The idea has been kicked around ever since the great housing recession. Indeed, lots of “used” homes that were under water with the bank got gobbled up by investors and then rented out. Have you considered new homes designed specifically for renters? The idea of new single family for rent has gained traction over the past couple of years. In fact, we’ve been working on single family for rent since the end of 2017. What have I learned so far during the process? Let’s delve into some takeaways.
If you’re the builder, you may have considered this as an alternative source of income, especially in a down market. Consider it a long-term investment. Perhaps you’re the builder for these new companies that already have a pool of homes they rent. On average, I’m told they will hold the houses 5 to 10 years before selling them – wanting to avoid the maintenance of an older home.
From the renter’s point of view, there are many reasons to rent. I like to break them up into two categories, Renters by Choice and Renters by Change. There are many reasons why someone is a Renter by Choice – it could be their choice or the bank’s choice, if you get my drift.
Renters by Change
This week, my focus is on Renters by Change – be it a career change or lifestyle change. Various factors and scenarios can lead someone to rent: Many newcomers to a market like to get to know the area before deciding where to place their hard-earned down payment.Perhaps one spouse moves first while the other stays back until the kids finish out the school year.A change in marital status – newlyweds to newly divorced or “just separated”.The death of a spouse has been the impetus to change residence. In short, renters range from newly wed to nearly dead (sorry, that was dark, but I couldn’t resist the rhyme) and everything in between. This means you should consider a variety of house sizes. The smallest we’ve done is less than 1200 sq. ft. without a garage. The largest, a 3000 sq. ft., 5 bed 50’ wide house.
I know what you’re thinking. How is a new rental house any different to a new For Sale house? On one hand, you don’t need to concern yourself with buyer options. Decide what you want and build it. You can also predetermine your streetscape with different plans, elevations and materials and colors. However, before you take existing plans and put them up for rent, there are other things to consider as well.
Let’s face it. If you owned the house, you would take better care of it. Think about the last time you rented a car. Were you as meticulous with it as you are with your own car? While you may not have trashed it, you probably weren’t crawling underneath the seats to vacuum every nook and cranny.
Single family rentals suffer the same fate. Floors need to be bulletproof. My clients insist on the most durable vinyl wood-look plank flooring – primarily because of pets. Countertops can be another source of anguish if red wine is left too long on unsealed granite. Showers should have solid surface walls, perhaps even a prefab unit. Face it, if it was your house, you’d be more likely to be concerned with the mold growing in the grout – or worse – the grout that has crumbed leaving the shower wall open to water intrusion.
The exterior of the home needs to be durable too. One operator likes brick exteriors because they are durable and don’t show the mildew as quickly as other exterior materials. Unless you’re building on concrete block, I would avoid stucco-on-frame because renters will never tell you if they think there’s a leak somewhere until it’s too late.
We’ve all seen them. Perhaps the maniac movers are just well-intended friends or the cheapest labor they could find on Craig’s list. Now, imagine the most under-qualified mover taking the largest, heaviest piece of furniture up the stairs, around the corner, and down the hall to the master bedroom. If they didn’t take out the handrail on the stairs, count yourself as lucky. What about all the exposed corners?
Give the movers a wide berth and minimize exposed corners. And put the master bedroom, which will have the biggest bedroom furniture, closest to the stairs.In case I’m not painting the picture in it’s entirety, clicking the picture below takes you to a 30 second YouTube clip from F.R.I.E.N.D.S. demonstrating an all-too-familiar scenario…
Managing the Mechanicals
How often do you change the air filter on your HVAC equipment? As often as the manufacturer suggests or as often as you remember? Renters will change it less – not great for the investment of the equipment. This could be a service the property management offers, so let’s locate the equipment where they can access it quickly and easily – probably not the attic. They could address the smoke detector batteries at the same time. To avoid damage when the tenants are away, place the water heater in the garage in case there’s blow out.
The Dog is the Disrupter
Often it is the beloved family dog that forces the renter to only consider single family rentals versus an apartment. Appealing to the care of the dog could be the game changer. This could mean providing a pet room where the dog’s crate lives – in case they get separation anxiety. It could also mean providing a covered back porch, so the homeowner can let the dog out in the fenced backyard to do their business in the rain without getting wet.
I certainly don’t want to give you the impression that all renters are recently released gorillas from the zoo. More often than not, they’re are just good folks who find themselves in chaotic transition and need a safe refuge that they don’t have to worry about to raise their families. The bottom line is, “New For Rent” can be an excellent way to fulfill a housing need while creating income for your business – but only if you fully commit to it! As more families struggle to save for a down payment, single family rentals could be the solution many are looking for.
Have you considered or started building single family homes for rent? Do you have any reservations to the prospect? I’d love to know what my readers think about this!
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This post was written by Housing Design Matters