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BUILD-TO-RENT REPORTBY AUSTIN GOOD AND LOE HORNBUCKLE
INTRODUCTION
As the U.S. economy has matured in recent years, the housing market has had to evolve along with it. In this report we give insights into a rapidly growing asset class (build-to-rent) as it looks to fill a growing gap in the modern housing landscape.
By delivering high-quality, well-managed homes we believe build-to-rent is an attractive asset class for investors looking for sustainable returns and provide more options for the modern renter.
I hope you find this report though-provoking and insightful. If you have considered investing in build-to-rent or want more information about investing in Real Estate please reach out using the contact info at the end of the report.
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GOODHORN CAPITAL IS PLEASED TO PRESENT THIS REPORT, WHICH LOOKS AT THE HISTORY, KEY DRIVERS
AND FUTURE POTENTIAL OF THE BUILD-TO-RENT (B2R) ASSET CLASS.
OVER THE LAST 15 YEARS THE HOUSING MARKET HAS SEEN A STRUCTURAL CHANGE
62%
63%
64%
65%
66%
67%
68%
69%
70%
2000 2002 2004 2006 2008 2010 2012 2014 2016 2018
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HOMEOWNERSHIP RATE IN THE UNITED STATES
30yr Average 66.0%
• Homeownership has long been considered an
integral part of the American Dream, however
current trends suggest this aspiration is waning
• After a long expansionary phase in the
economy and interest rates sitting at historically
low levels, homeownership rates still sit
comfortably below long-term averages
• The U.S. appears to be undergoing a structural
change. A shift that is not simply described by
rising home prices, or a greater demand for
urban living, but a fundamental response to the
modern knowledge-based economy vs. the
industrialized economy of the past
WE HAVE ALSO SEEN THE EMERGENCE OF TECHNOLOGY PROPEL SINGLE-FAMILY RENTALS INTO AN INSTITUTIONAL ASSET CLASS
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• Only a few decades ago the core challenge of single-family rental, how to acquire and manage enough
homes to turn a large profit, was essentially unsolvable
• Since then investment in real estate technology has exploded, from $33 million in 2010 to more than $14
billion in the first half of 2019, and six real estate companies were named to Forbes’ 2019 Fintech 50
• The effective use this technology has made analyzing, acquiring, leasing, managing and maintaining
geographically spread homes more cost-effective and less risky
• Since the recession, some of the world’s largest private-equity groups and hedge funds, as well as other
large investors have been capitalizing and the single-family rental space has rapidly grown into an
institutional asset class - e.g. public REITs such as American Homes 4 Rent (AMH) or Invitation Homes (INVH)
• Single-family rental companies are continuing to expand, suggesting that, rather than a temporary response
to a crisis in the housing market, institutional ownership of single-family rentals may be a new fixture of the
real-estate industry. Invitation Homes spent more than $280 million on new homes in 2018 alone.
• As the supply of cheap homes for sale has evaporated, public REIT American Homes 4 Rent has
started building new homes to add to its stock
BUILD-TO-RENT IS THE
NEXT EVOLUTION IN
THE SINGLE-FAMILY
RENTAL SPACE,
WHERE CUSTOM-BUILT
COMMUNITIES ARE BEING
DEVELOPED SOLELY TO MEET
THE SPECIFIC NEEDS OF
LARGE SEGMENTS OF THE
GROWING RENTAL MARKET In younger generations especially, the pursuit of personal freedoms and experiences often outweigh the importance of owning a home
The same convenience and flexibility of a professionally-managed multi-family apartment
Renters are looking for more privacy than an apartment, four walls to call your own and no vertical neighbors
The desire for a maintenance-free living experience that rents like an apartment but lives like a home
In the modern economy, people are more mobile than ever, they don’t want to be tied down and buying does not always make sense
Many renters can’t afford to purchase or can’t buy an equivalent home in areas they want to live
WHY BUILD-TO-RENT COMMUNITIES
ARE POPULAR WITH RESIDENTS
Product Description Smallest Largest Typical Density
Small single-family detached “horizontal
apartment” homes
650sqft
1bd/1ba
1,400sqft
3bd/2ba
12.1
Townhomes and duplex homes in two- to
seven-unit building configurations
1,500sqft
3bd/2.5ba
1,750sqft
4bd/2.5ba
10.4
Traditional single family detached homes
on traditional lots
1,400sqft
3bd/2ba
2,000sqft
4bd/3ba
7.9
Luxury single-family detached homes on
traditional lots
2,000sqft
3bd/3ba
2,800sqft
4bd/3.5ba
5.9
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BUILD-TO-RENT HAS BEEN SUCCESSFULLY DEMONSTRATED ACROSS A VARIETY OF PRODUCT OFFERINGS
Source: John Burns Real Estate Consulting, “Why Dedicated Communities of Single-Family Rental Homes Should Be Part of a Multifamily Rental Portfolio”
https://www.realestateconsulting.com/dedicated-communities-single-family-rental-homes-part-multifamily-rental-portfolio/
PART OF THIS SUCCESS IS DUE TO THE FACT THAT THEY DON’T COMPETE WITH APARTMENTS FOR THE SAME RESIDENTS
• Renters looking at build-to-rent communities are primarily looking for more space and/or more privacy than a traditional Class A apartment, in fact many residents come directly from apartments
• As a result, most build-to-rent developments don’t have to offer the standard amenities like pools and gyms and avoid the challenge of having to constantly upgrade amenities to stand apart
• Traditional Class A multifamily apartments are locked in a death-spiral to offer more and more amenities to stand apart from the competition
• Consequently build-to-rent projects often have lower turnover rates compared to multifamily apartments
“We’re in the middle of an amenities arms race, if you stay put as an organization, you’re probably going to be left behind”
- Valet Living CEO and President, Shawn Handrahan
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…While apartments battle it out in
‘Amenities Arms Race’
“These transformations within the multifamily industry indicate one stark reality: there may be no winners in the amenities arms race yet, but there will most certainly be losers.”
- National Apartment Association
Build-to-rent tenants are looking for
something different…
… MAKING THEM WELL-SUITED TO THE GROWING BUILD-TO-RENT MARKET
• Interior square footage and smaller lot size compared to traditional SFR makes a townhome cheaper to rent than a comparative quality single-family home.
Cheaper to rent than traditional SFR
• Since there’s no back yard, there is practically zero outside maintenance required of the homeowner and often any front-yard maintenance required is included in the rent
Lower maintenance
• Smaller square footage and shared walls, for example, often have added insulation benefits and don’t require as much energy to heat or cool as standalone structures
More energy efficient
• Compared to most privately held, traditional SFR. Modern designs and superior quality of new construction B2R communities make them more attractive to potential tenants
Newer construction of B2R
TOWNHOMES ARE A HIGHLY FLEXIBLE PRODUCT TYPE AND A POPULAR CHOICE WITH MODERN RENTERS…
FROM A DEVELOPER PERSPECTIVE BUILD-TO-RENT IS AN ATTRACTIVE PROPOSITION
Price/Density
Most build-to-rent properties take up less space than standalone homes, enabling builders to construct more of them on smaller lots. This is a big deal in metro areas and older suburbs, where land is scarce and expensive.
Beneficial Tax Treatment
Build-to-rent developers can utilize the tax benefits of accelerated depreciation, minimizing the recognition of ordinary income for tax purposes. Profits are mostly taxed as long-term capital gains.
Multiple Exit Strategies
This is an asset that is priced like a multifamily apartment but less risky. Most build-to-rent properties are individually platted, meaning multiple exit strategies are possible:
1) Sell the entire development as a single multi-family asset2) Sell individual units at retail price to homeowners3) Sell a portion of community to other investors
AUSTIN GOOD
Co-Founder
GOODHORN CAPITAL
Founder – Owner (Acquisitions/Land Development/Construction)• Austin founded the development arm of the business with the intention leveraging the knowledge gained on single family properties in the multi-family space. He has been instrumental in the development and construction management of several multifamily assets in Denton, TX e.g. Audra Heights Phase 1 – 72 units., Sherman Crossing Smart Homes – 58-units.
ANG DEVELOPMENT & CONSTRUCTION
Partner• Performed due diligence, asset management and ongoing construction oversight for 3 existing storage facility acquisitions (in Texas) and 2 more ground-up developments in Tampa, FL. State Storage Group is a top 100 self-storage operator in the country.
STATE STORAGE GROUP
Founder – Owner (Single-Family Acquisitions & Construction Management)• Responsible for the acquisition/construction/renovation of over 100 single-family properties either for resale, rental or owner finance strategies leading to over $3M in profits on fix and flip sales and acquiring a portfolio of single-family rentals and owner finance notes worth over $4M.
ANG REAL ESTATE, RENTAL & OWNER FINANCE HOLDINGS
Co-founder - Broker/Owner (Property Management & Residential Sales)• In 2009 Austin formed The Good Home Team with his brother Nick. Austin was instrumental in instituting systems and accountability metrics. The team became one of the fastest growing teams in the DFW market and The Good Home Team did $60M in sales volume and nearly $2M in commissions in 2019. Austin created the property management arm of The Good Home Team to service his multi-family assets, maintained occupancy levels in these developments over 95% since inception.
THE GOOD HOME TEAM
SKILLS
Construction Management
Land Development
Property Management
Syndication/Capital Raising
Team Building
PASSIVE INVESTOR
Single Family
Owner Finance
Multifamily
Self-Storage
Workforce Housing (RV Park)
LOE HORNBUCKLE
Co-Founder
GOODHORN CAPITAL
Founder - Owner - Chief Executive Officer 2015 – PRESENT
• Operating partner whose primary role is to ensure residents and families are completely satisfied with the care they receive, the food we serve, and the quality of our communication. Responsible for building and managing the executive team that oversees operations. Total of 40 beds in Dallas, TX across 5 properties overseen by a team of 35 employees. Familiar with raising capital, investor relations, asset protection and proper deal structure.
SAGE OAK ASSISTED LIVING AND MEMORY CARE
Sales/Support/Memory Care Expert 2017 – DEC 2019
• Independent contractor with Gene Guarino and the Residential Assisted Living Academy whose primary role is selling consulting, fulfilling consulting requests. Created an additional revenue stream by developing and teaching an advanced class on Memory Care. Currentlypositioned to become a nationally recognized person in the residential assisted living space as the RALA teaches approximately four thousand students per year, exposure which will continue to lead to above-average deal flow at no cost, and also creates a unique position in terms of disposition of assets.
RESIDENTIAL ASSISTED LIVING ACADEMY
Owner/Founder/Client Relations Manager 2010 – PRESENT
• Responsibilities include property management, construction management, financial strategy and capital raising which enabled Loulo Properties to acquire a portfolio of approximately 60 single family homes in Shreveport, LA with a total value of approximately three million dollars.
LOULO PROPERTIES
Property Manager 2014 – 2015
• Responsible for increasing occupancy and controlling expenses to position the asset to be sold. (88% to 93% occupancy during tenure.)
MC COMPANIES - THE PLACE AT VANDERBILT
Finance Director 2002 – 2013
• Finance Director over the entire auto group, managing the Honda, Mercedes Benz, Land Rover, Jaguar, Volvo and Sprinter locations, the total group retailed almost 4500 vehicles per year plus nearly 2,000 wholesale units. Every one of those deals had to go through the finance department in some capacity. During tenure, increased both profit and profit-per-unit over 50 percent. The owner, Charlton Holmes, eventually became Loulo Properties primary investor and a partner in Sage Oak Assisted Living.
HOLMES HONDA/HOLMES EUROPEAN MOTORS
SKILLS
Leadership
Marketing
Team Building
National Speaker on Assisted Living/ Memory
Care (Radio, TV, Events)
Certified ALF Manager
Syndication/Capital Raising
PASSIVE INVESTOR
Multifamily
Workforce Housing (RV Park)
Mobile Homes
Single Family
CONTACT INFORMATION
(318) 458-3554
Loe Hornbuckle
(469) 231-1383
Austin Good
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