There’s a time in almost everyone’s life when they’re ready to leave their parents’ basement but not quite ready to buy a house.
Apartments have typically been the go-to middle step; however, the explosion of the build-to-rent sector in recent years has left those in the space asking themselves just what exactly is taking shape. Over 300 industry veterans gathered in Dallas in late March for Zonda’s build-to-rent conference, picking apart the sector’s challenges and looking for answers to some of its most pressing questions.
As Zonda Advisory principal Mollie Carmichael noted during her panel on what makes a successful build-to-rent community, “There are about 1,000 definitions for the space, each one a little different.”
“We’re all doing something that is so very new,” echoed Jillian Anderson, president of Elmington Property Management.
And if those in the industry find it tricky to define the industry, imagine how the clerks at City Hall feel. A consistent theme throughout the two-day event was the need to educate municipalities on what builders are looking to accomplish in the space so these projects can be taxed fairly and judiciously.
“The thing to watch out for and to be on top of in this space that is different than other spaces is that taxes and insurance are different,” said Marti Burrows, managing director of real estate at Greystar.
What’s been working? You can’t count out location, participants agreed, and it’s essential to start thinking about the sort of amenities that will age well with your development.
“It all starts with our residents,” said Peter DiLello, senior vice president of Investment Management Group at Invitation Homes. “What do they want and look for in a home? For us, residents are predominantly looking for a true detached single-family living experience. They want a detached house with a private fence in the rear yard, three or four bedrooms, a driveway. We also seek to empower residents as much as possible—driving their long-term satisfaction is good for them and good for the business.”
What’s keeping people up at night? Access to credit, or the potential lack of access, as regional banks that are still in the game start to tighten up on lending.
“It’s easy to lend money,” said Zonda Advisory senior vice president Bryan Glasshagel. “It’s harder to get paid back.”
Tim Sullivan, Zonda Advisory’s senior managing principal, wrapped the conference with six takeaways that can help the industry find its feet over the next several years as rents fluctuate, taxes increase, and renters become more discerning in their decision-making.
- Be judicious: This space isn’t for everyone.
- New matters: You need to keep things feeling fresh.
- Understand the consumer: Why are they looking to rent?
- Standardize your product: Minimize costs while presenting a consistent lifestyle.
- Amenity equilibrium: Include only what is valued.
- Cash flow cyclicality: it’s here.
“Consumers still need housing and still want to move up, even in rentals,” Sullivan said. “What are we going to do to get them to move?”
