Dear valued investors and future investors,
Another sincere welcome to CPI Capital’s weekly news briefing containing a mixture of updates, commentary and informative articles about the lucrative world of real estate investment.
If you are already a subscriber, thank you. If not, why not sign up to our newsletter now so as to keep right up to date with all you need to know about syndicated real estate investment?
This week we’re going to look at some of the ways in which the “build to rent single family residence” (“BTR-SFR”) product has been evolving as demand increases and the needs of the target demographic changes.
BTR-SFR key demand drivers
As we have discussed previously, there are a number of key reasons for the surge in demand for BTR-SFR properties. A primary reason being that restrictions associated with the pandemic boosted demand for better, larger space for remote working or work from home (“WFH”) accommodation and/or learning. To many, build-to-rent single family residence communities fitted the bill well and, generally, offer far more flexible and affordable options compared to buying a new home.
As a result, there has been significant migration away from dense urban cores to smaller cities and suburbs where SFRs are more likely to be found. But, as you’d expect, the types of BTR-SFR properties on offer have evolved from those in the early pioneering schemes, plus there have been changes in the demographics of the prospective tenants for such homes.
So, let’s have a look at some of the key areas of evolution in design of the product on offer:
BTR-SFR developments are attracting more higher income tenants than expected
Many of the new build-to-rent single family residence communities being developed with the backing of institutional money or by private equity real estate (“PERE”) syndicated property companies are attracting an even higher income household than previously assumed.
This can be attributed to:
- the superior designs of the accommodation;
- higher quality of the materials used in the construction of the homes;
- on-site professional property management services;
- amenities and facilities which cater to tenant demand.
Attracting higher income households has obvious advantages with such tenants willing and able to pay higher rental but also wanting the BTR-SFR communities they live in to be well maintained and presented.
Some product and amenity trends in newer BTR-SFR schemes
Workspaces within BTR-SFR
A major trend is that WFH continues to play a large part in driving rental home demand, partly. SFR offers a more peaceful place to work, given that apartment complex noise affects concentration and the ability to work from home.
Even though a number of companies are pushing for employees to return to the office, many really don’t want to return, at least not full-time. With a tight labour market, forcing people back to the office is becoming more difficult and, so, newer build-to-rent single family residences are designing in at least one or maybe two (as there may be potentially be a professional couple both remotely working) workspaces with a desk and tech hook-up can be placed.
[ Passive investors : do you know how to vet a real estate investment group before making an investment?
Download and read our FREE e-book: 25 Fundamental questions to ask a Syndication Sponsor before making your investment ]
Flexibility in size and design
BTR-SFR developers are looking to provide a variety of product types in terms of house square footage and plot size. In the BTR sector, the “one-size-fits-all-locations” model does not work and it is important to identify the demand requirements from potential consumers local to a new project.
Generally, homeowners will pay a higher premium for a larger house than a renter would, so large homes and large plots will not be the preferred product.
From the perspective of renters the most required amenities are:
- good carparking;
- greater levels of privacy than in a multi-family apartment complex;
- a yard or garden;
- on-site maintenance;
- a good sense of community
Other facilities, such as those found in a multi-family apartment complex (ie pool, clubhouse, walking trail, etc) are not so high on the list and over addition of such things may involve both initial expenditure but also on-going maintenance costs, leading to diminishing returns.
Technological provisions need to be up-to-date
Demand for smart home technology is on a rapid growth curve and such smart home tech can make a build-to-rent single family residences project stand out. Having said this, smart home technology may become standard features in the near-to-mid-term due to consumer demand and choice.
Some developers of BTR-SFR are planning for points to charge electric vehicles in garages even though current demand is still small.
Use of more durable materials
Obviously, build-to-rent single family residences aren’t like homes built for sale and people move in and out more frequently. Therefore, the design and build should reflect this in order to keep the turnover time between tenants to a minimum and reduce repair and maintenance costs.
Homes can be designed to accommodate more movable items and use materials which are more resilient and standardised.
Some examples of smart choices are:
- minimal carpeted areas.
- laminated faux wood floors.
- stainless-steel, standard type appliances.
- wider halls and doorways to make moving things easier and reduce the chance of damage to the surroundings;
quartz or granite countertops in kitchens and bathrooms
CPI Capital knows that, as with any product, there will be an evolution in the final product presented to the market as demand evolves. BTR-SFR accommodation is no exception and, as a savvy REPE syndicated investor, we always regularly monitor market trends and demand shifters to ensure that the projects into which we invest meet the requirements of the end-users.
Only by doing this can we at CPI Capital work towards achieving the optimum investment returns for our growing numbers of passive investors!
CSO, COO, Co-Founder CPI Capital