United States
August 2022
US Market Report

BTR market pits local property managers against institutional investors

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As institutional investment picks up again after the COVID-19 pandemic, neighborhood property managers will need to play to their strengths.

The National Association of Realtors (NAR) has reported that institutional investors – which NAR classifies as companies, corporations, or limited liability companies (LLCs) that invest in property – made up 13.2% of national residential property purchases in 2021, compared to 11.8% in 2020. These investors took the biggest bite out of Texas, buying 28% of single-family rentals last year – the highest share out of all US states. Meanwhile, analysts expect that corporate investors will put $40bn into build-to-rent (BTR) development over the next 18 months. BTR developers build whole new apartment blocks or neighborhoods of single-family rental houses in order to rent them out, capitalizing on the increased demand for rental properties.

Some smaller-scale property managers worry that they could be squeezed out of the market altogether by deep-pocketed rivals, but the estimated 120,000 build-to-rent starts across the US in 2022 are unlikely to be enough to solve a growing housing shortage. While they may face increased competition for properties, smaller firms should still enjoy plenty of demand from tenants.

Small property managers may be able to avoid competing directly with the big investors if they focus on higher-end homes in mature rental markets, using their local expertise to build relationships with property owners and find profitable niches. According to the NAR report, when not building-to-rent, the institutions are mostly targeting less expensive properties, many of them fixer uppers, in areas with fast-growing populations and rising rents.

And the mom and pop groups have another key advantage too: service. According to the NAR’s survey, only 25% of REALTORS® reported receiving more timely service from institutional investors than from smaller property managers, while 36% reported that maintenance issues weren’t addressed as quickly. If smaller firms use PropTech to automate back-office tasks like rental payment processing, they can free up hours every week to press this advantage even further and make responsive service a key part of their sales pitch to landlords.

More build-to-rent headlines

You’ve heard of rent to buy? Welcome to the world of build to rent Fort Worth Business Press

What to know about investing in build-to-rent communities Forbes

"Uphill battle:" Institutional investors impacting the housing market WKRC Local 12

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