average age of a first-time homebuyer was 38 years old, a record high. This data indicates that demand for BTR properties is coming mainly from Gen Z and millennial households in transitional periods, with a large portion of older millennials looking for single- family rentals with yards, privacy, and room for their young families to grow.
country in rent growth for BTR properties as developers continue to expand supply. In the Sun Belt, select suburban edge markets around fast-growing metro areas like Dallas-Fort Worth and Phoenix are prime targets for BTR investment, because they combine affordability, renter demand, and land availability. Across these different growth markets, there is an emphasis on single- family, entry-level footprint homes that appeal to growing families or renters looking for more space in markets with tighter housing supply and stable economic conditions. DEMAND BEATS SUPPLY (LOCALLY) There are certainly areas in that market at risk of oversaturation due to the aggressive development pipelines seen in recent years. But even in markets with more supply, like the Sun Belt, the supply is overwhelming—the reality of oversupply is nuanced and hyperlocal. In undersupplied markets and localities with more balanced inventory, demand is likely to outpace new deliveries and push rents higher. In oversupplied markets, short-term drops in rent prices or longer lease-up periods can be expected, but overall BTR absorption will most likely remain healthy as younger renters look to single-family rentals as an affordable alternative to buying a home. SHARPENING THE STRATEGY Looking ahead to the second half of 2025, the BTR industry is sharpening its focus and is expected to continue its path of resiliency. As noted in the Spring 2025 John Burns BTR Trends report, operators are looking to operational efficiency,
amenity rationalization, and rightsizing floor plans to improve margins and meet shifting consumer expectations. For investors and developers waiting for lower interest rates or more economic certainty to enter or expand their existing portfolios into BTR, waiting may not be in their best interest. In fact, the structural factors reinforce that now is an opportune time to make a move, especially in markets with constrained for-sale inventory and growing rental populations. Overall, the fundamentals are clear: Renters want and need homes, not just units. BTR offers a solution for attaining the comfort and convenience of a single-family home without the cost, responsibility, and stress of making a purchase.
SQUEEZED MARGINS, STEADY DEMAND
For BTR operators, inflation remains a cost squeeze, and for investors, inflation is a key driver of costs. A recent John Burns Real Estate and Consulting survey found that in the first quarter 2025, operating costs for BTR communities grew faster (+3.2% YOY) than rents on BTR properties (+1.3% YOY). Although inflation expectations are slowing, unless there is a decline or stabilization of insurance rates and a reduction in property taxes, BTR operational expenses are likely to stay elevated for the remainder of the year. But demand is high and outpaces supply in many markets, which is helping to preserve occupancy levels along with long-term rental growth potential. HOT MARKETS FOR BTR It’s cliché, but the adage “location, location, location” remains especially relevant in the BTR space. The markets with strong job growth, inbound migration/population growth, and limited for-sale inventory or new construction are proving to be most attractive for BTR investors. Currently, the Midwest and Northeast are the hottest regions, leading the rest of the
TOM HALLOCK
Tom Hallock is head of construction lending at Kiavi, one of the nation’s largest private lenders to residential real estate investors. With decades of experience in construction financing and real estate investment lending, Hallock oversees all aspects of Kiavi’s construction lending vertical, including product ownership, team oversight, and growth strategies. Before joining Kiavi, he served in various construction financing leadership roles, including chief lending officer for DPL Capital and Genesis Capital as well as head of loan products at PeerStreet.
62 | think realty magazine :: september - october 2025
Made with FlippingBook Online newsletter