Terminology Guide for Build-to-Rent Investment
We recently released a Build-to-Rent (BTR) Development model to help students and developers better analyze this emerging investment type in commercial real estate. As we explored this type of analysis, it became clear that terminology is often distinct and evolving in this space.
To that end, we thought we’d share some of the distinct and evolving terms in BTR. This is a complement to our Glossary of CRE Terms where you’ll find definitions related to BTR.
Build-to-Rent (BTR) vs. Build-for-Rent (BFR)
In the United States, “Build-to-Rent” (BTR) and “Build-for-Rent” (BFR) are terms often used interchangeably but with nuanced differences. BTR specifically refers to the development of attached and detached homes intended for rental, with shared amenities and single ownership. BFR, however, generally covers a broader range of commercial real estate projects intended to be leased (rather than sold to owner/user-occupants) at completion.
The distinction between “building houses for rent” and “building houses to rent,” while subtle, carries significant weight in the Build-to-Rent (BTR) realm. The New Home Trends Institute’s Build to Rent Council strongly favors the term “Build-to-Rent” for its wider acceptance across various stakeholders, including consumers, municipalities, and online platforms. This preference is strategic, aimed at enhancing the sector’s appeal to a broader audience, optimizing search engine visibility, and fostering positive perceptions among local governments.
Common Terms in Build-to-Rent
The Build-to-Rent (BTR) lexicon is continually evolving, paralleling the sector’s growth and its complex interplay with consumer preferences and municipal regulations. Key terms like “Professionally Managed Rental Home Community,” “Private Yards,” and the clear distinction between “Attached” and “Detached Homes” are central to understanding BTR’s distinct value proposition.
Build-to-Rent (BTR)
This term signifies a development strategy focused on constructing residential properties, predominantly single-family homes or duplexes, designed exclusively for rental. BTR developments are characterized by their community-centric approach, featuring shared amenities and managed as a unified entity, ensuring a seamless living experience.
Professionally Managed Rental Home Community
Denotes a BTR project managed by a specialized company, guaranteeing uniform quality, maintenance, and tenant services. This model stands in contrast to properties managed by individual landlords, offering a higher standard of living and community consistency.
Private Yards
Refers to the exclusive outdoor areas assigned to each home within a BTR community, enhancing the private living experience by offering personal outdoor spaces.
Cottage Style
Describes BTR homes designed with a cozy, individualized feel, often featuring a smaller footprint and distinctive aesthetic elements. These homes deviate from traditional designs, providing a unique living experience reminiscent of standalone cottages.
Attached Homes
This term applies to BTR residences like townhouses/duplexes that share walls with adjacent units, offering a balance between community living and individual privacy.
Detached Homes
Refers to standalone houses within a BTR community, with no shared walls, offering maximum privacy and space, embodying the essence of single-family living.
Lease vs. Rent
In the BTR context, “lease” is favored over “rent” to convey a long-term occupancy commitment, mirroring the more enduring nature of leasing compared to short-term rentals.
Newly Built
Highlights the brand-new construction status of BTR homes, countering any negative rental property stereotypes and underscoring the modern amenities and design features that come with new developments.
5-Star, 4-Star, 3-Star Experiences
Adopts a classification akin to the hospitality industry, rating BTR communities based on the quality and range of amenities and services provided, thus setting clear expectations for tenants and investors alike.
