Why BTR Is Here to Stay
The market for single-family rentals is a diverse one that appeals to empty nesters, young families and people seeking temporary housing, according to panelists at this week's NAREE conference.
Investors who purchase single-family houses to rent may come and go, depending on lending costs and other variables. But those who build houses for rent are here to stay, two of them said earlier this week at the National Association of Real Estate Editors conference in Atlanta.
“Build to rent is not going away,” Todd Wood, the founder of Christopher Todd Communities, told the group of writers from throughout the country. “It’s only going to get bigger and bigger.”
Added Richard Ross of Quinn Residences: “We’re in it for the long haul.”
As many as one in eight new houses built these days are intended as rentals, Robert Dietz, chief economist at the National Association of Home Builders, said during another conference session this week. And that number could double over the next few years.
Half of all BTR houses are sold to investors, Dietz reported; the other half are erected by builders who hold them for their own portfolios. Wood and Ross are in the latter group.
Ten Cristopher Todd properties now dot the landscape in Arizona, where the company is based, and others are under construction in Texas, North Carolina and Florida. (Some are being built by Taylor Morrison, a giant for-sale builder in its own right.) The Atlanta-based Quinn Residences has more than 3,000 units in its growing portfolio.
Even together, the two companies represent only a small fraction of what the RCLCO consulting firm says were 60,000 BTR units delivered to the market last year. And judging from what the Bethesda, Md.-based firm is seeing, there’s likely to be more this year and into the future.
“We’re seeing increased interest among our clients,” RCLCO’s Kelly Mangold told the meeting.
But Wood warned that build-to-rent is not for everybody. “When real estate is hot, everybody is a developer,” the Christopher Todd CEO said. “But the small players will melt away.” Even large public builders will find the BTR sector difficult to navigate, he said. “Ours is a very different platform and a real challenge for many of them.”
The market for single-family rentals is a diverse one that appeals to empty nesters moving down from larger houses, young families just starting out, people moving to the area who want temporary housing while the look for a more permanent residence, among others, Mangold said.
And the properties themselves tend to have minimal impact on the local infrastructure, Wood and Ross reported. On average, Quinn residents are 35 years old and have .75 children and 1.5 pets, Ross said. Less than 3 percent of Christopher Todd renters have children, Wood said, so “there’s no burden on the local school system. … We’re not clogging the roads, we pay our taxes on time, we don’t have people cooking meth in their backyards.”
At the same time, Wood conceded that he and his colleagues “need to do a better job” educating the public about their product. “We are not the problem (when it comes to housing supply), he said. “We are the solution.”
As the Todd CEO sees it, “we’re creating a new way to live,” one he compared to the European lifestyle where most people are renters.
Noting that renting is “not everyone’s thing,” Cross said the BTR sector seeks to address the third of households who prefer to rent, not the two-thirds who don’t.
Both developers said their communities offer everything most for-sale projects offer, and more. For example, Todd neighborhoods, which Wood described as a hybrid of single- and multi-family, are all one-story houses with private backyards. And the list of standard features rivals those that many for-sale builders only offer as options.
Every one- and two-bedroom unit, ranging in size from 750 to 1,050 square feet, comes with quartz countertops, stainless steel appliances, dual pane windows, high ceilings, full-size washers and dryers and even doggy doors. And each has smart-house technology, such as keyless entries, climate control and doorbell cameras, which are all controllable from the occupants’ smart phone or tablet.
Each community has its own swimming pool, event lawns, barbecue area and fitness center.
Christopher Todd properties are indistinguishable from houses for sale, save for the fact that they are all single story. And Wood claims to be the only builder in the country creating branded single-family rentals.
“We’re branding our product like Marriott brands its hotels,” Wood said. “It doesn’t really matter where you go, you’re going to have the same Grade A experience.”