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Build-to-rent communities are one of the hottest trends in rental real estate right now! Many people who can\u2019t own their own homes still want to live the single-family lifestyle. Demand is so hot, almost 80% of the renters participating in a RentCafe survey said they were \u201cinterested in living in a community of single-family homes.\u201d (1) And with such a tight supply of existing homes, newly constructed rental homes are getting the attention of investors.

Hi, I'm Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

The RentCafe survey includes responses from 3,300 renters, and 78% of them confirmed that interest is growing in single-family rentals. Rentcafe.com says that last year, in 2021, there were three times the number of searches for rental homes as there were the year before, in 2020.

Demand Grows for Single-Family Rentals

Single-family rentals have been a hot investment choice for more than a decade, so it\u2019s not a new concept. The first big surge happened after the 2008 housing crisis when millions of homes were foreclosed but the former owners still wanted to live in detached homes. Investors bought the foreclosed homes and turned them into rentals. The pandemic has accelerated this demand once again because people want more privacy and more space, but there aren\u2019t enough existing properties to meet the demand so many investors and developers are building new rental homes.

Last year, builders pumped 6,740 new build-to-rent homes into the market. This year, that number is expected to double to almost 14,000 newly constructed single-family rentals. These figures refer to rental homes that are built within communities, which some people are calling horizontal apartment communities. But the rental units are stand-alone homes, with yards.

According to Shannon Hersker at Walker a Dunlop: \u201cThe pandemic just increased demand at a faster pace. People want to live in areas that are less dense, in communities that offer more space.\u201d And, it isn\u2019t just Millennials who are attracted to this kind of rental. Hersker says: \u201cIn reality, you have everyone \u2013 including college students, empty nesters, families with kids, pet owners, and those wanting to downsize.\u201d

Urban vs. Suburban SFR Locations

So where are all these built-to-rent homes located? RentCafe says that 61% of them are in suburban areas, and 39% are in urban areas. The website\u2019s analysis shows that most of the communities in the Southwest are in urban areas while those in the Midwest and Northeast are in suburban areas.

RentCafe has come up with two lists. One is for new single-family rentals in the suburbs of larger metro areas. The other is for cities that have the room for build-to-rent communities within city limits.

Phoenix tops the list for metros with a total of 6,420 new single-family rentals in communities that are dedicated to rentals. It\u2019s also a top metro for new apartment buildings, so there\u2019s a big demand in Phoenix for rentals of all types.

RentCafe used data from its sister company, Yardi Matrix for this analysis. There are 20 metros on the list with Columbus, Dallas, and Houston in second, third and fourth positions.

On the list of cities, Las Vegas is number one with 2,520 new single-family rentals. Houston, Tucson, and Phoenix are in second, third, and fourth place on that list. We\u2019ll have a link to the report in the show notes so you can check all the cities on both lists.

RentCafe also identifies the largest built-to-rent communities. And, it has state maps showing which cities have the most single-family rentals. The report says there are currently about 90,000 single-family homes in the U.S. within about 720 communities. That includes all kinds of detached homes as well as townhomes and buildings with up to four units that also have yards and garages.

Strong demand and higher home prices are also pushing rents higher, which is increasing investment value. CoreLogic says that single-family rents were up 11.5% year-over-year in November.

And, landlords are having no trouble finding tenants. RentCafe says the occupancy rate was 97% for single-family rentals last year. That\u2019s 2% higher than it was for apartments.

Check the show notes for links to the full report at newsforinvestors.com.

You can also find out more about investing in newly constructed rental homes at our website. It\u2019s free to join, and free to access hundreds of webinars and articles on real estate investing. You\u2019ll also have access to the Investor Portal where you can view sample property pro-formas for new and existing rental homes, and connect with our network of resources. That includes experienced investment counselors, property teams, lenders, 1031 exchange facilitators, attorneys, CPAs and more.

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Thanks for listening. I'm Kathy Fettke.

Links:

1 -https://www.rentcafe.com/blog/rental-market/market-snapshots/built-to-rent-single-family-homes-double-in-2022/