Build-to-Rent Real Estate — Another Look at a Hot Concept

What do you do when a housing shortage meets a shortage of home buyers? 

It’s real estate investors to the rescue! Developers are finding big opportunities building homes to cater to the needs of landlords. 

We’re talking with two developers who are taking the hot concept of build-to-rent to new heights. 

In this episode of The Real Estate Guys™ show, hear from:

    • Your informative host, Robert Helms
    • His inquisitive co-host, Russell Gray
    • CEO of Sage Oak Assisted Living, Loe Hornbuckle
    • Loe’s partner and construction developer, Austin Good

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A new approach to rental property 

We’re talking about a niche that is getting hotter and hotter by the minute. It’s something that lots of people can participate in … build-to-rent. 

Traditionally, builders have been buying land, building, and then selling what they built. 

But more and more, there is the idea of building the end product not for someone to buy and use … but for someone to rent. 

Most renters are looking at older properties … single family houses, apartments, townhouses … all already up and running and built for owner occupants. 

They may not be ideal as a rental for either the tenant or the landlord, but they work fine. Now, these properties are being built with the tenant specifically in mind instead.

We read a lot about the millennials and their debt load and inability to purchase houses. That means more people renting their homes and a giant demographic of young people that need a place to live. 

On the flip side, you’ve got a lot of interest in real estate as an asset class for the first time … so there is opportunity. 

Big benefits in build-to-rent projects

We’re talking to two men who have found the secret sauce in build-to-rent properties … Loe Hornbuckle and Austin Good. 

Austin started out as a real estate agent and quickly began flipping single family rental properties. But when inventory started to tighten he thought, “Maybe we should just go in, buy land, develop it, and build to rent.”

Doing so meant you could control the entire process a lot better and easier. “And as we did that, we found a lot of demand from investors,” Austin says. 

Some of the benefits of the build-to-rent scene is that investors are usually ready to close right away. You don’t have to wait things out depending on the market as much as a traditional developer. 

Physically, there are ways to optimize properties with renters in mind as well. 

“The biggest differences come down to durability of certain goods. We’ve gotten rid of carpet altogether in all of our deals because LVT flooring is more durable for a rental market,” Austin says. 

Austin also says that they design the homes with the investor’s exit strategy in mind. 

Right now, these properties will be used as rentals … but in 10 years the investor may want to sell to an owner occupant. It all depends on how the market changes. 

On that note, build-to-rent as a niche is fairly recession resistant. 

“These types of properties are a Class-A product that can rent for a Class-B price. You also don’t have to compete in the amenities space like apartment buildings,” Loe says. 

Currently, Austin and Loe build a combination of duplexes and townhomes … so people treat them as single family residences and don’t expect all the extras of an apartment complex. 

The other big pull for this niche, Loe says, are the tax advantages. 

When you sell a product, you’re being taxed. But build-to-rent has the advantage of the government realizing you are building affordable, clean, safe housing, so it offers many breaks and cuts to help you out. 

Then, you have the low turnover rate to consider. The two biggest expenses in renting are turnover and vacancy. If you can minimize those things … you’re in great shape. 

The tenants that come into build-to-rent properties treat them like they are their own, and they become attached and stick around. 

A big appeal of these build-to-rent properties right now is that they give the tenant the chance to rent something that is brand new or only a year or two old. 

Compared to living in a 25-year-old property … new is very appealing. 

In short, build-to-rent is a long-term asset with multiple exit strategies and multiple uses. 

Syndication in build-to-rent

Efficiencies are important when you’re undertaking a large project … and that’s exactly what Loe and Austin are doing. 

Their current project in Denton, Texas, has almost 90 units … which offers opportunities for a streamlined workflow and other efficiencies that mean more profit for builders and a better deal for investors. 

They also have a unique approach to ownership. Instead of selling individual units, they are collectively owning them. 

Many of Loe and Austin’s current projects are in Opportunity Zones. One aspect of investing in these areas is you have to hold the property for 10 years to get the maximum tax benefit. 

For many investors, investing in an opportunity zone is solely for the tax benefit … and with build-to-rent style investments, there are many additional bonuses for passive investors that want to get involved. 

Passive investors can see the tax advantage and return they want and are willing to hold the property for an extended amount of time. 

That’s why Loe and Austin focus on real estate syndication. Individual owners are foregone in favor of a leasing agent and maintenance staff that oversee the project. 

To learn more about syndicating in the build-to-rent niche … listen in to the full episode!

More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


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Podcast: Build-to-Rent Real Estate – Another Look at a Hot Concept

When a shortage of housing converges with a shortage of home buyers … it’s real estate investors to the rescue!

Developers large and small are realizing there’s a big opportunity in building homes to cater to the needs of landlords.

In this episode, we visit with two developers who’ve put a new twist on the build-to-rent concept.

So listen in as take another look at the hot concept of build-to rent.


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!

Senior Housing and Opportunity Zones – A Winning Formula

The only thing better than one investment opportunity … is two investment opportunities!

We’ve talked about senior housing and opportunity zones before … but what happens when you combine the two?

The combined demographics and tax incentives of these investment niches create exciting possibilities!

We sat down with a successful real estate entrepreneur who is putting senior housing and opportunity zones together into a creative … and profitable … investment play. 

Discover how to ride the wave of demand and capital to create a WINNING investment strategy. 

In this episode of The Real Estate Guys™ show, hear from:

  • Your riding-high host, Robert Helms
  • His here-for-the-ride co-host, Russell Gray 
  • CEO of Sage Oak Assisted Living, Loe Hornbuckle
  • Loe’s partner and construction developer, Austin Good

Listen

 


Subscribe

Broadcasting since 1997 with over 300 episodes on iTunes!

real estate podcast on itunesSubscribe on Androidyoutube_subscribe_button__2014__by_just_browsiing-d7qkda4

 

 


Review

When you give us a positive review on iTunes you help us continue to bring you high caliber guests and attract new listeners. It’s easy and takes just a minute! (Don’t know how? Follow these instructions).

Thanks!


Opportunity zones sweeten the deal

We’ve been talking a lot lately about opportunity zones … but today we’re going to focus on taking the idea into the real world. 

You may have heard Loe Hornbuckle on our show before. He specializes in senior housing. 

Loe recently began a new project … and discovered that the land was inside an opportunity zone.  

His team began to pay attention to how they could structure the deal around opportunity zone incentives … and he’s here to share what he has learned from the process so far. 

A word of caution before we dive in … be careful about picking an investment purely for the tax breaks and overlooking the real fundamentals of the deal. 

Loe sought out a location that was a good place to do business, fit in his niche, and gave him a unique selling proposition. The opportunity zone just sweetened the deal. 

Prepare for the silver tsunami

Let’s start with the silver tsunami. In a few years, baby boomers will be looking for assisted living … and the industry needs to be prepared. 

But that’s still a ways off. Loe says his average client is 87 years old. The oldest baby boomers are still about 75. 

That means there is time to get in the game and get prepared. 

A lot of times when people talk about senior housing, they’re really talking about active adult communities, independent living, assisted living, dementia care, and skilled nursing facilities all under one umbrella. 

But it’s important to look at each of these areas as its own asset class. 

The type of person that wants to live with other people 55 and up and play golf with their buddies is totally different than a person who may not be able to walk independently anymore. 

And when the baby boomers come looking for senior housing, they’re going to demand things that their predecessors didn’t.

Baby boomers want smaller, more intimate environments where they are around people that are like-minded in some way. 

Maybe they like the same music … or have the same cultural heritage … or even have the same medical condition. 

In Loe’s case, he began Sage Oak Assisted Living and Memory Care in 2015. It’s basically a boutique assisted living and memory care company. 

“What we do is focus on small facilities that are designed to make people feel more comfortable in a homelike environment,” Loe says. 

When most people think of assisted living, they picture a nursing home. But Sage Oak’s facilities are light, airy homes designed for anywhere from 8 to 16 people. 

Loe currently operates five of these locations in Dallas. 

But with the silver tsunami on the horizon, Loe is looking to expand his idea … more beds but preserving the intimate setting. 

For Loe and his team, the answer is raw land development into planned care communities. 

Think of it like a residential neighborhood … but instead of 3000 square foot homes that house single families, these are 9,000 square foot homes designed for 16 seniors. 

These independently owned houses operate as independently licensed facilities … some as assisted living and luxury assisted living and others as dementia care.  

And these houses can be tailored and changed over time to provide the personalized environment residents are looking for … allowing you to operate in any niche you feel the market is lacking. 

Obviously you would never exclude anyone, but you could help them find a house that they are most interested in. 

“One house might be for people with diabetes. Another might be kosher, with a kosher chef and visits from the local rabbi. The house next-door to that one could have a Korean chef and Korean newspapers delivered daily,” Loe says. 

Sage Oak has two such projects underway right now … one in Texas and one in Louisiana. 

A natural partnership

Loe’s partner, Austin Good, hails from the construction development side of real estate. 

Austin is a single family, build-to-rent developer … and that’s essentially what Loe and his team are creating. 

Starting from the ground up in building these campuses offers the advantage of control … controlling the process of creating the campus and controlling the end experience offered to residents. 

And now, the Texas development has the added advantage of being in an opportunity zone. 

“We selected a piece of land in Denton, Texas, to build a campus and discovered it was in an opportunity zone,” Austin says. “So, we had to rework our model a bit.

For example, Austin says they weren’t necessarily looking at a 10 year hold period at the start … but now they are making changes to gain the biggest tax advantages. 

An opportunity zone location also gives Loe and Austin the ability to offer investors a chance at making some money tax free … quite the incentive to come on board!

Senior housing is a natural companion to the opportunity zone structure for a lot of reasons. 

Since opportunity zones are typically in lower income or rural areas, you probably aren’t going to build a luxury hotel there. 

But if you create a reputation as the “go-to” place for senior housing, most people won’t mind driving a bit further … because the outcomes are so much better at your location!

“Our Denton project is about 10 minutes away from the luxury assisted living facilities in the area, so it’s not a difficult pitch for us to say, ‘Drive a few more minutes and be in a more intimate environment with a better caregiver ratio,’” Austin says. 

Another major opportunity zone benefit … access to an untapped workforce of caregivers. 

The number one problem CEOs in the senior housing space are facing is access to good caregivers. 

Opportunity zones located in lower income or more rural areas tap into a workforce that may live too far away to work at other facilities.

Find your winning opportunity

For people who are concerned about taxes and wanting to maximize their return, investing in a niche opportunity zone project can be … well … a great opportunity. 

You still get all the advantages of real estate … like bonus depreciation … and now you can get your capital back. 

It essentially allows you to make a better return on a post tax basis. 

As always, check with your tax professional to find out what will work best for your portfolio. 

And listen in to the full episode for more on how senior housing and opportunity zones can be a winning formula!


More From The Real Estate Guys™…

The Real Estate Guys™ radio show and podcast provides real estate investing news, education, training, and resources to help real estate investors succeed.


Love the show?  Tell the world!  When you promote the show, you help us attract more great guests for your listening pleasure!