3 Ways to Invest in Build-to-Rent Development

By Michelle Clardie on 01/21/2025.
Reviewed by Dan Gatsby .
Build-to-rent (BTR) developments are growing in popularity among real estate investors thanks to impressive benefitslike passive income, long-term appreciation, and lower tenant turnover. 

But this lucrative real estate investment model isn’t one of the most beginner-friendly ways to invest in real estate. It requires special industry knowledge or connections to those with the experience to make the project a success.

In this article, we’ll explore three ways for real estate investors to invest in built-to-rent development and help you decide if this is the right investing strategy for you!

But first, a quick BTR refresher…







What is a Build-to-Rent Development?


A build-to-rent development is any property specifically designed to accommodate long-term renters. BTRs can be single-family homes, multi-family apartments, or even entire communities. 

By building from the ground up, you can tailor the property to suit your target market while adding value, so the completed project is worth well more than the sum of its parts. 

Stabilizing the property with reliable tenants provides recurring passive income, which can be used to supplement your income, support your lifestyle in retirement, or fund the expansion of your real estate portfolio

So, what are your options for investing in BTR? Let’s find out!

Option #1: Manage Your Own Build-to-Rent Project


The first option for investing in BTR is the most traditional: purchase land and oversee the construction of the building(s) yourself. 

The ultimate DIY project, managing your own BTR requires you to:

  • Find, acquire, and prepare the lot.
  • Assemble a team of architects, designers, builders, etc. to plan and develop the new building.
  • Oversee the permitting, design, and construction of the project.
  • Find qualified tenants and stabilize the property. 
  • Manage the renters: collect rents, address maintenance issues, handle renewals, turn units between renters, and minimize vacancy losses. 

Pros of Managing Your Own BTR


The benefits of managing your own BTR include:

  • Complete control over every decision that arises. From selecting the location to designing the layout and choosing contractors, you control every aspect of the project.

  • Potentially lower costs. Managing the project yourself eliminates middlemen, potentially saving money. However, this is only a cost-saving measure if you have the knowledge, means, and network to manage the project effectively and avoid costly mistakes. 

  • Direct relationships with tenants. As the landlord and property manager, you can establish and maintain personal relationships with tenants, which could lead to increased resident satisfaction and retention.

  • 100% equity ownership. As the sole investor, you gain full ownership of the property and are not required to share the profits with other investors.

Cons of Managing Your Own BTR


The potential downsides of managing your own BTR include:

  • Shouldering the financial burden alone. Acquiring land, securing construction loans, and funding the project requires significant upfront capital. Plus, unforeseen expenses during construction can strain your budget.

  • Demands on your time. Not only do you have to scout properties and negotiate the purchase, but you also have to oversee construction, lease-up, and stabilization. Managing a BTR project involves coordinating multiple stakeholders, including architects, contractors, and inspectors, which is time-intensive and demanding.

  • Steep learning curve. If you don’t have experience in this area, navigating zoning laws, building codes, construction, and ongoing property management can be overwhelming.

Option #2: Partner with a Build-to-Rent Development Sponsor


If you don’t have the experience, time, or desire to manage the development of your build-to-rent property, perhaps you can partner with an experienced development sponsor

With Gatsby’s Built-for-You Developments, for example, you retain full ownership of the project while outsourcing the vetting, acquisition, construction, and lease-up to the real estate experts at Gatsby Investment. 

You can leverage our knowledge, experience, and industry connections to complete your new BTR efficiently and cost-effectively. 

Once the property has been stabilized, Gatsby steps aside, providing you with a new construction, fully-occupied, income-generating rental property.

Pros of Partnering with a BTR Development Sponsor


The benefits of partnering with a BTR development sponsor like Gatsby include:

  • Passive gains from the development. Every aspect of the development process is handled for you, freeing you to focus on other priorities while your multi-family rental property is constructed.

  • Enhanced property value. Building from scratch allows the sponsor to add value at every stage of the development.

  • Increased ROI potential. Ground-up development offers higher returns than purchasing an expensive turn-key property. Plus, an experienced development sponsor like Gatsby can stretch your capital further through cost-saving measures like economies of scaling pricing on labor and materials, favorable financing terms through our lender relationships, and reduced real estate fees.

  • Exclusive ownership. You retain full control of your new real estate asset without the need to share equity or profits with other investors.

  • Seamless project management. A good partner takes care of all the development complexities, providing an stress-free experience for you as the owner.

  • Tenant relationships. Once the property is stabilized, you’ll still get the opportunity to get to know your new renters. 

Cons of Partnering with a BTR Development Sponsor


The potential downsides of partnering with a BTR development sponsor include: 

  • Higher upfront costs. In addition to financing the deal yourself, you’ll need to cover the sponsor’s fees as well. The good news is that a strong developer can offset the cost of their fees by saving you money at every stage of the acquisition and build. 

  • Dependency on the sponsor’s performance. The success of the project is closely tied to the sponsor's expertise and execution. This is why it’s critically important to choose a BTR sponsor with a track record of successful projects.

  • Ongoing property management hassles. Once the sponsor steps aside, you’ll be responsible for the day-to-day operations of the rental property. However, your partner might be able to connect you with a strong property manager to professionally handle your units going forward. 

Option #3: Invest in a Build-to-Rent Syndication Project


When you invest in a BTR syndication project, you don’t have to fund the project alone or invest any time or energy in the project.

Real estate syndication is when multiple investors pool their capital to fund a specific real estate project. The entire project is professionally managed by a real estate sponsor (again, like Gatsby Investment). So every step of the project, from acquisition through construction, lease-up, ongoing rentals, and eventual disposition, is handled for you. 

All you have to do is choose from the available or up-and-coming projects, place your investment, watch the progress of your property through your online portal, and receive your share of the returns!

Pros of Investing in a BTR Syndication Project


The benefits of investing in a BTR syndication project with a sponsor like Gatsby include:

  • Minimal time commitment. You’re not involved in day-to-day operations or decision-making, allowing you to remain focused on other priorities.

  • Shared financial responsibility. Pooling resources with other investors reduces the capital needed to participate in a large-scale BTR project.

  • Professional management. The sponsor expertly handles every step, finding ways to optimize for investors along the way. 

  • Diversification potential. Because the investment minimums are so low, you can spread your investment capital across multiple projects to quickly create a diversified, risk-mitigated portfolio

  • Access to high-value projects. Syndication grants access to opportunities that might otherwise be out of reach to individual investors.

  • A stable ownership structure. Syndication investors are listed as limited partners in the LLC that owns the property, giving you a clear legal ownership record.

  • Regular updates. A good sponsor provides easy access to financial information and progress updates through a user-friendly online dashboard.

  • Rental income plus a lump sum upon the eventual sale. Once stabilized, you begin receiving your share of rental income periodically. When the property eventually sells, you’re also entitled to a share of the profits! Depending on the financing terms, investors may even have their initial investment returned early through a mortgage refinance. 

Cons of Investing in a BTR Syndication Project


The potential downsides of investing in a BTR syndication project include:

  • Reduced control. The sponsor makes all property-related decisions on behalf of investors, which might not appeal to hands-on investors.

  • Shared profits. Returns are divided among the investors, so your earnings are proportional to your stake in the project.

  • Dependency on the sponsor. The success of the project depends heavily on the sponsor’s expertise, making it critical to choose a trustworthy and experienced partner.

  • Management fees. Sponsors charge fees for their services, which can reduce your overall returns. However, as is the case with development sponsors, the right sponsor can increase the ROI in ways that offset their fees.



Choose an Option for Your New BTR Development Today!


Whichever option you choose for investing in a build-to-rent development, take action to move forward with your new investment today! 

If you plan to manage the BTR yourself, start looking at lots with potential.

If you plan to partner with a development sponsor, email Gatsby Investment at info@gatsbyinvestment.com to express your interest. When a suitable lot becomes available for the built-for-you program, we will notify all interested investors and host a Zoom presentation to go over the deal details and answer any questions.

And if you plan to invest in a built-to-rent syndication project, explore the syndicated investment opportunities with Gatsby now!

 

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