ERC Homebuilders, a Tampa-based builder, recently launched a “soft” IPO in hopes of raising $100 million to build more than 1,000 rental homes across the Sunshine State.
The homes will be built in contiguous tracts and sold in bulk to large-scale investors, the idea being that putting dozens of homes in a single location makes property management easier and less expensive.
“There is a consumer rental demand that is driving these institutions to want much greater levels of inventory of this product,” said ERC Homebuilders CEO Gerald Ellenburg. “They are learning or have learned that new inventory is a much safer and more official rental product.”
In the years since the foreclosure crisis – during which investors snapped up millions of distressed homes and turned some into lucrative rentals – the build-to-rent business has picked up steam. Distressed properties account for only 2% of home sales today, down from a peak of 49% in March 2009, according to the National Association of Realtors.
Lennar is among the big homebuilders in the build-to-rent space.
“We recently entered an agreement with one of our long-standing third-party relationships to build homes that will be purchased by that third-party in a stand-alone rental community,” said Lennar President Rick Beckwitt. “This community is in Florida and is the first in what we believe will be an ongoing business strategy and relationship where we build and sell homes in bulk on land owned by third parties with no lease-up risk.”
The National Association of Home Builders reports that 43,000 homes were built as rentals in 2018, accounting for just under 5% of total single-family housing starts, up from 37,000 in 2017. Those figures only include homes built and held by builders for rent – not those sold directly to investors.
Source: CNBC (06/26/19) Olick, Diana
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