It’s the Perfect Time For BFR, But For How Long?

It’s an asset class that’s been around for a long time, but now it’s trending – and for good reason.  

Build for rent has stormed the market at precisely the right time, after the COVID-19 pandemic sent much of the workforce home and a housing shortage, coupled with rising inflation, took buying off the table for many.

And, as CoreVest Finance CEO Beth O’Brien pointed out, “Now it has a cute acronym, so it’s fun to get on board with it.”

Though confusion remains over whether the official acronym is BFR or BTR, O’Brien said what matters is that “it is solving an unbelievable need.”

O’Brien, a mortgage provider, was among the panelists at IMN’s Single Family Rent Forum (East) on Monday, held at Loews Miami Beach Hotel.

The excitement around BFR is rooted in its importance to families across the U.S. now and for the foreseeable future. An asset class with high demand and low supply, it’s considered well positioned to weather any upcoming economic turbulence.  

The question, according to panelists, is: how much BFR housing will be produced and where will it go?

“We don’t have a lot of land. You have to have a lot of land to have build for rent. You have to have land in the right places,” O’Brien said. “You have to be close to where residents want to be in order for it to pencil out and make sense.”

Demand in more remote areas could also taper off if more people return to the office, the way Roofstock CEO and co-founder Gary Beasley sees it.

‘Be Careful’ With Rents

The speakers cautioned against pushing rents up too high while times are good.

“I think we need to be careful as an industry right now. We need to be more thoughtful,” said Stuart Denyer, who’s CEO of New Western.

That means raising rents in a sustainable way, according to Beasley, who said, “If you’re renting now you’re renting, probably, for a long time.”

“We do, as an industry, need to be cognizant of the fact that things taken to the extreme can be problematic,” Beasley said. “I do think that we do run a risk, if we raise rents so aggressively. that it creates a lot of problems for residents, and it’s not necessarily in everyone’s best interests. It’s certainly not in the residents’ best interest but maybe not in the industry’s best interest.”

Denyer said it’s important to consider what consumers are experiencing in today’s economy as that will hint at what they’re likely to do – or not do – in response.

“I think we’re at that inflection period right now,” Denyer said. “We’ve been on this tear of rising prices … What does it mean to different people?”

Ignore ESG ‘At Your Peril’

ESG is another hot topic and is now part of every investor conversation, according to panelists, who said it includes focusing on energy efficiency and affordability.

The general consensus is that not only is it important to embrace ESG because a significant amount of the carbon emitted into the world comes from the real estate industry, but disregarding it now means being shut out of capital.

“Ignore it at your peril,” Beasley said. “Especially if you’re looking to retain and attract younger people.”