By Fred Matera, CIO, Redwood Trust A lack of affordability will lead to near-term weakness,…
Looking Back at the Top 5 Takeaways from the IMN Build for Rent Forum
As we prepare for the upcoming 9th Edition of IMN’s Single Family Rental Investment Conference (West) in Scottsdale, Arizona, we reflect upon IMN’s recent Build to Rent conference focusing on private equity, debt and joint venture financing in the land and homebuilding markets. CoreVest exhibited at this event, spoke on panels, and connected with numerous homebuilders and developers in the build for rent space.
Overall, IMN’s 8th Edition of the Build-To-Rent, Land & Homebuilding Forum (West) in Las Vegas, Nevada was a well-attended, highly informative, and successful networking opportunity for developers, lenders, and service providers alike.
Below, are the top 5 takeaways from our team:
1.Land Costs Continues to Rise
One of the biggest pain points for developers is increasing land cost. It’s becoming extremely difficult to find affordable lots as new players continue to enter the market. The resulting increase in competition for land is pushing developers into new markets that were previously not considered. – Brandon Turk
2. Bigger is Better
Bigger is indeed better. There is substantial demand for 4- and 5- bedroom houses with an average premium of $150-$200/month per bedroom. If it is possible to build an extra bedroom within the same home footprint, investors should strongly consider it. They should also embrace technology as there is a premium for smart homes. – Boris Zhuravel
3. More Means Less
As many new SFR/BFR funds launch into the space, cap rate compression is deepened because investors are betting that they can continue to raise rents in the future. – Joakim Mortensen
4. Some Like to Mix It Up
At this conference, there was an increased interest in building multiple asset types in the same transaction. For instance, borrowers would discuss a mixture of townhomes and SFRs, or even garden style apartments and townhomes being built in one community. Some would consider selling one asset class upon completion, others would look to hold all development. – Brendan Hamilton
5. Pricing Over Leverage
A lot of the developers in attendance were less concerned about the amount of leverage and more focused on the rates. There seems to be a lot of money in the market, with many developers having moved a decent amount of their capital from stocks and other holdings into real estate. So, to these developers, it’s about the total return and not the rate of return since leverage amount has a greater impact on rate of return than coupon. – Stefan Malmund