10 minute read
The New Frontier: Build to Rent
What was once a growing fad has now become the next big thing in rental housing: Build to Rent. According to the Houston Business Journal, the pandemic, which has led to more demand for space and skyrocketing home prices, has accelerated a trend that was already well underway. Single-family Build to Rent communities are attracting significant interest and capital investment as homeownership in the country is declining. With the demanding need of building places for Houston residents to live being so high, the Houston Apartment Association thought that it would be best to hear directly from the source. We reached out to a few of our multifamily industry professionals – Ting Qiao, CEO of Wan Bridge, and Dana Dovell, Vice President of Residential Rental Operations at The Signorelli Company – to learn the latest trends, investments of importance to potential customers and to offer insight on Build to Rent in the Houston area.
Starting from the beginning, the Wan Bridge leadership team and co-founders came together with the idea of following your heart to find your way. Since then, Wan Bridge has been an integral part of evolving what real estate looks like in Texas, reimagining residential community development. The current build-to-rent business is like apartment business back in the 80s. Currently many people believe the only possible way to live in a suitable home is to purchase one and to maintain it by the buyers themselves. But Ting Qiao didn’t think that should be the case. People need to have choices. With this vision, Ting and his fellow co-founders wanted to bring their vast expertise and the desire to offer upscale rental home living experience to all Texans.
The Signorelli Company’s mission is to create better places to enrich lives and lifestyles through their fully integrated real estate development company. Their development teams include land, master planning, home building, retail, commercial, medical, storage, multifamily and property management. The decision to enter the Build-For-Rent space was a natural progression to bring the Signorelli Company’s talents in land development, master planning, home building and property management together.
These two companies may have had different starts in the industry, but one thing they do have in common is their knowledge on the Build to Rent scene in Houston. Ting and Dana dove into the nitty gritty and behind the scenes details of how to get to where they now stand.
How are your community locations selected?
Ting Qiao: Before acquiring any land, the Wan Bridge team carefully researches, evaluates, and monitors a new area for a potential community. We look for high growth potential, quality school districts, and overall retail and quality of life offerings in the area to finally decide where we want to lay new roots for our communities. This decision is not taken lightly and everywhere we choose is with the resident in mind.
Dana Dovell: As the primary principal in our ventures, we analyze market studies to identify opportunities within our master planned developments for sections dedicated to BuildFor-Rent homes, solving for the increase in the demand of quality new homes for rent. We seek and design communities that consider the entire resident experience from shopping, dining, commuting, school districts, wellness, and entertainment. Valley Ranch is a perfect example of our visionary approach to create the highest quality master plan that encompasses all facets of an enjoyable lifestyle.
Are all homes built ready for lease at the same time?
TQ: No, we will start leasing a home whenever it’s completed. The homes in a community are completed at different times, based on construction schedule, and they will be ready for lease at different times.
DD: Because our primary focus is to deliver quality homes to the market, our construction team builds the homes in a staggered sequence, allowing for a steady cadence of homes ready for lease.
Why would a resident move to your type of community instead of a multifamily?
TQ: A Wan Bridge home offers more space than an apartment does. We only have threebedroom and four-bedroom floor plans. They are either townhomes or single-family homes with attached garages and yards in most floor plans. We also include walk-in closets, pantries, and in-unit laundry space in all our floorplans. 10-ft high ceilings, oversized kitchen islands, and open living-diningkitchen areas are also our signature standards.
In addition, Wan Bridge offers its residents hassle-free living solutions that foster a sense of community and promote wellness. Our onsite team, TBD Management, stays engaged with residents throughout their lease terms through community events, meet and greets, and regular check-ins to make sure they enjoy their homes. We fully believe in our mission –residents do not need to own a house to call it home – and our five-star property management services give residents the peace of mind and the opportunity to spend more time with their families and friends.
DD: Residents are typically selecting a rental option based on choice or necessity. The challenges witnessed during the pandemic demonstrated a considerable shift for resident interest in having more privacy, and the willingness to trade higher rent levels in urban locations for more affordable suburban locations. In addition, the current inflationary climate is more prohibitive for home ownership. The opportunity to lease a newly constructed home combined with the convenience of landscape maintenance, pest control service, private yards, access to masterplan community amenities, and a full-service management and maintenance team has fueled the shift from multifamily to Build to Rent.
Do Build to Rent communities offer social activities for residents?
TQ: Yes, we host resident events from time to time. We love to partner with local businesses to showcase different food vendors and continue creating community within the communities we are in. Home and yard decoration contests, movie nights, and brunch are just some of the more popular events we host for our residents.
DD: Social activities are planned based on resident surveys and feedback, as well as the amenities in the community. We are passionate about connecting with our residents and host regularly planned events geared towards their favorite activities. Our residents are in turn engaged with each other, creating a true sense of community.
What amenities are offered that differ from traditional apartment communities?
TQ: When it comes to Wan Bridge’s community amenities, walking trails, dog parks, green space and playgrounds are the most frequented by residents, and therefore the most important. The onsite property management office is also a key value-add for communities, providing timely service so residents can enjoy the hassle-free lifestyle that Wan Bridge offers. Some of Wan Bridge’s communities are in master-planned communities. We are part of the HOA just like other homeowners, which means our residents can enjoy the same community amenities as homeowners do.
DD: Our communities are located within a larger master planned community, which allows for access to a wide variety of amenities such as parks, nature preserves, trails, pavilions, beautiful lakes with fountains, splash pads, pocket parks and tot lots. Our communities also offer a unique opportunity to earn incentives towards closing costs for the purchase of a new construction home with our partner First America Homes. Our Future Home Ownership program is a tremendous benefit for our residents as many have paused home ownership efforts due to high interest rates. This program provides our residents the ability to enjoy the comforts and conveniences of a beautifully appointed new construction home and master-planned community, while creating personal equity and taking advantage of incentives should they choose to purchase a future dream home.
Which lease do you use and does it have longer terms than a typical apartment lease?
TQ: We are members of the Texas Apartment Association and local associations that serve our communities. Our lease terms range from 12 to 15 months.
DD: We are currently using the Texas Association of Realtors® lease with conversion to the Texas Apartment Association residential lease in 2023. Lease terms are typically 12-15 months.
Do you think the Build to Rent industry will be able to maintain affordability?
TQ: What Wan Bridge offers to residents is not just a home, but all the conveniences of traditional property management services. By leasing a Wan Bridge home, a resident’s expense on housing is more predictable as there won’t be big surprises like fixing a roof or replacing an air conditioner. We handle the ongoing chores, so residents do not need to worry about items such as replacing air filters or mowing the lawn. Wan Bridge offers all the necessary services to maintain a home. These services provide savings in a resident’s budget that allow leasing a single-family home to continue to be more economical for years to come.
DD: Supply chain and labor fluctuations have created pricing volatility in 2022 but are starting to show signs of settling. We are fortu- nate to have relationships with outstanding supplier partners that are candid and straightforward about any foreseen or potential ripples in the pipeline. For now, interest rates, financing, insurance, and property taxes will be the driver for returns and the ability to maintain affordability.
How different is budgeting from multifamily?
TQ: Operational budgeting for single family build to rent communities is very similar to multifamily budgeting. The density of single-family homes often leads to similar pricing from vendors much like one would find in a multifamily setting. Density and scalability are keys to being efficient in single family rentals and build to rent is more in line with more traditional multifamily operating budgets.
DD: Budgeting is very similar in terms of approaching methodologies based on seasonality, occupancy goals, lease up versus stabilized, location, and product type.
Are construction/maintenance repairs handled internally or subcontracted?
TQ: Wan Bridge’s property management arm, TBD Management, handles all maintenance requests from plumbing to electrical and more. Like multifamily, our management company has in-house Service Technicians to support every day and emergency service requests. If a request is outside of our team’s expertise, the appropriate vendor is contracted to make the replacement or repair.
DD: Construction related repairs are handled according to any applicable warranty coverage. For any repairs outside of warranty parameters, we utilize internal service teams and vendor partners depending on the nature of the repair and ideal response time.
What have been the biggest hurdles with supplier services?
TQ: After experiencing historical highs for lumber, labor, and material costs in Q1 and Q2 2022 we’re excited to see positive change. As things eased up starting from Q3, our construction timeline benefited. This enabled us, for example, to build 250 homes in Q4 alone. We are actively looking for trade partners and suppliers to meet our growth production demand. Aligning our business with Strategic Trade Partners (STP) is one of our top priorities. This allows our STPs to maximize their efforts with WB Construction and have guaranteed volume within the project that can be broken down by start releases and allow for all parties to gain the best price for materials and capture a reduction in labor. We also must think outside the box and pull ideas from commercial contractors such as importing special cabinets for certain bathrooms and upgraded shower enclosures as an example, bulk buys, and contracted shipments to lock in pricing for a cycle or units rather than 30 days.
DD: Some of our biggest hurdles with supplier services have been maintaining a balanced cadence in the delivery schedule, due to varied supply chain issues. For second generation turns, deltas in competitive pricing for painting has been a challenge. Many suppliers have approached Build-For-Rent communities with residential retail pricing rather than commercial pricing.
For supplier members wanting to learn more about bidding opportunities and partnering with these two industry professionals, contact the Wan Bridge group at email@example.com, or the Signorelli Company by contacting firstname.lastname@example.org or email@example.com.