Rentals March 6, 2022

Behind the numbers: Build to Rent is here

For the first time since June, the days on market for single family homes in the Treasure Valley dropped slightly. Prices climbed slightly and we saw an increase in inventory.

Build to Rent: Can you still make money in Star?

Star, Idaho is appealing on paper. The rentals are getting around $2,400 and it is located on a path of development (heading west on Highway 44 for those that don’t live here). But what happens when we dig a little deeper? Is Star still worth investing in?

In the last three months, the typical single family rental home has sold for an average of $542,000. These homes are 3-5 bedrooms, 2-3 bathrooms, have 2-3 car garages, and range from 2,000-2,500 square feet.

However, the competition in Star is strengthening, and not from your typical investor.

Star is home to the American Star community, a build to rent neighborhood that is being developed by American Homes 4 Rent and makes up a third of the available rentals in Star. American Homes 4 Rent trades under the AMH ticker on the New York Stock Exchange. By the way, after some digging, it looks like American Homes 4 Rent has been purchasing properties in the Treasure Valley since at least 2013.

The AMH factor is important to consider for a few reasons.

First, they are able to rent their homes at a lower rate than typical investors. In the last six months, their American Star homes rent for about 0.3% less than traditional rental homes. But they are also 10% bigger, brand new, and their communities also offer club houses, swimming pools, and fitness centers. This provides a tough match up for older rentals with few amenities.

Second, the scale of these communities and the company provide options and a safety net. Most investors, like myself, put a single home on the market looking for the best tenant as fast as possible. However, with the number of rentals available in a single community and plenty of capital, AMH can show potential tenants multiple options. And if a home sits for an extra two or three weeks, the tax and insurance is paid from a large reserve.

This is all great news for families that want to rent a nice and affordable home with great amenities. But it should give investors a pause for thought to see if it fits into their strategy for adding rentals to their portfolio.

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