Who is the Single-Family Build-to-Rent Consumer?
By Leah Draffen
October 06, 2022
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According to a recent panel discussion, there is more than one generation 'buying in' to the single-family rental market.
In a housing market with high prices and hiked mortgage rates, it is presumed that priced out millennials are largely the target market for build-to-rent single family homes. According to the annual Zonda millennial survey, respondents reported that affordability is the main reason they have not purchased a home.
During a panel discussion between Tim Sullivan, senior managing principal at Zonda Advisory, Jacque Petroulakis, executive vice president marketing and investor relations at NexMetro Communities, and Jillian Anderson, president at Elmington Property Management, there seems to be more ages and stages, in addition to millennials, who want to rent a new, single-family home.
“Affordability on the for-sale side doesn't look like it is getting better anytime soon. What that means for us on the rental side of the world is more opportunity. The key is, how do we decode that when we do an analysis of a site? There is a whole series of things that we ask, but, really, it has nothing to do with product. It has to do with the consumer,” Sullivan said during the conversation at the 2022 Multifamily Executive Conference at the end of September.
Knowing the target customer, what they are willing to pay for, and what amenities are truly meaningful to them is key as the sector continues to expand and a consistent product needs to be built to minimize costs. These points continuously tie back to who the fundamental customer is. Revealing that the BTR consumer generally has a higher household income, Anderson and Petroulakis further outlined who these renters are.
Pre-buyers and professional millennials. Those stuck between sky-high home prices and soaring interest rates are opting for the feel of homeownership without the price tag. Falling into the millennial and Gen Z demographic, these consumers are ready to move out of the apartment space and into something a little more “grown up.” Anderson said that these renters are often choosing Elmington’s Class A product as an in between before buying. She said, “The vast majority of our renters will tell you that they are waiting to buy. They are staying in our homes maybe a couple of years right now.” Agreeable to Anderson’s point of view, Petroulakis said that NexMetro consumers have been very consistent in the 10 years the company has built Avilla communities. From market to market, professional millennials are renting in all the BTR communities, she said.
Life-change consumers. Whether a new couple, a recent divorcee, or someone ready to start a family, Petroulakis noted that she sees many renters in life transition. She said, “For someone recently divorced and has lived in single-family home for the last 10 years, they are not going to big box living. They are not ready to buy a home yet for one reason or another, so this works.”
Empty nesters and former homeowners. Also in transition, but of a different nature, empty nesters and baby boomers are discovering BTR communities as a maintenance-free, hassle-free environment. Petroulakis has found that the aging population enjoys the minimal lifestyle and simplicity. Over time, she has seen a constant statistic for NexMetro's communities. “Every consumer has a different reason,” she said. “Fifty percent of our residents in Avilla homes are coming from living in a single-family home environment, and, of that 50%, over 20% have actually owned.”
While the consumer can vary slightly depending on market, it is certain that consumers of all ages are taking advantage of BTR homes. Some renters even have a sense of ownership for the rental homes, Petroulakis noted. As the sector grows, all three housing experts agreed that builders and operators need to keep closely listening to consumers and being nimble in order to reach future success.
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