The build-to-rent sector is heating up rapidly. In the last year, billions of dollars have been allocated to the sector, but Sudha Reddy of Haven Realty Capital says that there is still plenty of opportunity and room for competition.
"There has been a sizeable amount of capital raised and announced for BTR. But we do not believe that capital has flooded the market. There are still fewer competent BTR operators in the market than there is capital," Reddy, CEO of Haven Realty Capital, tells GlobeSt.com. "The housing market is large and fragmented so there is plenty of room for competition."
While the BTR space has grown rapidly in popularity in the last year, Haven has been active in the sector for longer, which has earned the firm a competitive advantage. "We have a long track record in the space and that continues to grow rampantly as we see more deal flow coming from existing builders and land owners across the country," says Reddy. "Execution and track record in this sector is really important as we are in the early innings."
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The firm is targeting opportunities in nine states—Nevada, Arizona, Georgia, Tennessee, North Carolina, South Carolina, Florida, Alabama and Illinois—and 11 major metros within those states. The target markets are common growth areas—Atlanta, Charlotte, Chattanooga, Greenville, Huntsville, Jacksonville, Knoxville, Las Vegas, Nashville, Orlando and Phoenix. "We expect to continue to add markets in the Southwest and Southeast as opportunities present themselves. We will continue to focus on primary and secondary MSAs across the US and I suspect that we will enter several new MSAs in 2022," adds Reddy.
Haven isn't only targeting specific properties but also specific properties. It is looking closely for buildings with large floorplans. "We believe there is an undersupply of larger floorplan rental housing across many markets in the country," explains Reddy. "As a result, our focus is to create quality dedicated rental communities that have larger floorplans for individuals or families looking for more space. We essentially rent for sale housing. In other words, our DRCs do not look or feel any different than a normal for sale subdivision."
While Reddy admits there is ample opportunity in the BTR sector, he does draw a distinction between the firm's strategy and horizontal multifamily, which has also become a popular asset class to serve BTR demand. "The horizontal multifamily product type is less dense than your typical garden style multifamily building but still contains apartment style floor plans, meaning primarily one-bedroom and two-bedroom units," he says. "There is clearly demand for both types of product types, but these communities will have renter profiles similar to traditional multifamily assets."
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Kelsi Maree Borland
