There is a new asset class I’ve seen in several different alternative investment “wrappers.”

Besides using Delaware Statutory Trust’s (DST) alternative investment, companies are also putting this new asset class in three-to-five-year programs to build, lease up, and sell.

This new asset class is single-family build-to-rent homes. As millennials reach the age where many start families, they encounter a challenging housing market. A lack of available homes, skyrocketing prices, and affordability issues make homeownership difficult for many. This has led to a surge in the popularity of single-family build-to-rent homes, which offer spacious living solutions without the burden of a mortgage.

Let’s Look at the Numbers

The median age of millennials was 33 at the end of 2021. Today, the median age is 36 years old. According to Harvard’s The State of The Nation’s Housing 2023 report, “growth in households headed by people ages 35-44 more than doubled from 210,000 per year in 2017-2019 to 560,000 per year in 2019–2022.”

As these younger Americans age, their housing preferences will likely transition from prioritizing walkable amenities over space and security to larger homes in suburban locations more traditionally attractive to family households.

This need is satisfied by investor demand for high-quality single-family rental communities. There are finite assets available for investment, creating an attractive supply/demand dynamic for property valuations. In the last 30 months, Blackstone has invested over $9.5 billion cash into single-family rentals.

Cushman & Wakefield’s December 2023 The State of Build-to-Rent notes that build-to-rent communities are averaging substantially more absorption. Cushman & Wakefield estimates it would take just a year and a half to absorb all of the new build-to-rent construction, compared to approximately four years to absorb new multifamily construction.

More than half of U.S. renter households are not in apartments. Over 24 million Americans rent homes that are scattered single-family homes, townhouses, and manufactured homes. Through 2023, only 1,231 build-to-rent communities were operational across the entire country, and that compromises just 156,981 homes. As families, individuals and retirees recognize a new and improved rental option that will only increase demand.

To take advantage of this opportunity, accredited investments are raising capital to build these communities. This asset class also includes DST structures that allow 1031s and deferred capital gains.

Read more at Forbes.

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Securities are offered through Arkadios Capital. Member FINRA/SIPC. Advisory services are offered through Creative Capital Wealth Management Group. Creative Capital Wealth Management Group and Arkadios are not affiliated through any ownership.

This material was created for educational and informational purposes only and is not intended as tax, legal, or investment advice.

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Frederick Hubler is the founder and CEO of Creative Capital Wealth Management Group, a retainer-based wealth strategy firm specializing in alternative strategies located in Chester County.