Is Now the Time to Consider Investing in a Build-to-Rent Home?

As the kids return to school and fall is in the air, the red-hot real estate market in Charleston is still going strong. With interest rates rising, however, and the cost of living increasing, there are concerns that the market might soon have to adjust. What that means for potential homebuyers is uncertain, but what is certain is that many are looking to make Charleston their home and not finding success in becoming a homeowner. That is driving rent throughout the South up. That begs the question of whether now is a good time to consider investing in a build-to-rent home, or put it on the back burner and throw your investment funds elsewhere. These are the suggestions that we made to our RedFin audience.

What are Build-to-Rent Homes?

Generally speaking, build-to-rent homes are homes that are built with one mission in mind: to generate income for the investor. It isn’t that they can’t make good second homes for an investor who chooses a great vacation destination for their build-to-rent home; however, the main purpose is renting it out to provide a stream of income. That rent money can be invested back into the home to pay off any mortgage that it carries. In essence, it is like building a home to make money and have someone else pay the bills.

Why Are They Becoming So Popular?

They are becoming so popular because with interest rates on the rise and an all-time inventory low in the housing market, many are deciding that it might be better to rent and ride it out for a bit to see where housing prices land. If you invest in a home right now, there is a good chance that you might be paying for it at the top of the market, and no homeowner wants to be upside down on their mortgage in a couple of years if the market drops out, like in 2009. A build-to-rent home offers tenants all the luxury that comes with a new home, including new appliances, and eliminates hassles that you get with other rentals.

Pros and Cons of Build-to-Rent Homes

Pros

If rental prices rise, which they are forecast to do, then you not only get the luxury of additional monthly income; the renters will help to pay down your mortgage and utility costs. Another pro is that you own the home, and as mentioned, if you buy in a popular vacation spot, you can have a second home to enjoy when you want to get away. And once the home is paid off, then it is your home and investment for the long term. Throughout history, real estate has been one of the safest places to invest, because it is a physical property that can be bought and sold at any point.

Cons

The cons of a build-to-rent home are obviously that you have to apply for a mortgage and be approved, which might not be that easy to do. Also, if you don’t choose the location wisely, it can be difficult to rent out. If no one rents the house and you are relying on renters to help with the mortgage and utility expenses, that can put you in a bind. Renting can be difficult on a home, which means that its depreciation might take a bigger hit with renters than if you bought the home to live in yourself.

How to Invest in Them

Getting approved for a second mortgage is not always easy. It might take going beyond traditional financing options to get the financing you need. It can be wise to find other investors who are willing to partner up. That way, you can use the profits to reinvest into more homes and then really enjoy accumulating wealth. Non-QM loans are different in what you need to be approved and are always an option to consider.

If you are looking to invest over the next decade, times have never been more uncertain. With interest rates on the rise and inventory remaining low, it is probable that rental prices will climb, which means that it is also a great time to invest in build-to-rent homes. Is it a good decision for you? Maybe. If you are interested in finding property and building a second home for business or pleasure, then Sea Turtle Properties is here to help. We can help you find land in the best locales and start becoming a landlord to earn multiple streams of income today!

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