Single-Family Rentals, Build-to-Rent Communities and Detached Homes: What is the Difference?
The emerging single-family rentals (SFR) communities have rapidly grown in popularity, filling the void between traditional multifamily rentals and owning a home.
A common misconception within the real estate industry is that single-family rentals (SFR), build-to-rent (BTR) communities and detached homes for rent are synonymous with one another.
Although these three types of housing may seem similar at first glance, subtle yet distinct characteristics set them apart from one another. Let us break it down.
Multifamily vs. single-family asset class
Multifamily properties are residential buildings that can house multiple families or households, ranging from small apartment buildings to large complexes made up of hundreds of units. In comparison, SFRs are designed to accommodate a single-family household and offer more space than multifamily properties.
SFRs are an excellent option for renters who prefer the experience of living in a standalone home without the commitment and responsibility that comes with homeownership. A wide range of options exists – from small one-bedroom homes to large luxury estates. SFRs provide an ideal solution for many residents as the rental itself feels similar to owning an entry-level starter home.
The emerging single-family rental market
Recently, SFR communities have rapidly grown in popularity, filling the void between traditional multifamily rentals and owning a home.
As home prices and interest rates remain at an all-time high, securing a home loan can be seen as a daunting task for many. Consequently, it has led to a shift in the housing landscape; significant growth is being observed in the SFR asset class with a particular emphasis on the rise of BTR communities.
What are build-to-rent communities?
BTR communities are a subset of the SFR asset class and are gated communities consisting of single-family homes for rent.
These communities are primarily developed in suburban areas, where land utilization can be maximized. They are highly sought-after, offering family- and pet-friendly accommodations with private-fenced backyards, controlled access entry, and various amenities – inclusive of pools, fitness centers, and community clubhouses. In partnership with ownership groups, property management companies handle the day-to-day admin and maintenance operations of BTR communities.
Investors are drawn to BTR due to high demand from renters and the financial viability of the asset class. Additionally, developers prefer BTR as they require less land compared to detached homes.
Are detached homes included in the SFR asset class?
Detached homes, which are standalone properties owned by landlords or property management companies and rented out to tenants, are also part of the SFR asset class. These homes provide residents with more privacy and autonomy over their living spaces than multi-unit buildings such as apartments or townhouses.
The key identifiers to determine if a community contains detached homes are:
- Detached homes require more land and separation, opposed to homes within a BTR community
- Detached homes do not have to be within a gated community
- Detached homes do not come with a standard set of amenities that is traditionally expected at a multifamily community; instead, they are part of an HOA.
Advantages of the SFR asset class
Arguably the greatest advantage of single-family rentals is that they offer more control over the asset. Investors can choose the location, size and condition of the property, and can make changes and upgrades as they see fit. They also tend to have lower maintenance costs than multifamily properties.
Today’s housing solutions are centered around providing residents with an exceptional living experience tailored to their needs. Build-to-rent communities, detached homes or any other type of single-family rental allow residents access to the convenience of apartment living without having to sacrifice the added perks of owning a home, including the luxury of space and privacy.
Renters can now confidentially choose a space that feels like home.
Source: Rental Housing Journal
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