Are Smaller Rental Units Leasing Faster Right Now?

Question

We’re currently building a small cluster of new-construction duplex units in Little Rock, and we made a deliberate decision to go smaller than our recent builds.

Each unit is:

• 2 bed / 1 bath
• Single story
• Approximately 650–695 sq ft
• Brand new construction

2 bed / 1 bath

Single story

Approximately 650–695 sq ft

Brand new construction

Here’s the part that surprised me:

We underwrote these units at roughly the same rent as larger, older, more worn-down rentals on the same street.

That creates a pretty simple choice for tenants:

• Bigger but dated and inefficient
• Smaller but brand new, clean, and efficient

Bigger but dated and inefficient

Smaller but brand new, clean, and efficient

So far, demand has strongly favored the new construction.

We also intentionally skipped features like fenced yards and other upgrades. At this price point, it appears that affordability and simplicity outperform overbuilding, especially if added features would require pushing rents beyond what the neighborhood realistically supports.

I’m curious what others are seeing in their markets:

• Are smaller units leasing faster where you are?
• Are tenants choosing newer over bigger at similar rents?
• Has anyone regretted overbuilding for a neighborhood and missing the rent ceiling?

Are smaller units leasing faster where you are?

Are tenants choosing newer over bigger at similar rents?

Has anyone regretted overbuilding for a neighborhood and missing the rent ceiling?

Would love to hear what’s working (or not) in your market.

Matthew Paul · Answer

My 2 bedroom units always have the most responses and rent quickly BUT the most denials . Why the denials ? Because I get applicants that want to move in with 5 and 6 people . ( Nice area ) . I have a 4 person max occupancy .

Stuart Udis · Answer

I believe this is very market dependent. Where I own property, my two bedroom plus home office units or true three bedroom units priced at the top of the market are the fastest to lease. That product is scarce in my area, which is a big part of why it performs so well. My next best performer is larger one bedroom units that include a logical work station area that does not interfere with the main living space.

The bigger takeaway for me is that performance should drive decisions. Pay close attention to how the market responds to each unit type and continue refining your offerings over time. Just as important is understanding why tenants choose not to rent a unit. Being able to take negative feedback, identify patterns, and adjust the product accordingly is often what separates strong long term operators from those who keep repeating the same mistakes.

Carini Rochester · Answer

@Chase Calhoun Thanks for sharing the plans! These units look very nice.

Aaron Zimmerman · Answer

Interesting post! Thank you for sharing. Sometimes the best strategies are clean, simple, and affordable living, especially as tenants may be tightening their budgets.

Kenneth Garrett · Answer

@Chase Calhoun

Nice concept. I like the idea. I think in general providing better quality housing always will out do the competition even if the price is slightly higher.

I like to have my properties updated so they stand out from the competition and look nicer. The cost is higher on the upfront, but you get better tenants, better rents and they stay longer. Rents need to be just shy of the market in my opinion.

We are looking for a deal and so are tenants. A nicer looking property at $50-$100 less; rents quicker and tenants stay longer is a home run in my book.

Thanks for sharing.

Henry Lazerow · Answer

Yes, if can price cheaper then most 2/1s the smaller sqft units always lease way quicker, at least in my market Chicago. Tenants tend to stay longer too as they are a good deal for the bedroom count.

Frank Pyle · Answer

We’re seeing the same thing in a lot of markets. At similar rent levels, most tenants will pick clean, new, efficient, and low-maintenance over extra square footage that comes with higher utilities and more “wear-and-tear” feel. The rent ceiling is real, and the regret I see isn’t building smaller, it’s overbuilding the finish level for a neighborhood where the comps won’t support the rent bump. Curious what your turn time is from list to signed lease on these 650–695 sf units vs your larger builds?

Frank Pyle · Answer

We’ve been seeing a similar trend. I had a conversation with a local investor here in Indianapolis yesterday and we both agreed there’s some real downward pressure on rents in a few pockets, especially once you get above the “affordable” band for the area. He also mentioned they’ve had a harder time finding quality tenants lately, even when the property is solid. Are you seeing that same tenant-quality challenge in your market too, or is it mainly just slower leasing at the higher price points?

Chase Calhoun · Answer

Leasing for us has been very slow lately, we really try to not over finish these BTR units and will go higher end if we are targeting a nicer area/ price point. We are still a little ways out but will try to remember to revisit when they hit the market. as a whole though i am seeing more affordable units rent faster than more expensive units right now.

Carini Rochester · Answer

These units look great! I'm glad you're seeing demand for these. I'm seeing good traffic for smaller, less expensive units. Single people and couples seem more plentiful than families looking for 3 bedrooms or more. My studios and one bedrooms move pretty quickly. Would you mind sharing the floor plan (photo of the architect's plan?)

Are Smaller Rental Units Leasing Faster Right Now?

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