The Anatomy of Build-to-Rent
FROM LAND ACQUISITION TO FINAL INSPECTION, THE CYCLE OF AN INTRIGUING INVESTMENT STRATEGY
by Bruce McNeilage
some of my past articles, I’ve talked at length about the Build-to-Rent Subdivision concept and the
enter into an agreement contingent upon the property meeting several specific criteria. It will allow you to hold the property while you do the due diligence to make sure the property is suitable for your needs. After conducting due diligence, you can sign a final contract. DUE DILIGENCE Once you have the LOI signed, you have bought yourself some time to do your due diligence and determine if you can do what you need with the piece of property. Is the property built on a flood zone, which will require addi - tional and likely expensive insurance? Can the land be re- zoned for residential use? Is the property on rock, which will require expensive removal? Are there environmental issues that will need remediation? STEP 2 Due diligence allows you to look under the hood, so to speak, and determine how much additional work it might take to make the land build-ready. It will help determine additional costs or perhaps even allow you to walk away from property that has too many hidden challenges.
advantages to investors and builders alike. Like a lot of concepts, though, it’s easy to talk in broad strokes and leave out some important minutia that can make or break a deal. Recently, several would-be investors have asked, “Bruce, tell me everything that goes into a Build-to-Rent deal and tell me where some of the pitfalls lie.” With that in mind, I’ve compiled a list of key steps and that every Build-to-Rent subdivision deal must go through to be successful. Each of these phases is as critical as the next, with some taking place simultaneously and others taking significant up- front capital and risk.
FIND THE RIGHT LAND, SIGN
LETTER-OF-INTENT, CONTRACT An obvious first step is to find the right property. You can’t build a house in thin air. When you find a piece of land suitable for a single-family home subdivision, it’s important to get a Letter-of-Intent signed as soon as possible. The LOI will allow you to make an offer and
68 | think realty magazine :: november 2020
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