There’s a new player in the Southern Nevada new-home construction market, and it’s not a traditional public builder, and more are likely on the way.
California-based American Homes 4 Rent, which already has acquired, renovated and leased single-family homes in Las Vegas, has made its first move to build single-family homes to rent, as it has in 14 other markets.
The publicly traded real estate investment trust owns more than 53,000 single-family homes in 21 states and has more than 1,000 in Las Vegas. It has been active since about 2012, buying homes through the Multiple Listing Service and foreclosure homes through auction.
Home Builders Research reported American Homes 4 Rent pulled 14 new home permits in July, the first they have pulled in Southern Nevada. Home Builders Research President Andrew Smith said the company already has homes for rent in the Las Vegas area from $1,200 to $2,600 a month.
The company began buying land in 2018 and has closed on eight parcels around the valley.
The first project for the 14 permits is known as Serene Park. It’s south of Blue Diamond Road, west of Fort Apache Road in the southwest valley, Smith said. There will be 21 homes, eight of which will be delivered in October, eight in November and five in December. Thirteen of the homes have three bedrooms and 2½ baths and eight homes include four bedrooms and 3½ baths.
“They have made quite a few purchases of land, so they’re ready to be serious about Vegas,” Smith said.
Dave Singelyn, the CEO for American Homes 4 Rent, said institutionally owned and managed homes didn’t exist a decade ago. The company since has branched off into building its own supply.
“We’re doing it in many markets, and Las Vegas is one of our later markets we added this business plan to,” Singelyn said. “This year, we’re looking to add just under 1,000 homes where we build them across the country. There’s an opportunity to acquire homes through the building process that have approximately the same cost structure as buying existing homes. We can build a higher-quality rental home than if we buy an existing home in a neighborhood.”
The homes will be in the $200,000 to $300,000 range and will have granite countertops and higher quality finishes, according to Singelyn, who added they’re built for long-term rental. The homes will be about 2,000 square feet to 2,200 square feet with three to four bedrooms.
Three-bedroom houses will rent for $1,795 a month, and four-bedroom homes will rent for $1,950 a month. There is a minimum of a 550 credit score, and there is a one-month security deposit for those with a credit score of 650 and above. Those under that score will need 1.25 times the monthly rent.
“There is a social shift in the United States to more of renting than ownership,” Singelyn said. “It’s not tied to economics. Our average household income across the United States is in excess of $100,000.
“(Renters are) 37 years of age, and most of our homes have school-age children. Our residents have the ability to own a home but choose to rent for the flexibility. People’s lifestyles are changing. Think about cars. People use to desire to own their own automobile, but those in their 20s and 30s are much more comfortable using Uber and Lyft and the ride-share concept. That is another form of a rental program.”
Las Vegas historically has had a single-family home population that were rentals, Singelyn said.
“What you haven’t seen is having them institutionally owned and managed,” Singelyn said. “It raises the quality of the rental experience for residents from having an individual landlord.”
Smith said with the rental market facing strong demand and rising rents, companies like American Homes 4 Rent are seizing upon an opportunity.
“It’s a good time to be a landlord if you own a house outright,” Smith said. “Even if you don’t, you can charge more than rent than your mortgage is or pretty darn close. The apartment rents don’t seem to be slowing down.”
With the build-to-rent concept, builders can keep getting revenue over time rather than in one lump sum, Smith said.
“It’s a little more common in the Phoenix area and some other places,” Smith said. “It’s interesting that it’s just coming into our market. They have been very successful at it, so they must have analysis and a business plan that’s working for them. Instead of buying homes and adding them to their rental portfolio, the market they are looking at must show them about the specific locations they can do this and do their own development.”
One of the executives with American Homes 4 Rent is Dana Rogers, who previously worked for Ryland Homes and is on the board of directors of the Southern Nevada Home Builders Association.
Nat Hodgson, CEO of the builders group, said the build-to-rent concept is new to the marketplace but appears to be working for the company nationwide.
“I think it’s a good concept,” Hodgson said. “Some people just don’t want to own, but they don’t want to be in a town home or apartment. They want a house. Obviously, there’s a market for it, or they wouldn’t be doing it.”
Arizona-based builder and developer Randall Martin Homes plans to do a joint venture in single-family homes, attached and detached, in North Las Vegas.
There are many reasons for the growing interest, analysts said.
It’s about affordability for those millennials who can’t afford a down payment. Baby boomers like it, too, because many are looking to downsize. Many like the flexibility of renting and letting the landlord worry about maintenance. Families prefer to be in a home rather than an apartment, and people relocating for work prefer to rent rather than buy right away. It also works well for military families who can be quickly reassigned.
Owning a home doesn’t carry the same cachet with some as it once did. Many don’t feel stigmatized by renting anymore, analysts said.
Jody Kahn, a senior vice president with John Burns Real Estate Consulting, said built-for-rent homes are popping up across the country after getting their start in the Southwest where the population growth is strong.
“People of all ages appreciate the convenience and mobility that renting offers,” Kahn said. “In the last three to five years, many more people have ‘rented’ someone else’s car through a ride-share service or ‘rented’ a stranger’s home for a vacation. Today, both young and mature singles and couples are electing to rent in walkable neighborhoods near the restaurants, clubs, shops and entertainment that they love.”
None has been done in Las Vegas to date, Kahn said, but a handful of built-for-rent communities have been completed in master plans, and more are coming. Phoenix has been at the epicenter of it, she said.
“It’s definitely a growing segment and really coming out of the ground in the last year,” Kahn said. “Phoenix may have been the first, but I’m not surprised to have it in Las Vegas as a growth market.”
American Homes 4 Rent grew from being a company that bought single-family homes at depressed prices after the nation’s housing collapse and successfully rented them, Kahn said. The company ran out of those purchase opportunities when the market recovered, and it turned to building and renting homes to grow its housing portfolio and revenue, she said.
Kahn said some developers have been surprised when they expected millennials to be their customers and got plenty of empty nesters.
“They would rather have a brand-spanking new house over a conventional apartment,” Kahn said. “They like the flexibility, and sometimes it’s about the location, too, because of walkability and lifestyle amenities. There’s no longer this concept that you’re throwing money down the drain if you’re renting. You’re looking for something specific, and that has value. No one is going to look down upon you at a cocktail party.”