Welcome to the November edition of the Investor Newsletter! This month’s newsletter breaks down two approaches to tapping into the rental market: Build-to-Rent and Buy-to-Rent models. Plus, don’t miss out on our “Did You Know” spotlight on absorption rates and current trending SFR headlines. Let’s get into it!

Build-to-Rent vs. Buy-to-Rent: 2 Paths, 1 Market

In the single-family rental market, there is a growing fork in the road: Build-to-Rent (BTR) or Buy-to-Rent (B2R). Both serve the same demand for quality rentals, but take very different routes to get there. For investors, understanding where each model thrives, and how they can complement one another, may be the key to potential long-term portfolio success.

BTR, where homes are built specifically for renting from the start, has risen in recent years. According to a recent market analysis, BTR capital allocation jumped from $10 billion in 2020 to $58 billion in 2024. BTR communities appeal to renters who value new homes, professional management and amenities, while often at a lower cost than owning an equivalent home. Additionally, BTR homes lease quickly and occupancy is higher, averaging 97.3% compared to 92.7% occupancy for existing homes. Adding to the appeal, national builders like Lennar are offering discounts and incentives to investors in select markets to purchase brand-new, ready-to-rent homes at more attractive rates (more information here).

B2R, on the other hand, is the historically traditional model of purchasing existing homes and leasing them. A 2024 market overview notes that this strategy still makes up the majority of the market. Unlike BTR, which is often utilized by institutional investors and/or large builders, B2R is driven more by smaller, local or “mom-and-pop” investors who buy individual homes. B2R is typically preferred for mature neighborhoods, affordable price ranges, and areas where homes can be renovated to add extra value.

So where does each model usually thrive?

• Build-to-Rent tends to perform well in markets where there is available land to support new construction, consistent population growth and strong tenant demand. While Sun Belt cities once dominated BTRs, about 65% of new projects are now emerging in the Midwest and Mountainwest, showing these models are being adopted nationwide.
• Buy-to-Rent, on the other hand, typically excels in established neighborhoods and entry-level markets with good renovation potential. These properties may perform well in established communities where infrastructure, community amenities, and tenant demand are already in place.

Both models play key roles for investors in today’s rental market. With Build-to-Rent, investors get new homes with fewer maintenance costs, but typically higher entry prices. Conversely, Buy-to-Rent can offer flexibility and strong returns if managed well. For investors, success may not be choosing one over the other, but understanding where each model fits best and how to balance both for long-term growth. Reach out to us any time to discuss which strategy is best for you!

Did You Know: Absorption Rates

Everything You Need to Know in 60 Seconds!

• What is it? The absorption rate measures how quickly available homes are selling or being rented in a specific market over a given period, which can indicate sales and rental demand and market strength. A high absorption rate means properties are moving fast, meaning there is strong demand, while a low absorption rate may warn of oversupply, slower activity or weaker tenant demand.
• Who uses it? Investors, property managers and developers use absorption rate as a tool to gauge how fast or slow the market is moving. This can help decide when and where to buy, anticipate vacancy, set pricing, and plan or pause on new builds.
• Why should investors care? Absorption rate gives investors a snapshot of supply and demand balance. When absorption is high, it may signal a strong rental market and faster lease-ups, which is ideal for acquisitions or rent growth. When it drops, investors can anticipate longer vacancy periods or price pressure. Watching this metric helps investors stay one step ahead of market shifts!
• When does it matter? Absorption rates can be useful during shifting market cycles (when interest rates change, new supply hits the market, or tenant demand cools). Staying ahead of the game and watching this metric can help investors act on potential upcoming market trends and pricing.
• Where can you find this data? Absorption data is typically found in Multiple Listing Service (MLS) reports, Realtor.com market updates, and analytics platforms like CoStar or CoreLogic.

SFR Trending Headlines

Stay Up to Date on the Hottest SFR News & Stories

• Renters Want to Own… But Don’t Think They Will
• Supply, Rent and Affordability: Goldman Sachs Breaks It Down
• Big Myth Busted: BlackRock Isn’t Buying All the Houses
• Key Takeaways from October’s Property Market Data
• Are Renters Catching a Break as Builders Catch Up?

Rate Update:

We've Partnered with LendingOne to Bring You The Best DSCR Rates & Terms!

Until Next Month!

The Healdsburg Property Management Team