Multifamily developers continue to dive into the hot single-family build-to-rent (BTR) sector, citing that the demand drivers and operations are similar to traditional apartment communities.
However, speakers on the “Tracking the Build-to-Rent Evolution” panel—moderated by Kimberly Byrum, managing principal, multifamily, at Zonda—at the MFE Leadership Summit in early March cautioned that there are challenges to overcome with purpose-built single-family rental communities, with the sector still somewhat in its infancy.
“Based on our research, we really believe that the demand drivers for single-family rental properties, particularly for these [purpose-built] communities, are really not that different than multifamily demand drivers,” said Christopher Finlay, founder and CEO of Middleburg, which develops both multifamily and single-family purpose-built communities. “So this idea that you're going to buy a bunch of houses 45 minutes outside of a metropolitan area, and that's going to leverage the growth in that market, I think is a little bit displaced. We look at ratios of 20-minute rush hour drive times, and that tends to be where we see the greatest amount of demand. We have a saying that people drive to own, and they don't drive to rent.”
Middleburg launched The Hamlet brand to satisfy the growing demand for single-family rental properties in high-growth Southeastern markets. Its approach is a single-platted community with six to eight units per acre for a total of 200 to 300 units. While it doesn’t feature a 12,000-square-foot clubhouse, Finlay said the community model is a little more utilitarian but very tech enabled, with self-guided tours, smart locks, and other smart-home technology.
“The big amenity for somebody in this type of community is to be able to go outside. So we've tried to be thoughtful and not overprogram,” he said. “For us, grill areas, fire pits, and dog areas are really the three big entities that we try to hit.”
In addition to its Authentix and Springs Apartments brands, Continental Properties launched Aventerra Homes, which combines the flexibility and convenience of an apartment with the privacy and comfort of a single-family home.Aventerra offers one- to four-bedrooms home with or without a garage.
“We approach this very much as an appendage of the model that we already have that is working and functioning very well in the multifamily space; we see very similar demographics with the renter profiles,” said Sara Johnson, vice president of development at Continental Properties. “And it's really just leaning into those residents that are looking for a little more privacy. They may be renters by choice but don't appreciate the noise if they have shared walls with customers that share the home next to them.”
Continental has four communities under construction and another two in the approval phase. In terms of amenities, Johnson said the company is focusing on community areas that can be flexible. “We don't want to overprogram the areas until we can really get in and see what those customers are looking to experience.”
In terms of demographics, Finlay and Johnson both said they are seeing a diverse group of renters for the BTR product.
“We've got renters by need and renters by choice, and we're seeing a lot of young professionals as well as empty nesters—those who are looking for a lock-and-leave lifestyle,” said Johnson.
Finlay added that it’s important to have a variety of different unit types and options so that people can find what they're looking for. “You have everyone from somebody who just graduated high school or trade school and has a really good job to somebody who's a retiree and making a lot of money still and everybody in between,” he said.
While Finlay told the audience his firm has been pleased with the finished products, he added that it has been difficult to develop the homes because of the slew of issues cropping up with the product type being so new and officials being unsure whether it’s single-family or multifamily.
“It looks good on paper, but then the municipalities don't know how to entitle it, they don't know what the zoning is, they don’t know what the setbacks are, and they don’t know what the building code is. … The fire marshal doesn’t know if it should be sprinklered or not sprinklered. Do you do ADA or not ADA? I mean, the list just goes on,” Finlay said. “And then your subcontractors that are building it, they don't know if it's single family or it’s multifamily. It's been a challenge to actually execute.”
Johnson added that you really need to take the time on the front end to educate politicians and external stakeholders about the product before you make that formal submittal.
“You’re going to get in front of a city council, and they're going to see it looks and feels like single-family, and that's where the questioning comes in,” she said. “So you really have to hold their hands through the process. We use catchy phrases, like ‘you don't even have to change a lightbulb,’ and we really emphasize that maintenance-free lifestyle that our residents would be coming in to experience to help get the stakeholders sold and on board.”
Finlay agreed, saying that’s a big sales pitch for municipalities once they understand that a management company will be maintaining and taking care of the community.
