“A BUILD-FOR-RENT STRATEGY COMBINES THE BEST SKILL SETS OF DEVELOPERS, BUILDERS, AND PROPERTY MANAGEMENT COMPANIES.”
itable. That’s where a Build-For-Rent partnership is a great strategy.
in comparison to an end-to-end Build-to-Rent scenario, but we know the homes will be done right and done on time. The higher price is also our reward to the builder for helping shoulder their portion of the risk. We have formed relationships with local, regional and national builders to put this strategy to work. We ne- gotiate discounts from these build- ers that average 10-to-15 percent reductions to appraised values. As an investor, I’m happy paying more for a negotiated home price up front. I know exactly what I need in rental income to meet my metrics and I have completely removed construc- tion headaches and potential cost over-runs off of my plate. BUILD-FOR-RENT PARTNERSHIPSWORKAS RENTALHOMES STAYHOT Builders and investors need to seek these types of partnerships as the rental home market is highly likely to stay hot. Millennials (born between 1981 and 1998) continue to start families. Unfortunately, they are saddled with a large portion of
our nation’s $1.6 trillion in student debt. They still want a house with four sides and a yard for their chil- dren to play. Renting a single-family home makes sense for them. Builders want to stay in business, but the risk of putting up spec hous- es in an unpredictable market might keep builders on the sideline. Real estate investors are al- ways looking for another avenue to generate a return. The returns from single-family rentals can provide a safe haven in an otherwise volatile market. Throw all these factors together and a Build-for-Rent scenario is a win-win-win for builders, investors, and consumers alike. It’s highly like- ly we’ll see this scenario continue to grow over the coming months. •
BUILD-FOR-RENT COMBINES RISKAND REWARD FOR BUILDERSAND INVESTORS A Build-For-Rent strategy com- bines the best skill sets of develop- ers, builders, and property manage- ment companies. It helps mitigate construction cost risk in a project’s early phases, then weeds out the cost — and risk — of marketing and selling the house at construction completion. In this scenario, the investor does not become the property owner until the home’s completion. The sale and the sale price will have been negoti- ated up front in partnership with the builder. Both parties focus on what they do best: the builder focuses on managing the construction process, while the investor focuses on finding renters and managing the property. This arrangement cuts out all costs of marketing and selling the house and eliminates the risk of the house sitting on the market for months. With Build-for-Rent, we typically pay a slight premium for the homes
Bruce McNeilage is the managing member and a co-founder of Kinloch Partners and a partner in Harpeth Development.. He is a passionate advocate for housing affordability and
homeownership, and invests heavily in Nashville, Tennessee, as well as throughout the southeast. Learn more about his projects, including single- family built-to-rent communities and the Solo East and North condominium projects at www. Kinlochpartners.net.
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