We've been discussing build-for-rent communities in quite some depth over the last few weeks. This is—in no small part—because build-for-rent as a value-add strategy has been integral to our success here at the Peak Housing REIT.
There are a few key reasons why we choose to cover the material we do:
- It's useful information for investors to have who are currently trapped by a burdensome portfolio
- Understanding how REIT investing can help would-be investors leverage new construction is important
- We try to help both seasoned and novice investors find a more profitable way to do less work.
The reality of build-for-rent communities (especially up to the scale of 75-unit neighborhoods) is that few individual investors can leverage the capital and connections they would need to undertake these kinds of projects alone.
Instead, they are forced to turn to existing construction in one of the following ways:
- They purchase a troubled home below market value, and spend the difference in price making it rental-ready with the right renovations that appeal to renters (costly and time-consuming)
- They purchase a property that has already been renovated—hopefully with renters in mind—from a fix-and-flip investor (this is also costly but somewhat less time-consuming)
- They purchase a 'pristine,' completely-new property within a build-for-rent community that's already rental-ready and guaranteed to have updates that appeal to renters (the least time-consuming but the most costly).
The hidden trap here for most investors is that, even with the new-construction smell still lingering in these units, there's no accounting for the quality of the renovations in the former's case and the build's quality in the latter.
Can You Trust the Team Behind the Work?
At The Peak Group, part of our dedication to our investors comes in the form of our commitment to transparency. A lack of transparency when it comes to any portfolio-building strategy is already a problem. That's why we feel it's important for investors to ask themselves the following questions before they commit to the above:
- How thoroughly did you inspect your acquisition and contractor before you renovated the property?
- How trustworthy is the fix-and-flip investor you worked with who made the renovations for you?
- Who can you get in touch with—and who's responsible—if something goes wrong?
- Can you trust the build quality of the rental community you're buying into?
Vertical integration is not an aspect you typically find in the majority of real estate investing ventures. This means that your ability to control build quality is several limited—and your need to vet potential partners crucial to success.
Many private REIT investing groups are not invested alongside their investors—and it's partly what has given them a terrible reputation when plans go awry. If you lack the confidence to put your capital into your venture, it speaks to the quality of your venture. At The Peak Group, we have invested more than $4 million of our wealth alongside the investors we serve. Why does this matter?
Accountability is much easier to uphold and enforce when you've got your funds on the line. That may be a simplistic way of looking at it, but it quickly cuts to the heart of the matter. Rather than trusting a contractor and build you don't know, working with an equity REIT investing group that's as committed as you are is a great way to ensure standards.
High-Quality Housing Pays Excellent Dividends
With the benefits of vertical integration, we can control the quality of our build-for-rent communities from start to finish. This gives us unprecedented control over everything from community placement all the way through to successful renter selection and property management services.
- This kind of streamlined approach to building allows us to maximize our returns for investors—without you ever having to personally account for the value-add of each individual unit.
- You benefit from immediate quality and cash flow without having to manage any element of the build.
- Additionally, if something doesn't perform as planned, you've got the same experts on hand that designed and carried out the construction able to respond to an issue appropriately.
- This adds up to a better renting experience for your residents and encourages them to stay long-term while forming a cohesive community all under the care of the same management umbrella.
This is, in part, why we continue to focus on educating interested investors as we do. Why should you have to go through the considerable expense and effort of acquiring a few properties at a time when you could tap into build-for-rent properties within a collective portfolio?
Selecting private equity REIT investing as your investment vehicle of choice is an excellent option for investors looking to exit the workload of an existing portfolio while retaining the income and stability they enjoy from real estate. It's also ideal for entry-level investors who want to experience the benefits of real estate investing in build-for-rent and new-construction communities without the pitfalls of solo ownership.
You can learn more by perusing our existing articles, browsing our FAQ, or directly contacting us. At The Peak Group, we're always here to help lead other investors towards a better way to grow wealth from real estate.
Posted by The Peak Group on December 31, 2020