Vacancy is the enemy of real estate investment. But no fear!
You can invest in a property with zero deferred maintenance and a whole lot of attraction to tenants.
Smart builders are helping real estate investors dramatically reduce the risk of vacancy and expensive repairs.
Listen in as we chat with a man who is creating build to rent properties in some of the best rental markets in the United States … and see what opportunities await investors like YOU.
In this episode of The Real Estate Guys™ show, hear from:
- Your helpful host, Robert Helms
- His deferring co-host, Russell Gray
- From Fourplex Investment Group, Steve Olson
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Discover build to rent
Today we’re going to talk about an interesting niche within real estate.
More and more, we’re seeing builders who don’t build property to sell to an owner occupant … they’re selling to investors instead.
It’s called build to rent.
With millennials fighting student debt and not forming households or buying property as soon in their life, it’s a great time to get into the rental game.
We’ve dabbled in this niche ourselves … though it wasn’t firmly established at the time.
We’d catch a builder in a phase of development and say, “What if we came in and bought the rest of your inventory?”
It was a real win-win. The developer no longer had to question which properties would sell … and investors could get inventory that they otherwise wouldn’t.
The tenants benefitted too. They got to move into these brand new, beautiful properties.
As the niche has grown, it has only become better.
Now, you have builders building with the landlord and the tenant in mind … which means you can do some value engineering that maybe you wouldn’t do if you were selling to owner occupants.
All of this means bringing product at a more competitive price … which means a better ROI.
Our guest today is Steve Olson of Fourplex Investment Group (FIG). FIG builds brand new fourplexes in a variety of markets … ready for investors to swoop in and swoop up profits.
Creating a valuable niche
The days of buying a home for less than it costs to build are gone. In many cases, developers, builders, and investors are finding that it’s more economically viable to just build new.
If you want to be in the investment property business … you’ve got to find somewhere to get inventory … and you have to look at shifts in the marketplace.
Two major demographic shifts are happening.
One, baby boomers are looking for something more convenient … a managed community with some amenities to it.
Two, millennials are more likely to rent than to buy … homeownership is getting more expensive, and many of them have a distaste for it.
So, people want to live in these build to rent properties … you just have to pick the right markets.
“More importantly, I think, you need to pick the right sub-markets within those solid markets. You’ve got to get to know the neighborhoods,” Steve says.
And when you are building to rent, you’ve got to be able to look out at the horizon and be confident that there will be tenants in the area in 18 months … or more … however long it takes to get property standing.
Steve and the team at FIG build brand new fourplex units … beautiful homes that are attached and have parking.
They are an upscale rental … built in communities that allow them to offer amenities and services.
“The idea is that we have to balance two worlds. We have a bunch of different investors but the feeling of a cohesive community. We do this by creating uniform standards through an HOA,” Steve says.
As far as the tenant knows, they’re in a townhome complex or apartment complex. They have amenities. There is a property manager they report to … the same experience across the board.
HOAs aren’t always popular … but that’s usually because homeowners are too busy to be bothered to come to meetings and be involved.
Investors aren’t like that.
Owners that are investors are very interested in the long-term health and viability of the complex.
This type of investment is especially suited for someone who thinks a little more long term. The average investor doesn’t come in, buy a fourplex, and flip it to another guy in a year.
With FIG’s approach, there is a certain amount of value engineering that can take place.
“We deliver units cheaper than almost anybody I know of, but you have to strike a balance so you aren’t paying for it down the line,” Steve says.
For example, Steve and his team have started using as a standard luxury vinyl tile floor … it’s meant to take a beating.
“It looks good, like wood, but you can drag a couch across it. The dog can run around on it, and it’s still going to last a long time,” Steve says.
But everything else is meaningless if you don’t talk about markets.
The right markets for fourplex investment
A market is where we find tenants … so Steve and the team at FIG are very conscious of the markets they choose to build in.
“Strategically, we’re looking for population growth. We’re looking for employment. You can get past a lot of things if you have those two things,” Steve says.
FIG started in Utah in the Salt Lake City metro. Then, they expanded into markets in the Houston metro and into Boise, Idaho.
Boise has tons of growth with jobs coming in from the Northwest and other less business-friendly states … and the vacancy is really low across the board.
The team is also moving into the Phoenix metro area.
For more information on this investment niche, listen in to the full episode!
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