In the latest episode of Onward, Ben Miller sits down with Josh Hartmann, CEO of NexMetro Communities, a trailblazer in the Build-to-rent (BTR) sector. NexMetro has led the way in the BTR market, with over 55 projects across the U.S., offering cottage-style homes specifically designed for renters. Hartmann provides insight into BTR’s growth, his unique business strategies, and the challenges in reshaping real estate for a new generation.
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Understanding Build-to-rent
Hartmann explains BTR as homes designed exclusively for rental, offering tenants a single-family home lifestyle without ownership. NexMetro’s developments include a range of single-story cottages that foster a sense of privacy while delivering amenities typically found in multifamily units, such as gyms and pools. According to Hartmann, BTR appeals to people who value flexibility and quality without the commitment of home ownership, filling a gap in the housing market for those who prefer to rent but want more than an apartment.
The three pillars of BTR
Hartmann distinguishes three BTR categories:
- Single-family homes for rent.
- Townhomes purpose-built for renting.
- Cottage-style multifamily units, NexMetro’s specialty, blending the appeal of detached homes with the advantages of multifamily living.
Timing is everything in real estate
Real estate cycles are pivotal to innovation and profitability. As Miller points out, real estate evolves through “waves,” such as the mall boom in the 1970s or the single-family rental trend in the 2010s. Build-to-rent is shaping up to be the next big wave, attracting increasing interest from renters and institutional investors.
Consumer-centric development
Understanding renters’ needs has been crucial for NexMetro’s success. For example, through consumer research, they’ve learned that amenities like clubhouses or dual bathroom sinks were less important than space efficiency. This consumer-first approach allows NexMetro to streamline costs while delivering a product that resonates with its target demographic.
Challenges and future outlook
Zoning and permitting obstacles are major hurdles. NexMetro often needs 18 months or more to secure zoning approvals, with success rates around 60%. Political and community factors complicate projects, especially as cities grapple with housing shortages and balancing growth.
Hartmann remains optimistic about the future, especially with real estate facing declining supply due to high interest rates and reduced construction starts. This scarcity may benefit BTR, positioning NexMetro to meet rising rental demand in areas where traditional homeownership is out of reach or less desirable.
Conclusion
NexMetro’s discipline in maintaining a consistent product across markets and responding to consumer demands is a model for success in the real estate industry. With a focus on quality, flexibility, and consumer needs, the company is poised to continue shaping the BTR landscape and setting the standard for future developments.
