Many real estate investors inadvertently limit themselves, focusing on traditional investment types like single-family home rentals and flips. But these classic investment models can leave you open to local market downturns, vacancy risk, and limited potential. That’s why experienced investors start looking for assets that combine growth, income, and operational efficiency in a single play.
Multi-family build-rent-sell captures the upside of ground-up development before transitioning into a stabilized, income-producing asset designed specifically for long-term rental demand.
Instead of buying aging inventory and renovating it, you can create a purpose-built rental property optimized for modern tenants, lower maintenance, and stronger unit economics from day one.
Here’s what you need to know about multi-family build-rent-sell.
What is Multi-Family Build-Rent-Sell?
Multi-family build-rent-sell (also known as build-to-rent or B2R) is a property with more than one dwelling unit, built specifically to be held as a long-term rental.
Multi-family BRS can include new construction duplexes, triplexes, four-plexes, or apartment buildings with 5+ units.
Build-Rent-Sell vs. Build-To-Sell
Unlike BRS properties, BTS buildings are constructed with the intention of selling upon completion. In that case, the developer looks for a single buyer (often an institutional buyer, but it can be a partnership or individual as well) to take ownership of the newly constructed project.
Compared to BTS, BRS offers a few advantages. Namely, BRSs get to take advantage of both the forced appreciation of the construction phase and the cash flow and appreciation of the holding phase. BTR also offers additional tax advantages through the lower long-term capital gains rates on the proceeds from the sale (when the property is held in service as a rental for at least one year before the property is sold).
BTS properties, on the other hand, allow investors to get in and out of a deal more quickly, avoiding ongoing property management responsibilities and freeing up capital for the next project. Having said that, capital can be released from a BRS under certain conditions. For example, you might perform a cash-out refinance after lease-up to pull your initial investment capital out of the deal without selling.
Multi-Family vs. Single-Family
Compared to single-family, multi-family tends to cash flow better as there are more units to bring in rental income. Multi-family is also more cost-effective because you can have multiple units sharing one lot (as well as sharing walls and roofing in many cases), which reduces the cost per unit. And it’s a more efficient way to scale your portfolio since you can construct multiple units at once.
However, single-family BRS has an advantage in affordability and manageability. It typically takes less capital to construct a single-family home compared to a multi-family home, and managing one unit is naturally simpler than managing multiples.
Pros and Cons of Multi-Family BRS for Real Estate Investors
While all real estate investments offer certain benefits to investors, multi-family BRS is especially advantageous in these key areas:
- Predictable, diversified income. With multiple units, you don’t have to rely on a single tenant for 100% of your rental income. Vacancy losses from one unit can be offset by the other occupied units.
- Strong demand. With housing becoming less affordable, there is a greater demand for high-quality rentals.
- Economies of scale. Operating costs per unit are typically lower for multi-family BRS compared to scattered single-family homes. Maintenance, management, insurance, and other services can be centralized.
- New-build efficiency and lower maintenance. Because BRS properties are newly constructed, they often require less maintenance than older buildings, improving net operating income.
- Rent growth potential. Rental increases are often an expected part of the renewal process, which means rental income often increases year by year. More units give you more opportunities for increases.
- Additional Tax advantages. Depreciation, cost segregation, and expense deductions can substantially reduce taxable income. And, by holding the property in service as a rental for at least a year, proceeds on the sale are taxed at favorable capital gains rates.
However, there are possible drawbacks to consider as well, such as:
- Higher capital requirements. Funding the land acquisition and construction presents a large barrier to entry for most investors. However, this can be overcome through certain investment models, as we’ll see shortly.
- More complex management. Carrying a property from development into lease-up and stabilization requires operational experience and skill.
- Longer timelines. Multi-family BRS requires a longer commitment than BTS projects.
- Regulatory exposure. Multi-family housing may be subject to more regulatory scrutiny. Zoning and permitting may be more complex than with single-family.
5 Different Ways to Invest in Multi-Family Build-to-Rent
There are multiple methods of investing in multi-family BTR, making this sophisticated strategy available to investors of all experience levels and budgets.
1. REITs
REITs (real estate investment trusts) are companies that own income-generating real estate. Investing in a publicly traded REIT is just like buying stock in a publicly traded company. You purchase shares, which entitle you to a percentage of the company’s profits, paid out as dividends.
REITs often specialize in specific property types and/or geographic regions. While there are no REITs claiming to hold only multi-family BTR, multi-family BTR is a part of many residential REITs. So purchasing shares in a large residential REIT offers likely exposure to the multi-family BTR market.
When you invest in a REIT, you invest in the company, not necessarily the underlying real estate. You don’t have any control over which properties are held by the REIT or how they are managed.
2. Do It Yourself
If you’re looking for full control, and you have the experience, skill, availability, capital, and connections, you can develop your own multi-family BTR.
As the sole owner, you would be responsible for sourcing the land, obtaining permits, overseeing architecture and design, supervising construction, leasing up the completed units, and managing the stabilized property.
While the upside is enormous for the right investor, very few investors are qualified to manage such a project alone.
3. Partner with a BTR Development Sponsor
If you have the capital, but not the experience, network, time, skill, or desire to personally manage the development, you can partner with a BTR sponsor, essentially outsourcing the development phase to professionals.
Take Gatsby Investment’s Built-for-You program, for example. With this model, you finance the development, giving you sole ownership of the completed project. But instead of sourcing land deals, chasing permits, and managing architects, designers, and construction crews yourself, you outsource this phase to the expert developers at Gatsby.
This dramatically reduces the risk profile of the investment, as you get to leverage the resources of a team that has completed over 100 development projects to date. Our systems and networks have been designed to save time and money while maximizing your ROI potential.
4. Private Equity
Private equity is the traditional method of pooling funds from multiple investors to finance a specific real estate project. Each investor chips in to purchase the land, fund the construction, and earn a share in the rental income and proceeds from the eventual sale.
The project is typically managed by a professional sponsor, with the level of investor involvement varying by deal.
One difficult aspect of private equity is access. By definition, these deals are not made available to the public. You need to be well-connected with other investors and real estate developers to find private equity opportunities. Another difficult aspect for many investors is the capital requirements. You may need $50,000 to $100,000 (or more) to buy into a private equity deal.
5. Real Estate Syndication
Real estate syndication is the more modern iteration of private equity. Like private equity, you have multiple investors pooling funds. However, unlike private equity, these deals can be marketed to the public. Not only does this make opportunities more accessible, but by allowing for more investors, syndication reduces the investment minimums. You may be able to buy into a multi-million dollar multi-family BTR for as little as $25,000.
Syndication is often compared to crowdfunding (and rightly so, as the models are extremely similar). However, syndication offers a more stable ownership structure, with all investors named as limited partners in the property’s ownership entity.
The professional sponsor is built into the deal, so investors don’t have to haggle over design or management decisions. Everything from land acquisition through stabilization is professionally handled for you.
Invest in Multi-Family Built-Rent-Sell with Gatsby Today!
Are you considering investing in multi-family BTR through a partnership with a BTR sponsor or via syndication? Gatsby Investment would be proud to support you in your investment journey!
Gatsby specializes in multi-family build-rent-sell in the high-demand Los Angeles rental market. You can leverage our carefully crafted systems, curated professional network, and decades of local real estate experience to boost your portfolio.
Those who have invested with us have earned average annualized returns of 22.3% since 2017! And with our 100% profitable track record, you can invest with confidence.
Learn more about investing with Gatsby and explore our syndicated multi-family build-to-rent investment opportunitiestoday.