Is a Build-to-Rent Community Right for You?
Build-to-rent neighborhoods are an option for people who don't want a traditional ownership arrangement.
Sky-high interest rates, low inventory, and a competitive market have made buying a home difficult in the past few years. One solution popping up in many parts of the country is build-to-rent communities.
These communities offer single-family, home-style living with rental agreements and amenities typically found in condominiums or apartment complexes. They offer a good compromise for those who have considered owning a home but either can’t or don’t want to take the plunge. Instead, they rent one.
“This is a changing business model, like Lease to Own is changing the landscape of the real estate industry,” says Jan Carlisle, a Better Homes & Gardens Real Estate realtor at Paracle.
Related: Should You Buy a House in 2023?
New Living Option Growing in Popularity
While the number of single-family, built-for-rent communities remains small, its popularity increased by 33% from 2021 to 2022, according to a National Association of Home Builders report.
“Realtors have to be willing to understand that not everyone wants to become a homeowner,” Carlisle adds. “Some people just want no stress, no problems when living in a beautiful home.”
Take a closer look at what these communities offer and what to consider if you’re looking to rent in one of them.
What Is a Build-to-Rent Community?
A build-to-rent or built-for-rent community offers residents a way to enjoy the lifestyle of living in a single-family home without the burden of a mortgage or qualifying for a home loan. Instead, the tenants rent the home temporarily, enjoying the flexibility and advantages that other rentals might not offer.
“Build-to-rent provides the components of apartment-style living but offers the lifestyle of a homeowner; a garage that connects to your kitchen, a front yard, back yard, patio for outdoor activities, larger units,” says Justin Underwood, Real Property Management owner/broker.
"“Build-to-rent communities offer the tenant the lifestyle of owning a home at a lesser cost.”"
Justin Underwood, Real Property Management
These communities have unique perks up their sleeves as well.
“Build-to-rent communities also provide access to resort-style amenities; pool, workout facilities, parks, walking trails, and pickleball courts,” Underwood says. “All the maintenance is taken care of: landscaping, all appliances, pest control. And they offer a better sense of community; people spend a lot of time walking and congregating in their front yards.”
Drew Henner, a global advisor with Premier Sotheby’s International Realty in Orlando, says the build-to-rent trend fills a gap for would-be homeowners.
“Our project, Highland at Park Lake, offers Central Florida Residents a unique opportunity in our highly competitive residential market,” Henner says. “Our brand-new townhome-style residences live like single-family homes, with modern finishes, an abundance of natural light, solid block construction, and private parking garages.”
The NAHB points out a few key differences between these built-to-rent communities and your average single-family home development.
They are often smaller than other single-family homes, with fewer bedrooms and bathrooms than your average single-family home, and they are typically one-story buildings. These homes are often townhomes located on smaller lots with a smaller, one-car garage. As of 2019, build-to-rent communities were most prevalent in Texas, Oklahoma, Arkansas, and Louisiana.
Related: 33 Apartment Decorating Ideas to Make Your Rental Feel Like Home
Who Are Build-to-Rent Communities For?
While there is no single demographic for whom the build-to-rent community is ideal, one commonality exists among many of those interested in the arrangement—namely, individuals who don’t want the responsibility of homeownership.
“Often home buyers don’t understand the hidden costs that come with owning a home,” Underwood says. “Maintenance is the biggest. There is much more than a down payment, mortgage payment, taxes, and insurance to consider when buying. Build-to-rent is a much less committed commitment, giving individuals more freedom to move for job advancement, education, or travel.”
Underwood also says many older adults and empty nesters who don’t want to maintain their homes or yards downsize to these communities because they still enjoy the perks of living in a home.
Also, many younger individuals like the idea of owning a home but can’t qualify for a loan or are struggling to justify the cost of homeownership.
“When it comes time to start a family, millennials seek to transition out of their apartments and into a home,” Henner says. “They desire the American Dream—a yard, privacy, proximity to good schools, and access to popular dining and entertainment—but are limited by the economic reality of student loans, stagnant wage growth, and soaring home prices. Even though millennials may find it challenging to muster a 20% down payment for purchasing a home, many are willing to dish out a premium on monthly rent to experience the benefits of residing in a new home within these build-to-rent communities.”
For those who qualify and want a home, the market might be too tight for those dreams to become a reality. That is when a build-to-rent community can provide a temporary solution.
“From a macro perspective, build-to-rent communities are fueled by the housing market’s lack of supply,” Henner says.
In short, there are many reasons why someone might be interested in a build-to-rent community.
“People of all ages rent these homes,” Carlisle says. “Turnkey-ready is what some renters look for when relocating to another city.”
Carlisle points out that not all real estate agents are keen on this new trend as it doesn’t make them as much money as selling homes to buyers, so you might have to ask about the options when looking for your next home.
“I like this concept ... I see it as an affordable housing solution for many people,” Carlisle says.
Related: What First-Time Homebuyers Need to Know, According to Real Estate Pros
The Pros of a Build-to-Rent Community
Many benefits come with living in a build-to-rent community, starting with the perks you’d associate with living in a condo or townhome.
“Our community at Highland at Park Lake has a dedicated boutique property management team,” Henner says. “We provide a personalized level of service, employing strategies similar to a Ritz Carlton experience.”
Henner’s team manages the property’s maintenance, much like you’d have in an apartment complex, covering everything from HVAC filter replacement to the building’s exterior appearance and overall site upkeep.
"“Unlike a traditional landlord, build-to-rent communities offer more consistency in maintenance, repairs, and community oversight.”"
Drew Henner, Premier Sotheby’s International Realty
For those who travel, build-to-rent homes can be great. “People travel more now and love the idea of just locking everything up, knowing everything outside will be taken care of,” Underwood says. “Some communities even offer a service to check on the property while you are gone.”
The amenities offered at these sites are similar to condos and townhomes, where renters can enjoy community parks, gyms, and pools.
Henner says these features are only perks depending on your preferences. “Do you prefer equity or flexibility? Stability or mobility? Home repairs and maintenance or hassle-free living?” he says.
Some Drawbacks of the Build-to-Rent Lifestyle
Like any living arrangement, there are potential downsides to consider.
“Renters do not build equity as homeowners do and have less autonomy when it comes to property modifications. Aside from the obvious, rent can be increased, or the property sold—just as with any property you are leasing,” says Henner.
"“The drawbacks of a build-to-rent community are limited to those of any property a person might lease,”"
Drew Henner, Premier Sotheby’s International Realty
Underwood points out that many communities have rules and restrictions, similar to homeowners associations, which dictate how you can use or even decorate your home.
With that in mind, your living arrangement could change without your input in these types of communities. In some cases, Carlisle says communities will opt to rent the units to new tenants periodically, every four or five years. In those situations, the renter might not have a first right to ownership.
“Some of the leases say the tenants have no rights to ever buy the home, and some leases say the tenant has first rights of refusal,” she says.
It’s paramount that renters read all the fine print to understand how these agreements differ from apartment rentals or single-family home rentals and how these communities differ from one another.
Related: 100 Years of Real Estate and Homeownership, Through the Pages of BHG
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