At 24, with a roommate and another on the way, Luke Janney knew he needed more than his two-bedroom apartment in East Brainerd, but wasn’t ready to become a landlord.
“I had fun with it [ownership] option, but I didn’t think I was ready,” says Janney, who works in Chattanooga for Knoxville-based Axle Logistics. “Renting seemed like the smart move; it’s definitely more convenient, given my stage of life and with some pretty hectic things at work.”
So in mid-July, he, Tyler Daniel and Brad McCurdy moved into a single-family-style detached house in Mill Town, a neighborhood that rises from the site of the long-abandoned Standard Coosa Thatcher factory.
Janney says he and Daniel used to split their $1,300 monthly rent. Mill Town will cost $2,390 a month, he says, but is worth the price.
“With the three of us, it really won’t be a huge difference,” says Janney. “And with a third bedroom, being closer to downtown, it was the right thing to do.”
According to rentcafe.com, Janney’s accommodation choice is extremely popular. In a December 2021 survey of 3,300 renters by the National Apartment Search website, 78% of respondents expressed a preference for living in a single-family rental home community. A plurality, 29%, of respondents said they opted for a single-family rental over an apartment because, like Janney, they needed more space.
Mill Town builder Ethan Collier says detached single-family rental homes are proving attractive on many levels.
“They give individuals the opportunity to stabilize their families before beginning the difficult process of finding housing [to buy]”, he says. “And I think there has been a generational change in that some people don’t see property as the main way to create wealth – and they think that if you can create wealth wealth without owning a house, why take on this responsibility?”
Collier says quality of life and flexibility tip the scales for many who choose to rent over buy.
“It’s like living in a hotel,” he says. “You don’t have to mow your lawn. You don’t have to replace the roof or the HVAC. I grew up with a dad who spent every weekend working on a house because something was wrong. People don’t want to spend their weekends at Home Depot and try to fix their sinks.
“And if you rent here and get a job in Seattle, you move to Seattle – you don’t have to try to sell a house first,” he adds.
Collier says the economy of scale is one of the advantages of built-to-rent communities over traditional neighborhoods, in which homes are built to be sold.
“Build-to-let is built much faster because of the way it’s financed,” he says. “The whole community is funded at once and all the houses are built at once.[contractor] comes to dig soles, starts with #1 and doesn’t stop until he’s done the 48, for example.
“In build-to-sell, you can build six or eight houses at a time. Then, once those are financed, the builder will go into more debt and build more houses,” he adds.
According to data compiled by Yardi Matrix for rentcafe.com, its sister company, there are more than 700 communities nationwide with some 90,000 homes built for rental. The website says a one-year record 6,740 such homes were built last year, with another 14,000 under construction across the country this year.
Hamilton County is “reflecting the national trend,” says Doug Fisher, CEO of the Homebuilders Association of Greater Chattanooga. Among the built-for-rental communities in the Chattanooga area are The Guild on Shallowford Road, slated for completion later this year; Cannondale Court Townhomes, due for completion next year, and three properties from Collier, Generation Property Management and Texas developer RoseRock – Julia’s Park in Hixson, which is complete; Mill Town and Audrey’s Park, just off Brainerd Road.
Doug Ressler, head of business intelligence for Yardi Matrix, said the trend towards single family rentals (SFR) began following the 2008 financial crisis, including “the collapse of much of the housing market. lodging”.
“It’s grown to the point where you see big real estate investors getting into it,” he says.
“There was a huge need for affordable housing on the consumer side and a good rate of return on the landlord side.
“Demand for SFR has increased during the COVID-19 pandemic,” adds Ressler. “Even though the economy shut down for an extended period, demand for SFR homes soared as people moved to larger homes in suburbs and smaller markets.”
Ressler says single-family rental operators are optimistic for the next six months, but adds that with interest rates rising and recession looming, the SFR market will “likely go through a cycle.”
“It’s not a linear type of progression,” adds Ressler. “The rising cost of silver and construction will cause a type of cyclical development. It’s a strong asset class and doing quite well but, like any other asset, it will be challenged.”
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