The global trend of demand for affordable housing is rising exponentially owing to various intricacies like economic uncertainties, increasing sub-urban relocations, higher costs of owning a home, and changing consumer preferences.
This is where build-to-rent comes into picture and eases things for those looking at economical housing solutions and for investors looking at a relatively safe asset class which brings in passive income and generates long term wealth.
Build-to-rent is a submarket within private equity real estate that is growing quickly across the world and particularly in the United States. As a sector, Build-to-rent is fast becoming a proven asset class within the larger real-estate investment basket.
Given the nature of the asset, institutional investors have a smart opportunity at their behest in the form of build to rent – be it a large pool of single family homes, or a group of multi family residences or even a mixed bag of all variations of a build to rent house. The variety only adds to the effectiveness of the investment.
Institutional investors have an integral need to manage strategic investments and at the very least meet the ROI expectations, if not exceed it. An ever increasing risk factor of the crypto market, the volatility in the equities market, and the issues with bond yields, push for a foray into substantial alternative asset class for institutional investments.
Real-estate investments being a gold-class asset segment, could be the market for institutional investors – both as hedge, and core investments portfolio segment. The lack of homes for sale and record-high prices and interest rates have made it hard for a significant number of Americans to buy their own homes. Build-to-rent gives this generation a great alternative while also giving investors good returns.
Despite some strategic testing kinds of investments taking place in the build-to-rent options earlier, post-2017 economic conditions, large-scale investments like Blackstone and other institutional investors realized the true potential of the rent-to-build portfolios they built up.
As more investment groups focused on single-family homes leading to a new kind of asset that investors and affordable housing seekers had never seen before.
Some of the key reasons as discussed in Forbes study, as to why institutional investors can see the Build-to-rent as a potential option for wealth generation, and passive income set-up is
- 60% of Americans have affordability issues to buy a home but need affordable housing, thus, the build-to-rent segment is a good alternative to this 60%.
- 36% of rental households, or about 16 million people, have moved out of multi-unit or large-family apartment options and into single-family homes.
- The severe supply shortage is the other key reason for the prominence of build-to-rent options
- Benefits of better and consistent cashflows in comparison to the conventional private equity real estate investments
- Sustainable option, as the volumes, are big, and the managed services in the build-to-rent have more options
According to Bloomberg, Institutional capital worth billions of dollars is going into private equity in general. The real estate segment of private equity holds real promise backed by statistics and numbers which are a testament to the returns it generates.
Build to Rent (BTR) becomes an even more focused asset class which could potentially help generate long term wealth and grow the size of AUM handled by institutional investors. This becomes even more true given the record-low number of homes for sale and a considerable chunk of the populace who want to buy a home.
Private equity real-estate investments strategically managed in the build-to-rent segment could be the next driver of ROI yields which is more than the cost of living, a source of consistent passive income leading to long term wealth generation and appreciation in the AUM corpus.
At 33 Holdings, we have an experienced team of investment professionals who team up with subject matter experts from within the real estate market to produce the best possible results for our investors – be it HNWIs, family offices or institutional investors.
Call us at 678.824.4508 or email ir@33holdings.com for an in-person consultation.
