Could Single-Family Rentals Help Sell Homes?

For Justin Onorato, CIO of BTI Partners, which is developing a 1400-acre master-planned site called Crossprairie in Osceola County, Fla., single-family rentals represent a possible conversion opportunity within a master-planned community.

“Our experience has been that renters actually become buyers in the community,” Onorato says. “So it [single-family rentals] is an interesting way to bring people to the community. If they like the location, the next thing you know, that renter becomes a buyer.”

While Onorato doesn’t think the large, national homebuilders want to be inundated with too much of the same product, they aren’t opposed to some rental homes.

“They look favorably at having that type of product [rentals] at the right location within the master plan community,” he says.

BTI’s strategy is to buy larger sites and build different types of homes. “You’re able to maximize absorption if you’re able to offer many different products,” Onorato says. “In Osceola, we have conventional primary homes and townhomes. But we do have some interest in the single-family for-rent product. That’s a very interesting concept.”

The pandemic has made it more popular with renters.

Teleworking and social distancing have shown people the value of single-family rentals that have a home office or backyard. “Why not be in a single-family rental community as opposed to being in a high rise or dense setting in an urban location?,” Onorato says. 

Onorato says rentals have been increasingly on BTI’s radar, partially because they offer another solution that addresses housing affordability.

“Our bread and butter is the for-sale product, but we’re definitely open to rentals,” Onorato says. “We have at least one parcel and in Cross Prairie that we’ve identified for about 200 or 250 townhomes. We’re currently talking with people who develop the townhomes for rent. In our view, it’s an affordable housing solution.”

For a developer, like BTI Partners, the process of selling sites can be different if a rental builder is purchasing the land. For instance, Onorato says single-family rental builders and for-sale builders employ different land takedown strategies.

“They [single-family rental builders] want to buy their site, build their homes, rent out their homes and then maybe move on to the next one,” Onorato says. “So they’re more upfront. As the [for-sale] home builders are targeting buyers and setting up sales and marketing efforts, they like to have 600 to 1,000 lots under contract. Then they take them down equally over a two- or three-year period.” 

Single-family rental builders generally make one-off purchases. And the deal size is usually much smaller for rentals. “If we had 200 or 250 for-rent products, that is a good-sized deal for a product like that,” Onorato says.