Build-to-RentNational Housing Market OutlookSingle-Family Rental

Is the Price Right? How to Find Your Build-to-Rent Community’s Rent Premium

Don Walker Headshot

Reid Randall

Don Walker

February 9, 2024

Living in a build-to-rent (BTR) community usually costs more than renting a scattered single-family home (SFR) or garden-style apartment. But there’s no set premium to add when underwriting new BTR projects. When determining rents for a new project, we look at:

  • The type of homes and who will live in them
  • The amenities and services available
  • The quality of similar rentals (comps)
  • The balance of supply and demand

Our Consulting team analyzes build-to-rent premiums to help our clients maximize their revenue based on the specific product type and location. Our studies also include rent and lease-up projections for each product type. Contact Don Walker to discuss your rental project or for help navigating the dynamic trends of your market.

We’ve learned how to price rents by studying past rent premiums by product. BTR premiums have declined in recent years for a couple of reasons:

  • More BTR competition has entered the market, reducing the product’s scarcity and novelty.
  • The sting of inflation has limited what people can spend on rent. BTR communities are setting their rents at price points that better compete with apartments.

Finding the right comps

To calculate premiums, we use a different method for each BTR product type:

For single-family detached BTR communities, we compare rent to similar SFR homes nearby. If the BTR community has good amenities, the premium is about 23% on average but varies depending on:

  • The quality and finishes of the homes
  • Whether the project offers full-time and attentive on-site maintenance
  • Whether the project has professional management
  • The extent and attractiveness of the BTR community’s amenities
  • The general quality and appeal of the scattered SFR homes

For horizontal apartments, we compare rents to the newest garden apartments nearby, with a stable premium of 18%–19%.

For townhomes, we also compare rents to nearby garden apartments. Amenitized BTR townhome communities have an average premium of nearly 10%, which can fluctuate significantly. In our case studies of 16 amenitized BTR townhome communities, the premium ranges from -12.9% to a whopping +34.5%.

Calculating premiums

We estimate a BTR premium by plotting the rents against similar homes or apartments and then calculating the percentage difference. The rent premium is visualized in the graph below by the space between the slope of the two trend lines. In this case study, we found that a BTR community had a 32.5% premium over comparable scattered SFR homes.

Case study insights

The gated community in this example offers a clubhouse, fitness center, pool, BBQ grill, and picnic area. The homes are nicely appointed with an attractive street scene, and the community has on-site maintenance and professional management. The community has commanded substantial rental premiums historically because of these factors.

Our recent national BTR Tenant Survey, which had over 6,000 responses, confirms the importance of amenities. Tenants verified that on-site maintenance and professional management were critical in their rental decisions. These two factors are more important than if the homes are new or in a dedicated rental community.

Premiums vary.

Rent premiums aren’t the same for every project. For instance, a new, amenity-rich horizontal apartment can charge much more than an older garden apartment. However, an older horizontal apartment might rent for less than a new, high-end garden apartment. And in some instances, there’s no premium at all.

We constantly monitor how different factors affect rent premiums across the country. If you need help with pricing for your BTR project, please get in touch with us.

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About The Author

Reid Randall
Manager, Consulting
Reid conducts analysis, research, and field work to prepare consulting assignments and market research reports.
Don Walker Headshot
Don Walker
Managing Principal
Don has 30+ years of experience in real estate finance and operations, including running a Top 40 homebuilder, and uses this experience to help clients make informed, strategic investment decisions in real estate. Don is passionate about build-to-rent, product and community planning, builder/developer M&A, and property and company valuations.

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