Built-to-Rent Homes Performing Well for Investors
New York, NY, November 9, 2021-Single-family homes built to rent are emerging as the hottest corner of the U.S. property market, as investors respond to booming demand from home-seekers priced out of housing for sale, reports the Wall Street Journal.
“Rents on homes are rising faster than ever. New household formation is also increasing the demand for rentals, as more young people get their own places.
“Meanwhile, historically high housing prices and steep down payment requirements for homes are driving more people to keep renting, even as rents rise, said Green Street analyst John Pawlowski.
“‘The cost of housing alternatives for single-family renters has exploded,’ he said.
“The expected risk-adjusted annual return for built-to-rent investments in the private market is now about 8% on average, according to securities advisory Green Street, the highest of 18 property sectors tracked by the firm. The weighted average return for all property sectors was 6.1%, Green Street said.
“The growing investor interest in building homes for rent is driving a land grab, especially in the Sunbelt where proponents expect the housing demand sparked in part by the pandemic to continue for years.
“Close to 100,000 built-to-rent homes will have started construction this year, according to estimates from Brad Hunter, founder of the Hunter Housing Economics consulting firm. Investors have poured about $30 billion in debt and equity into the sector in 2021, with many billions more in future commitments, Mr. Hunter said.”