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Build-for-Rent: A Real Estate Trend to Keep an Eye on in 2023

11 Jan, 2023

When it comes to investing in real estate in 2023, one area some of your clients may be interested in is build-for-rent (BFR) opportunities. In fact, right now there is a big need for single family rentals due to inflation and interest rates. Which is why for those that want to invest in BFR real estate, now may be a great time. 

What is a BFR investment? 

Usually, BFR focuses on building single family homes with the sole purpose of renting them out. This makes them stand out from a typical renovation or rehab. According to the National Association of Home Builders (NAHB), a lot of investors are focused on BFR right now. In fact, in its November 2022 “Eye on Housing” report, NAHB stated that, “…there were 68,000 BFR construction starts over the four quarters ending in Q3 of 2022, up 42% compared with 48,000 such starts during the prior four-quarter period.” 

The demand for BFR homes is growing 

So much has impacted the real estate landscape over the last three years. Prior to COVID, many BFR properties were solely in urban areas. However, with the new work-from-home era upon us, this has opened up a lot of opportunity (and demand) for single family homes everywhere. People now have the benefit of working from home, and they want that home meet their changing needs. That, coupled with high interest rates and inflation, and many people are looking to rent for the time being. And for those with the means to invest, now could be the time to cease the opportunity! 

Understanding the benefits of investing in BFR in 2023 

Whether your client, or yourself, are thinking of investing in a BFR home in 2023, here are some great benefits to keep in mind when deciding: 

  • Did you know BFR homes often qualify for federal loans? This means your payment will be a lot less than a traditional mortgage. 
  • When it comes to single-family-home rentals, your tenants are often long-term. Unlike apartments that see tenants come and go frequently, BFR renters are often looking for a place to grow roots for a while. That means you can count on steady revenue coming in.
  • You can charge a good amount in rent right now. Based on the demand for single-family-homes for rent, your tenants will be willing to pay more.
  • One big difference in flipping a home and investing in BFR is that you get to choose the location. Location is KEY to the success of this type of investment. You can look at the market, demographics, etc. in different areas and then find a lot to build on. It means you have strategy on your side from the beginning.

One thing is for certain, with the current housing market we will most likely be seeing the uptick in BFR properties for quite a while. If you have clients who have been thinking about investing in real estate, now may be the time—and you can help by educating them on their opportunities. You may also have a lot of clients who need help finding a BFR home to actually rent. Understanding this concept, and how it impacts your portfolio is a great strategy for 2023. 

To learn more about real estate investment tips, check out this great article “New Year, New Real Estate Investment: Five Tips for First Time Investors.” 

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