Wall Street companies, which are finding it harder to buy single-family homes in established neighborhoods, are flexing their economic muscle by creating “build-to-rent” communities.
There are approximately 900 neighborhoods across the country, each with an average of 135 to 150 housing units, designed for institutional investors to own the homes and rent them to single households. According to data cited by the Wall Street Journal.
According to the National Association of Home Builders, about 10% of new home construction is done with a “build-to-rent” model in mind.
New homes are equipped with modern flooring and furniture designed to withstand years of wear and tear, saving businesses significant maintenance costs while also making them more appealing to tenants.
“Like most companies, Wall Street real estate investors are looking at economies of scale,” Ted Jenkin, founder and CEO of Atlanta-based oXYGen Financial, told the Post. told.
“If you can buy a parcel of land and build a similar style home using similar materials, it will be much cheaper and therefore more cost-effective.”
As high interest rates reduce inventory and fewer homeowners are willing to put their properties on the market, there is a growing trend to build entire communities from the ground up.
According to John Barnes Research and Consulting, homes purchased by landlords with at least 100 properties in the third quarter of 2023 accounted for just 1% of all homes sold in the United States, and by 2022. This was down from 3% during the same period in 2017.
The data shows single-parent homeowners purchased 19.4% of all investment home purchases during the same period.
After the 2008 financial crisis, Wall Street became a major player in the residential real estate market, with companies such as private equity giants like Blackstone and Carlyle and hedge funds like Cerberus buying up thousands of foreclosed properties for $1. It became.
But this process is time-consuming and expensive, especially when inventories are very low, forcing Wall Street firms to rethink their approach.
“The distributed site model is over. It worked when many homes were in foreclosure, but this is not the future of the industry,” Brad Case, chief economist for the Middleburg Community, told WSJ.
