Do you know what the “fastest-growing trend” in real estate is at the moment? Well, according to an article that just came out on CNBC, it’s the “build-to-rent” movement. Let me explain.
More and more home builders are now building new single-family homes—specifically so they can rent them out. Last year, about 43,000 single-family homes were built for rent, the largest number in nearly 40 years.
This makes good sense for several reasons:
- Rents are increasing nationwide. Home prices grew nationwide 2.7% this year. While this is a respectable number, it’s also the weakest increase in seven years. On the other hand, rent is surging and grew 3.2% nationwide year over year. In other words, rents currently offer some of the best returns on investment in real estate.
- Demand for single-family homes is growing like crazy. More and more renters may prefer to raise a family or live in a single-family home versus an apartment complex or community or building. The increase in both single-family home sales — as well as the growth in rent — is proof of this.
- It’s an investment that can pay for itself within seven to 10 years. The math for build-to-rent home is simple: For investors who hold these properties even for just seven years, the residual cash flow could be worth more than the sale one time.
These reasons explain why big builders and investors are so keen on “build to rent” right now. But is there a way you too could benefit from the same underlying market conditions?
Well, one smart option is to invest in a single-family home yourself and then rent it out.
This might make a lot of sense in the current market for two big reasons. First, mortgage rates are at a temporary dip right now and are near their all-time lows.
In other words, it’s simply more affordable to buy a home right now, because the interest payments at current rates would be so much lower than if you bought even six months ago.
The other good reason is that several affordable and attractive single-family homes have recently come on the Austin area market. In my opinion, they would make an excellent choice as an investment property.