By Lynn Pollack
February 07, 2022 at 07:42 AM
Traditional BFR companies are branching into duplexes and townhouses to make infill locations work.
As the build-for-rent space continues to enjoy robust demand in both urban and secondary cities across the US, it’s getting tougher for developers to find suitable locations to build single-family detached homes, according to one industry executive.
“We’ve been very fortunate that our portfolio has a lot of infill locations. But those are becoming more and more challenging to find,” Mark Wolf, CEO and founder of Texas BFR builder AHV Communities told John Burns Real Estate Consulting’s Dean Wehrli recently.
Wolf said AHV will soon announce acquisitions and developments that will function as “holes in the doughnut in very good locations” featuring “true” single-family detached homes, which he defines as a three, four or five bedroom home on its own traditional lot.
But while attached product like townhomes are typically not considered part of the build-for-rent category, Wolf says traditional BFR companies are branching into duplexes and townhouses to make infill locations work.
“But even we have morphed a little bit into doing some duplexes to make these infill locations work, to pencil, and even townhomes,” Wolf told Wehrli. “We got into the town home business recently because we’ve had some exceptional locations that warranted our involvement. But maybe four years ago when capital wasn’t prevalent, that we would have maybe passed on. So our brand has actually branched out a little bit as well. We’re not just doing single family detached homes anymore.”
Despite that, he said, designing quality product remains paramount.
“For us, we have a long-term hold mentality,” Wolf said. “Now, whether we sell it in three or five years is a whole other story. But our hold period right now with our capital is 10 to 20 years. And so, when you have that mentality, you build a different product. You design a different product…I think, look, first off, location, and second, what product?”
That analysis includes both amenity and management maintenance, according to Wolf.
“These are designed to be true functioning communities for the duration, that we’re not building a trade, we’re not building a flip,” he said. “We care about the quality inside and outside. We care about the design and flow of the community, as well as the house and the efficiency to live in that house and maintain it and operate it over a long period of time.”
The BFR space has been flooded with new capital funds as of late. The most recent example comes from TruAmerica Multifamily, which has just launched a BFR development division for townhome and single-family rental communities in suburban submarkets that align with its existing multifamily platform.
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