Hope you had a great July 4th, and if you were lucky enough to snare a 5-day weekend, then good for you !
It always amazes me to see the things people do to adapt to the financial environment, but when you start looking at what large companies do to adapt, you quite often will see a slower response, as the inner mechanics all need to line up, however, that is not always true!
With the bump in May building permits spanning both single and multi-family (apartment), this indicator of future construction made it to the best levels seen in about 4 years. With this market direction, a large number of Developers are building single family homes as rentals, per a recent article on CNBC.com, titled, "More Builders Are Turning to New Market: Rentals".
The interesting point, the article says, is that, "Historically, builders did this largely in low-income, government-subsidized housing projects", but goes on to say that the "market is quite different today." One such developer mentioned was Joe Petersen of Insight Real Estate Strategies in Texas, who said that "there are so many people with mortgage issues … and just recognizing these issues will not go away soon, we felt like how could we deliver high quality rental housing in a product that single family homeowners would appreciate?”. The answer: high-end homes built specifically as rentals, which takes all of the variables into account (mortgage industry, economy, etc).
Petersen is clearing land and raising money to build single family homes just outside Ft. Worth, and does mention that a lot will be different in this type of construction, including the maintenance and business plan, but he "believes demand is strong enough for him to be able to charge premium rents"
Petersen is banking on the fact that since rent homes are typically "not the nicest homes", that he will be able to offer people something different, "having a professional staff on site, maintaining and managing it", in which they can "offer a lifestyle very different from a part-time Realtor or a homeowner who’s renting it because he can’t sell".
Now, back to those "rent homes". Per the CNBC.com article, Beazer Homes recently launched a “pre-owned” business, “for the purpose of acquiring, improving, renting and ultimately reselling previously owned homes within select communities and markets which we operate,” according to its recent 10-Q.
Taking this a step further, Beazer is "buying foreclosed homes", "rehabbing them, then renting them with the intention to ultimately sell.", so in other words, Rent to Own. Petersen is also keen on the Rent-to-Own option. He intends to build up to 300 homes, and will use the rent-to-own option just as other builders have; "to alleviate a backlog of unsold homes and reduce carrying costs."
What are your thoughts on this strategy?
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Have a Great Weekend, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com
TAGS: #realestate #developer #buildingpermits #futureconstruction #builders #rentalhousing #renttoown #rent-to-own #foreclosedhomes #rehabbing #realtor #homeowner
