It is believed that, for the first time in roughly 50 years, more homes are being built with the intent to rent than to own. This is a major shift reflecting a runaway housing market that is plagued simultaneously by a shortage in the supply of homes and increasing valuations that have placed ownership beyond the grasp of many.
With that in mind, various forward-thinking companies have begun leveraging technology, in the form of equity crowdfunding platforms, to offer access to ‘Build/Built to Rent (BTR) initiatives – a practice touted as a modern solution to an ongoing housing shortage. Notably, equity crowdfunding refers to raising capital from the public by selling shares in a startup or project online. A process that is typically undertaken to access a diversified investor base, greater marketing exposure, and increased community engagement.
What is ‘Build to Rent (BTR)’
‘Build to rent’ (sometimes referred to as ‘Built-to-Rent’ or BTR) is a real estate development model where buildings or communities are designed and constructed specifically for the purpose of being rented out, rather than sold off to individual homeowners. This approach is different from more traditional models in which homes or units are built with the intention of selling them to individual buyers.
Some key characteristics of the built-to-rent model include:
- Single Ownership: Typically, the entire community or building is owned by a single entity, often an institutional investor or real estate company. This, however, is changing with the rise of equity crowdfunding.
- Professional Management: Given the single ownership model, these properties often come with professional, on-site management. This ensures consistent maintenance, service, and amenities for residents.
- Community Amenities: BTR properties often feature amenities like gyms, communal lounges, and swimming pools, enhancing the living experience for tenants and attracting potential renters.
- Consistent Design and Branding: Properties within a built-to-rent community often share a consistent design aesthetic, branding, and quality standard, in contrast to mixed-owner communities where design and upkeep can vary widely from unit to unit.
- Long-Term Focus: Owners of BTR properties often have a long-term investment horizon, focusing on generating steady rental income over time rather than quickly flipping properties for a profit.
The build-to-rent sector has been particularly popular in countries like the UK and Australia, where rising home prices have made homeownership challenging for many, leading to increased demand for rental properties. In the U.S., the concept has also gained traction, especially in response to housing market dynamics and changing consumer preferences around homeownership.
Why is Built to Rent (BTR) So Popular Right Now?
The popularity of the “built to rent” (BTR) model has surged for several reasons, influenced by economic, societal, and market-driven factors:
- Economic Dynamics:
- Rising House Prices: In many regions, rapidly escalating home prices have made homeownership less accessible for many individuals, especially younger generations.
- Changing Consumer Behavior:
- Flexibility: Renting offers greater flexibility compared to homeownership. It’s easier for renters to relocate for job opportunities or lifestyle choices.
- Delayed Life Events: Many millennials and younger generations are delaying traditional life milestones, such as marriage and having children, leading to an extended period of renting.
- Lifestyle Preferences: The amenities and community-focused environments that BTR properties often offer can be appealing to modern renters.
- Market and Investment Dynamics:
- Stable Income Stream: For institutional investors, BTR provides a stable and predictable revenue stream, especially in an environment where other assets might be yielding lower returns.
- Diversification: Real estate portfolios are diversified through BTR investments, reducing reliance on sales in volatile markets.
- Scale: Large-scale BTR projects allow institutional investors to deploy significant capital efficiently, something harder to achieve with individual buy-to-let properties.
- Societal Shifts:
- Urbanization: As more people move to cities and urban areas, there’s a higher demand for rental properties in these regions.
- Shift in Perception: Renting is increasingly viewed as a viable long-term housing solution rather than a temporary one.
- Operational Benefits for Landlords:
- Efficient Management: Owning multiple units in a single location (like a BTR community) can be more efficient to manage than scattered individual properties.
- Quality Control: With the entire community under single ownership, there’s consistent maintenance, design, and service standards.
- Housing Shortage: In many areas, there’s a housing supply gap. BTR can offer a faster solution to this problem compared to traditional housing models, as developers can quickly build large numbers of units.
- Technological Advancements: Modern construction techniques, like modular construction, can speed up the development of BTR projects, making them more financially viable.
Industry Players
For those interested in learning more about equity crowdfunding platforms that routinely offer BTR opportunities, make sure to consider and learn about the following.
1. Fundrise
Fundrise is a U.S.-based platform that allows individual investors to invest in commercial real estate projects, including built-to-rent housing. The platform is known for its eREITs (electronic Real Estate Investment Trusts), which are diversified portfolios of real estate projects.
Source: X @fundrise
Founded in 2012 by Ben Miller and his brother Dan Miller, the company sought to democratize real estate investment by providing an alternative to traditional investment methods. Instead of relying on Real Estate Investment Trusts (REITs) or direct property ownership, Fundrise offers eREITs and eFunds, which are specially designed investment vehicles that pool money from multiple investors to invest in real estate.
The platform gives ordinary investors the opportunity to access real estate deals with relatively low minimum investments, often starting at just $500. With its tech-driven approach, Fundrise aims to provide transparency, diversification, and ease of use, allowing users to track their investments, view project updates, and receive dividends through the online dashboard. Over the years, Fundrise has grown significantly in popularity, catering to a broad spectrum of investors looking for a more hands-off approach to real estate investing. Its innovative model and user-friendly interface have positioned Fundrise as a leading player in the real estate crowdfunding industry.
2. RealtyMogul
RealtyMogul is another prominent U.S. platform offering crowdfunded real estate investment opportunities. The platform allows both accredited and non-accredited investors to invest in a variety of commercial real estate ventures.
Source: X @Realty_Mogul
Launched in 2013 by Jilliene Helman and Justin Hughes, RealtyMogul aimed to provide individual investors with access to institutional-quality real estate deals, which were previously mostly reserved for large institutions or high-net-worth individuals. The platform offers a mix of investment vehicles, including private placements, Real Estate Investment Trusts (REITs), and 1031 exchanges.
With a tech-centric approach, RealtyMogul emphasizes transparency and thorough vetting of deals. Users can choose specific properties to invest in or opt for diversification through the company’s curated portfolios. By merging technology with real estate expertise, RealtyMogul has become a key contender in real estate crowdfunding, catering to both novice and seasoned investors.
3. CrowdStreet
CrowdStreet connects investors with institutional-quality commercial real estate investments. Its platform is more geared toward offering a wide range of real estate investment types, often including BTR opportunities.
Source: X @CrowdStreet
Notably, CrowdStreet has, on various occasions, taken the time to share its own insights into the growing trend of BTR – one that it describes as taking “…the best aspects of single-family rentals and upgrades the experience by developing all homes inside a professionally managed community”. It has noted the following as playing a role in driving this trend.
- Rising Interest Rates & Cost of Homeownership
- Capital Flows into BTR
- Shifting Demographics
- Work from Home
This platform was founded in 2013 by Tore Steen and Darren Powderly. Unlike some competitors, CrowdStreet’s primary focus is on individual accredited investors and their unique needs. The platform provides direct investment in individual properties, allowing investors to pick and choose specific deals that align with their investment goals. One of CrowdStreet’s distinguishing features is its marketplace, where a variety of real estate sponsors list their offerings, enabling investors to diversify their portfolios across property types, geographic locations, and investment strategies. By providing tools, educational resources, and a streamlined investment process, CrowdStreet has established itself as a leading platform in the real estate crowdfunding domain, enabling a broader audience to engage in commercial real estate investing.
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