NASHVILLE, Tenn. (WKRN) — The build-for-rent home market is catching steam in Music City, with so-called “professional buyers” investing like crazy.
Think of it as a game of Monopoly, where player one (the investor) buys up all of the homes on the board and then rents them out to the other players.
As more of these neighborhoods take shape, Joel Sanders, CEO at Apartment Insiders, says though it hinders the first-time homebuyer, the trend helps those needing to rent by lowering the price per renter.
“$75 million has been allocated for these types of subdivisions in the U.S,” Sanders said. “People I talk to say this amount seems to be growing by the day.”
These neighborhoods are growing in Nashville, Lebanon, Antioch, Murfreesboro and Smyrna and that’s through just one company, American Homes 4 Rent. According to Sanders, the homes are professionally managed, typically with professional managers onsite and onsite maintenance.
Sanders says if there wasn’t a demand for these rental homes, there wouldn’t be as much money invested into them, but according to investors, it’s so far so good.
“Where it can be pretty helpful it can alleviate some affordable housing pressures that Nashville has as far as the rental market goes,” Sanders said.
One way this can have a positive impact on Nashvillians is these properties can help lower individual rent costs for nicer products. There aren’t a lot of three-bedroom apartments in the Nashville market. However, you can rent a newer three-bedroom house in a nice location for $2,650 per month or $883 per roommate. That’s less than $900 per roommate.
A $900 apartment (if you can find one) is usually going to be much older and potentially lack some of the amenities or strength in location that these houses provide at that price. A comparable one-bedroom apartment in the same neighborhood and about the same age as the rent house is $1,600 at a minimum. A resident would need to earn $57,600 per year or more to qualify for that $1,600 one-bedroom apartment rent, according to Sanders.
However, there is a downfall. As more investors buy up homes, fewer homes are able to go on the market for purchase, leaving first-time homebuyers with little luck.
Lack of inventory, in turn, contributes to growing prices — a continuous cycle that would be difficult to end.