Between them, record high house prices, plummeting inventory and rising interest rates have forced many would-be buyers out of the market. As a result, rentals are their only alternative, although this market is also over-stretched. However, the recent trend for built-to-rent in Florida provides the opportunity and nowhere more so than in Orlando, the state’s hottest market.
Boom in built-to-rent in Florida
Experts say the biggest challenges currently facing the US housing market are lack of supply and burgeoning prices. “There are huge affordability challenges in the housing market,” said David Howard, Executive Director of the National Rental Home Council (NRHC). “The reality is that there just aren’t enough homes for people to rent.”
Built-to-rent provides the answer and allows families to live in single-family homes, often with private outside space. And Florida is one of the nation’s hot spots for this type of investment.
Orlando and Tampa are particularly popular and built-to-rent communities in both metros have boomed over the last few years. In Orlando, for example, they made up just 3% of rental providers in 2019. By late 2021, the figure had skyrocketed to 26%.
Attractive option all-round
For home builders, built-to-rent in Florida provides access to a booming investment market and allows them to brand a community as their own. Large-scale developers such as American Homes 4 Rent and Taylor Morrison have built major communities in central Florida around Orlando and Tampa.
The Orlando metro area currently has around 335 built-to-rent units, constructed over the last decade. Over 1,170 more are under construction and some 800 in the pipeline.
Types of built-to-let properties
The vast majority are single-family homes with three to five bedrooms. They are usually spacious and have their own private outdoor space, a feature in high demand since the arrival of the pandemic.
Typical monthly rentals cost around US$2,100 for four bedrooms, about 10% more than tenants would expect to pay for an apartment in Orlando or Tampa.
Main demographic targets
Homes that are built-to-let in Florida tap into two demographics: millennials and baby boomers, two of the largest population groups in the US. A built-to-let single-family home offers an attractive option for millennials with young children. It allows them access to accommodation without having a down payment or meeting the cost of rising mortgage rates.
Baby boomers also favour built-to-let. Many have downsized and no longer wish to own a property or be responsible for its maintenance. A built-to-let home also gives them flexibility on location, permitting them to be near their children and grandchildren.
Attractive investment option
Howard believes that unless house prices drop significantly, built-to-let homes have a ready market. They form an attractive option for both big and small investors, from large-scale developers to individuals who wish to tap into this ready market.
(Source: National Rental Home Council)
