Not All BTR Is Created Equal

As build to rent has grown, so has the use of the term “BTR.”

Today, it can be used to describe everything from a portfolio of single family rental homes scattered throughout a city to a professionally planned community of townhomes designed specifically for renters.

But those are very different products.

For residents, the experience can vary significantly. For developers and investors, the differences can be even greater. Understanding what sits behind the BTR label is important because the type of housing, how it was developed and how it operates can all influence demand, costs and long term investment performance.

Purpose Built BTR

Purpose built BTR communities are exactly what the name suggests. They are designed and constructed specifically for rental from the beginning. Rather than adapting an existing housing product to the rental market, every part of the community can be considered through both the resident and investment lens.

That includes decisions about location, density, floor plans, parking, garages, outdoor space, amenities, landscaping and ongoing maintenance.

At Sallee, our BTR communities primarily feature townhomes and ranch products that offer many characteristics associated with single family living. Residents can have private entrances, attached garages, multiple bedrooms and more personal space while still enjoying the flexibility of renting and the benefits of a professionally managed community.

Purpose built communities may also include amenities such as pools, clubhouses, playgrounds, dog parks, fitness areas and shared green spaces. The result is a rental product that sits somewhere between the traditional apartment experience and homeownership.

Scattered Site Single Family Rentals

Single family rentals are not new. What has changed is the scale at which some investors have acquired and operated them. A scattered site rental portfolio may include dozens or even hundreds of individual homes located throughout different neighborhoods.

For renters, these homes can provide many of the benefits of traditional single family living, including private yards, driveways and more separation from neighbors. From an investment and operational perspective, however, scattered site rentals are very different from purpose built BTR.

The homes may have been constructed by different builders at different times with different materials, systems and floor plans. Maintenance teams may need to travel between properties, and the homes may be spread across multiple municipalities or submarkets.

Purpose built BTR, by comparison, provides the opportunity to create consistency from the beginning. Homes within a community share construction methods, materials, floor plans and maintenance standards, which can create efficiencies throughout the life of the investment.

Apartments and Traditional Multifamily

Traditional multifamily serves another important segment of the rental market.

Apartments can efficiently provide housing at greater densities and often offer extensive shared amenities. For many renters, particularly those who prioritize location, convenience or a smaller living footprint, apartments are an attractive option.

BTR is not intended to replace that model. Instead, it provides another choice for renters whose needs may have changed.

A renter might need an additional bedroom for a home office, more storage, an attached garage or additional space for children or pets. They may want the feel of a neighborhood but still prefer the flexibility of renting. That is where purpose built BTR can fill an important gap in the housing market.

Why the Differences Matter to Investors

From an investment perspective, putting all rental housing into one category can overlook some important distinctions. A purpose built BTR community, an apartment building and a scattered site portfolio may all generate rental income, but the way each asset is developed, operated and maintained can be very different.

For BTR investors, factors such as land basis, density, construction costs, product mix, achievable rents, absorption, operating expenses and resident retention all matter.

So does the design of the community itself.

The location of a garage, the amount of green space or the decision to offer two bedroom versus three bedroom floor plans may seem like individual development decisions, but together they help determine who the community serves and how it performs. That is why successful BTR development requires thinking beyond simply building rental homes.

The Resident Experience Is Part of the Investment

One of the most important lessons we have learned through developing BTR communities is that the resident experience and investment performance are connected.

A community has to provide something renters value.

The right floor plans, quality finishes, useful amenities, professional management and well maintained common areas all contribute to the experience residents have within a community. When the product meets a real housing need, it can help support demand, lease up and resident retention.

For investors, understanding that connection is important. BTR is ultimately a real estate investment, but the performance of that investment begins with creating housing people actually want to live in.

Looking Beyond the BTR Label

As build to rent continues to mature, understanding the differences within the sector will become increasingly important. Not every rental community is designed the same way. Not every BTR investment has the same strategy. And not every renter is looking for the same housing experience.

The term BTR may describe how a home is occupied, but the real investment story is found in how the community is designed, built and operated. At Sallee, we believe purpose built BTR works best when those decisions are considered together from the very beginning. Because ultimately, successful BTR is about more than building rental homes. It is about creating communities that make sense for residents, municipalities and investors alike.