What Is Build-To-Rent?
Build-to-Rent (BTR) is a powerful investment strategy focused on long-term cash flow and property appreciation. Rather than selling newly constructed homes to homeowners, investors instead retain them as rental properties, thereby capitalizing on the growing demand for high-quality rentals. This approach provides consistent rental income while allowing properties to appreciate in value over time.
At Dominion Financial Services, we offer a seamless 2-step financing solution for BTR investors. First, our ground-up construction loan funds the development of the property. Then, once construction is complete, investors can refinance with a DSCR loan, securing long-term financing based on the property’s cash flow—not personal income. This strategy enables investors to scale their portfolios efficiently while maximizing rental income potential.
The Benefits of Build-To-Rent
BTR investing offers several compelling benefits, making it an attractive investment strategy for experienced investors. Those benefits can be categorized into four categories.
1. High Demand for Rentals
Millennials and Gen Z are facing financial challenges, especially regarding homeownership. While lifestyle preferences and a refocus on an experiential existence are part of the move toward rentals, the main reason is the cost.
Housing shortages, rising housing prices, and out-of-control student debt motivate younger generations toward rentals. A rental property represents fewer responsibilities and worries, ultimately driving a rental boom.
2. Customization Opportunities
Since you’re building the house or community, you can customize the features and amenities to target and attract your desired demographic. Many renters prefer energy-efficient installations, higher-end finishes, and technology packages. You may also want to offer different floor plans to suit more people.
3. Long-Term Wealth Building
Build-to-rent also offers the opportunity to build long-term wealth. Not only do you receive recurring rental income, but your property, just like traditional real estate, will appreciate over time, building equity. Additional tax advantages, such as deductions for mortgage interest, property taxes, and depreciation, also mean more money in your pocket.
4. Scalability
BTR investments don’t need to start with large-scale communities. You can start with a single-family home and, depending on the property size, build more houses as your budget allows. Maybe you’ll succeed in buying smaller properties, building a duplex or multiple homes, and replicating that small-scale project elsewhere. The point is a BTR strategy can grow with you.
The 2-Step Financing Process for Build-To-Rent
A BTR strategy requires two loans: a construction loan and a rental loan. Each loan is for a different phase in the project lifeline.
1. Ground-Up Construction Loan
A ground-up construction loan is a financing solution for a property’s initial purchase and development. The loan should cover the land acquisition, permits, materials, and labor. Depending on the investor’s experience and the property’s size, the loan amount should also include some flexibility to scale and optimize designs for profitability.
Dominion Financial offers construction loans with no appraisal requirements and fast closings — in as little as seven to 10 days. Loan program specifics include:
Loan-to-cost ratio up to 90%Interest-only terms during constructionFinancing for new builds on raw land or for teardown/rebuild projects
To manage construction timelines and costs effectively, hire an experienced project manager. Also, talk to your loan officer. They offer expert support to all real estate investors.
2. Refinance With a Rental Loan
When construction is complete on your build-to-rent project and occupancy rates are climbing, it’s time to consider refinancing with a long-term rental loan. A rental loan provides lower interest rates for stabilized properties and a predictable monthly payment. With the freed-up capital from the refinance, you can continue to grow your rental portfolio.
Dominion offers rental loans for single properties or portfolios. It also offers a price-match guarantee on rates and a streamlined underwriting process. If you apply for a rental loan, you can expect:
Long-term, fixed-rate options for stabilized propertiesDSCR-Based underwriting (no personal income verification)DSCR Price-Beat Guarantee
Loan approval also means cash-out refinancing options for future projects, so you can unlock your equity.
5 Steps to a Successful Build-To-Rent Project
A BTR project is a worthy investment only if you understand how to make the most of the opportunity. There are five steps to a successful BTR project:
Research the Market: Who is your ideal renter? To appeal to them, you must determine their demographics and lifestyle preferences. Beyond defining your renter, analyze the market (rental rate, vacancy rate, demand for rentals) and assess your competition. Secure a Construction Loan: Work with a Dominion loan officer to get pre-approved. Complete a thorough and compelling application.Plan and Build: Create a detailed construction plan that includes layouts, materials, and amenities. Focus on the budget.Stabilize the Property: Develop a comprehensive marketing strategy and set competitive rental rates. Consider offering rate specials to stand out from your competition.Refinance With a Rental Loan: Once you have tenants, it’s time to convert to a long-term loan with lower rates and more predictable payments. A rental loan makes rental ownership and management more affordable.
It helps to consult an experienced investor or finance professional about these steps. Dominion representatives can offer guidance on the financial aspects of build-to-rent opportunities.
Why Choose Dominion Financial?
You should work with a lender you’re comfortable with, especially for costly and commitment-heavy BTR projects. Dominion Financial specializes in financing solutions for real estate investors and our staff deeply understands the BTR market.
With a streamlined application and approval process, thanks to Dominion’s in-house underwriting team, you’ll experience quick closings and fast funding. Both the construction and rental loan programs average a seven to 10-day approval timeline.
Dominion believes in investor-centric terms and a relationship-focused approach.
Getting Started with Dominion Financial
Are you ready to start your build-to-rent project? Contact Dominion Financial Services at 410-593-1413 or through the online form. A representative will guide you through the application process and answer all your questions.
