One of the first things you learn in economics is the concept of economies of scale. The principle is simple, as you make more of something, the per unit cost goes down. In the property industry, this plays out when it comes to multifamily buildings. The larger a building gets, each of its units are able to share more services, which makes them cheaper to manage and own. Due to labor costs, the economies of scale in a building are not perfectly linear. Instead, the form is more of a stair step. A few hundred units might need only one maintenance person or leasing agent, a few more might need two. But, for the most part, the bigger the building is, the cheaper it is to run and the more shared amenities it can afford to offer.
The operating efficiencies that come with having all of your customers under one roof is what has traditionally pushed larger investment groups into the multifamily housing sector. Now, though, investors are looking at built to rent communities as a way to tap into the growing market for single-family rentals. As Brad Hunter, president and owner of Hunter Housing Economics said, “Demand for rental homes is growing faster than supply.”
Luckily, advancements in technology are helping to make built to rent communities just as efficient to manage and amenitize as their multifamily counterparts. Scalability is being noticed by large companies as landlords of single-family rentals can host premiums up to 15 percent higher than comparable multifamily projects. “Part of the appeal of multifamily buildings is the amenities that they provide and the community that they can create,” said Lucas Haldeman, CEO of smart home technology platform SmartRent. “Now, we are seeing large single-family rental communities rolling out the same kinds of amenities. They are basically a multifamily building spread out over an entire development.”
For tenants, that means that they can have the benefits of living in a house, like adjacent parking, ample storage, and a yard, while still benefiting from communal spaces like pools, gyms, and clubhouses. Booking these can be done easily thanks to mobile apps, and access can be granted via smart locks. Single-family rentals generally have less turnover than rental apartments, and the addition of these types of leisure facilities can even further increase the average length of stay.
There is also an added benefit of bringing a community of built to rent homes together: better wifi. In order for smart rentals to function, they must be equipped with their own wifi. This is the case for standalone rental homes but the advantage that rental communities have is that they are able to create a network by meshing every house’s signal. That means that if any one router stops working, devices can instantly and securely be connected to a neighbor’s signal, which avoids the dreaded signal outages that derail Zoom meetings and interrupt someone’s favorite show.
Community-wide wifi is an amenity that people care about. It doesn’t just make work or play easier, it makes communities safer and consistently connects property managers with residents.
Lucas Haldeman, CEO of SmartRent
This community wifi hub’s capabilities are not restricted to new builds. It can also be done as a retrofit to existing built to rent communities. With the trend of remote working, residents can take their work to the park or to the office-like space at the community center without having to switch to a new wifi network. “Community-wide wifi is an amenity that people care about. It doesn’t just make work or play easier, it makes communities safer and consistently connects property managers with residents,” explained Haldeman.
Connections among community homes go beyond wifi; they include integrating technologies like Ring doorbells and smart thermostats. For example, SmartRent’s integration with Ring lets users add their front door devices to their smart home app for a live view of what’s happening around their home even when they’re not nearby. “Every smart home vendor should be thinking about an “occupied” vs “vacant” mode. In vacancy mode, owners have access but once it is occupied, their abilities go away except for things like leak sensors,” stated Demetrios Barnes, COO of SmartRent. The smart thermostats allow residents to remotely activate different modes, keeping their home comfortable while saving energy and reducing costs.
The integration doesn’t reduce the capabilities of these devices, it just brings everything together in one app so residents can easily access what they need. Plus, with the community hub wifi, it is always online and accessible. One app, one community.
And, when something goes wrong, the same app that brings everything together doubles as a work order platform. “If you need to put in a maintenance request, you already know how to do it. Residents don’t need to search for where to go,” added Haldeman.
As much as smart home tech can make a community better for built to rent occupiers, it is an even bigger benefit for management and staff. Leasing is one of the most labor intensive parts of any rental building. Since many prospective tenants want to tour homes after work and on weekends, it can be difficult and expensive to staff a full-time leasing office.
Now landlords are able to effortlessly grant access to prospects thanks to one-time smart lock codes. “It’s interesting that it took the pandemic to wake up the industry to self-guided tours; we’ve been doing those since 2011 as it was necessary for us to manage homes across states,” added Barnes. Monitoring and maintaining the amenity spaces are also much easier. Smart locks record who was the last person to use any area and closed-circuit cameras allow security to monitor even a multi-acre complex from one central command center.
For vacant residencies, tech enables the built to rent community with control and monitoring without having boots on the ground. “When you send someone over to do work on a place, the first thing they do is adjust the temperature to make it comfortable. Nine times out of ten, they don’t turn it back up,” said Barnes. With remote control, spaces that are unoccupied are kept within an acceptable range of comfort even when human error is taken into account.
Technology has allowed managers of large rental communities to tap into the economies of scale much like multifamily buildings do. Earlier this year the country’s largest homebuilder, Lennar, announced its plans to both build and manage built to rent communities. This new business model will help Lennar branch out past the low margin, high risk business of building houses and tap into the stable, recurring revenue and economies of scale that come with being a landlord.
From the resident’s angle, it’s all the community aspects and perks without all of the responsibilities and downsides of home ownership. It’s not just a go-between from renting to owning; to many, these homes are the perfect mix and the absolute end goal. This can lead to high retention rates, and also a unique attraction to future residents. And it is all made possible thanks to the devices and software that are now widely available in all of our homes.