When builders put up new single-family homes, they build on behalf of buyers who have already signed a sales contract, right? Likewise, they build apartment complexes and townhomes for people they know are going to rent. Well, not so fast. The latest trend in home building is developing entire neighborhoods consisting of nothing but single-family rentals.
Such a neighborhood is on its way to Odessa, Florida, just north of Tampa. This is the first such development in Florida for NexMetro, but not their first foray into all-rental subdivisions. The company has already built neighborhoods in Dallas, Denver, and Phoenix. Similar communities are popping up all over the country.
New subdivisions populated by single-family rentals run contrary to what we normally believe about home building. But it is a concept that seems to be working. NexMetro tends to rent to people who can afford to buy but would rather lease instead. These are young professionals, families that prefer resort style living, and even older Americans looking to downsize without having to buy something new.
Neighborhoods with Amenities
So what’s the appeal of single-family rentals? Mainly, it’s the amenities. Renters enjoy all the benefits of apartment renting but in their own, detached homes. Communities offer swimming pools, gyms, tennis courts, and more. Property owners handle all exterior maintenance and repairs, so renters do not have to worry about cutting the grass or trimming the shrubs.
Property owners also maintain the houses themselves. If an HVAC unit breaks down, a renter need only call the office to arrange for repairs. If the roof needs some attention, the community manager will take care of it.
Not Vacation Rentals
It should be made clear that the new rental-only subdivisions are not neighborhoods filled with vacation rentals. The neighborhoods offer homes with long-term leases with the intention of attracting singles and families that intend to stick around for several years. In other words, they are designed to be inhabited for the long-term.
By contrast, there are neighborhoods in popular tourist destinations consisting mainly of vacation rentals. Park City, Utah is home to some of them. According to Sparano + Mooney, a local architectural firm that specializes in mountain modern architecture, vacation rentals are typically owned by people who use the homes several weeks per year and then rent them to tourists the rest of the time.
The thing about vacation rentals is that they appeal to an entirely different demographic. If you were to hire Sparano + Mooney to design your vacation home in Park City, you would likely be upper-middle class, at the very least. You would probably choose Park City because you enjoy skiing. Moreover, you would probably rely on rental income to help pay your mortgage. But in the end, you would not live in your vacation rental full-time.
Like a Separate Apartment
The rental-only subdivisions popping up Odessa and elsewhere are definitely not vacation rentals. Each house is like a separate apartment in terms of function. Sure, some of the houses are more like cottages than anything else, but they are single-family dwellings detached from neighboring dwellings. They have their own yards, driveways, garages, etc.
It will not be long before Odessa sees construction begin in earnest. The rental-only model coming to their town will attract a different type of renter. NexMetro is hoping for long-term renters providing the residual income to make the project a success. They have had good luck so far. There is no reason to believe that their luck will not continue in Odessa. If they do succeed there, expect the company to develop more subdivisions throughout Florida.