supply Crisis: 

The persistent lack of existing homes for sale, coupled with the growing demand for single-family rentals, has created an urgent need for housing supply. The BTR model has emerged as a solution to this crisis, attracting attention from large institutional investors who recognize its potential in creating much-needed housing supply and providing high-quality living options for families.

2. Market Dynamics and Demand: 

Economic factors, including surging mortgage rates and home prices, have shifted market dynamics in favor of renting over buying. This economic reality has driven increased demand for single-family rentals, particularly from millennials and the emerging Gen Z population. The desire for more space, flexibility, and lifestyle amenities has propelled the demand for BTR communities, leading to their rapid growth and expansion.

3. Builders’ Response to Market Trends: 

Homebuilders have responded to the changing market landscape by shifting their projects toward BTR communities. The increase in BTR construction starts and completions reflects builders’ efforts to meet the surging demand for single-family rentals. Luxury single-family rental communities with amenities like pools, fitness centers, and playgrounds have become particularly attractive to modern millennial families.

4. Institutional Investor Interest: 

The scarcity of resale supply has bolstered the demand for new homes, attracting the attention of institutional investors to the BTR market. Large institutional players have entered the BTR sector through acquisitions and joint ventures, indicating confidence in its long-term potential and strong returns.

5. Outlook for Future Growth:

Multiple trends, including the persistent housing shortage, sustained demand for rentals, and continued investment inflow into the BTR market, point towards long-term growth and stability. BTRs offer investors a differentiated product with strong operating features and potential exit optionality, making them an attractive asset class in the real estate market.

The rise of BTR as a dominant acquisition model in the SFR sector presents investors with compelling opportunities to address the housing supply crisis, capitalize on shifting market dynamics, and achieve strong returns in the long term.

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