Build to Rent

[Damien Davis]

Hello BP Community,

I'm a rookie investor, only have one deal under my belt (Long term rental) and it's been treating me very well. As I take in as much content as possible from listening to the Rookie Real Estate podcast, I feel drawn to building multi-families and renting them out. I have a full time W2 that I'm passionate about, so I feel this process will allow me to time to make sound decisions as opposed to quick fix n flips. I'm interested in knowing your opinions, experiences with this strategy and any advice. Thanks for reading, look forward to hearing feedback!

[Brady Morgan]

Build to rent is a great strategy if you are able to utilize some competitive advantages in your market.

To help you with running your own analysis I find it helps to use an example, so I will give an example from my own market. I can build a 4-plex, four two story units side by side, with a total of about 5000sf for about $1m, land included. This 4-plex will rent for around $2500 per unit and would have a finished value of about 1.3m. This of course can be scaled up as well for better profits, if you have a 1 acre lot, you can probably fit 2 buildings with 4 units each (depending on zoning requirements), or 4 buildings on 2 acres and so on. The 4-plex would produce around $1000/mo cash flow after financing, and that financing would recover your total build cost leaving you with no money in the deal at the end and an "infinite return" for CoC. This is of course an ideal scenario, and the goal for each build. Actual results vary a bit with each project.

Hopefully that gives you an idea of what a builder would look for in numbers for the market to make sense. Of course your specific return requirements will vary, so figure out what the numbers are for your market, analyze them to determine margins and decide if that is an appropriate return for the risk you are taking. Please feel free to reach out and ask questions if you have any! I plan to cover multifamily in future videos/streams on my yt channel so you can look for info there as well in the near future (Brady_Morgan).