Growing Demographics, Demand Prompt Developers To Bring Build-To-Rent Trend To Colorado
Young adults and retirees have rented single-family homes from mom-and-pop landlords or blue-chip investment firms for years, but the idea of building brand-new homes specifically for the purpose of renting them has been growing for a decade, and it is now headed for Colorado’s Front Range in a big way.
Developers both local and otherwise are working on build-to-rent housing projects in Colorado, with their sights set on appealing to the growing number of residents who want the space of a home, with things like a garage and a yard, but without the cost and responsibility of owning a home.
In markets like the Front Range, where buying a home is increasingly difficult for most people, but where the population continues to grow, the BTR model offers a solution, AHV founder and CEO Mark Wolf told Bisnow. AHV began developing BTR homes in 2012 after realizing the standard way of amassing a single-family for-rent portfolio — buying up existing homes to create a patchwork collection of properties — lacked efficiency.
Wolf and his partners recognized they could apply the same amenities found in apartment complexes, like pools, fitness areas, centralized management and coordinated maintenance, to single-family developments, benefiting residents and management companies alike.
After 10 years of operation beginning in Austin, AHV is making its move on the Colorado market. The company just closed townhome development deals in Colorado Springs and Broomfield, and it has a second Broomfield deal in the works as well as one in Loveland.
Wolf and his company spent years eyeing Colorado for expansion as the population grew and homes became more difficult and costly to come by.
They’re not the first ones to the Colorado market with this product, though. In 2018, NexMetro Communities broke ground on Avilla Buffalo Run in Commerce City, a 123-home development specifically for renting. Last year, Walton Global Holdings announced plans to put up 600 single-family for-rent homes in Lochbuie.
Today’s investors are increasingly on the hunt for the best yields they can get, and the long-term income potential of rental properties offers that, Wolf said. With a rental property, he said, the yields are smaller, at 7% to 8%, but are collected for as many as 20 years, where the larger yield from selling a home is a one-time payoff.
Of course, rental owners and managers must reinvest in their properties with repairs, paying employees, upgrading common areas and other maintenance needs. But, Wolf said, the long-term payoff of collecting rent makes the investment a worthwhile one.
Developing these projects is not without its challenges. Like any kind of construction, labor and materials are costly and difficult to come by. Getting the right zoning can also pose a specific challenge, due to the attitudes and stigma around the idea of having renters in a community. Renters are viewed in some cases as caring less about their temporary properties and communities, an idea that can sometimes make it difficult for developers to move rental properties through the zoning process in residential areas.
But Wolf argues that today, the idea that everyone wants to and can buy a home is outdated, comparing it to the sentiment that everyone should go to college.
“Where’s the path for people who don’t want to go to college?” he said. “We have people stuck in the past with this mentality that everybody has to own a home.”