Graphic of "For Rent" sign.

Investors Try Out New Approach: Build to Rent

As the number of foreclosed homes dries up in some markets, some investors are looking elsewhere for properties to turn into rentals. With the rental market still strong, some investors are either buying finished single-family homes that they can use as rentals or even developing vacant lots to turn into rentals from the ground up, The Wall Street Journal reports.

Last year, 5.8 percent of single-family home starts were being built as rentals, the highest share since 1974, according to an analysis by the National Association of Home Builders.

“For investors, the interest in new homes reflects their belief that the rental market will continue to see strong demand and rising rents,” The Wall Street Journal reports.

For example, Colony Capital LLC’s Colony American Homes has added about 1,000 new homes into its 15,000 rental portfolio.

Apartment rents have been on the rise, increasing 11.3 percent since 2009, according to Reis Inc.

Investors have turned a high number of single-family homes into rentals. As of last year, about 15 million single-family homes nationwide were rentals — up from 10.8 million in 2005, according to the research firm Zelman & Associates.

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