Someone on YouTube asked me a great question recently: what’s your process for finding good deals on land to build rentals on? It’s a part of the business not many people talk about, but so much of building profitable rental properties hinges on it. I filmed this answer while checking in on one of our build-to-rent houses here in Central Arkansas, a four-bedroom, two-bath single-family home underwritten to rent for about $1,550 a month when it’s finished. Here’s how we keep our pipeline of good land deals full.
Two Types of Land Deals
When you’re looking for land to build on, there are really two different kinds of deals. The first is straight raw land, where you take a parcel through the entire entitlement and development process. That can be a great way to do it, but it’s a lot more complex and a lot more expensive, so it’s not where I’d tell most people to start.
The second type, and where we’ve focused most of our energy over the last year and a half to two years, is infill lots in existing subdivisions. These are much more approachable, and there’s more opportunity in them than people realize.
Where We Find Infill Lots
Most of what we buy falls into a couple of categories. The first is lots in subdivisions that simply never sold and never got built on, parcels that have just been sitting there for years. The second is lots that had existing homes on them that are no longer usable, whether a house burned down and was torn down, or a structure got so dilapidated that the city red-tagged it and removed it. Those lots end up sitting unused, and they make great opportunities to come in and build something new.
A big advantage with these infill lots is that the zoning is usually already in place for a single-family home, which removes a lot of the friction and cost you’d run into with raw land.
Why We Like Single-Family Build-to-Rent
Single-family homes give you more options than a duplex, triplex, or fourplex. You can rent it out, or you can sell it to a homeowner, depending on what the market is doing. Right now we’re focused on building to rent rather than building spec homes to sell, though we’ve done plenty of for-sale building in the past and will do more as the market picks back up.
Here’s a real example of that flexibility: we recently put one of our nicest single-family rentals under contract to sell. It was originally a heavy rehab, almost like new construction, that didn’t sell when we finished it, so we leased it to a tenant instead. She’s been there three years and has been an absolutely amazing tenant, and now she’s buying the home. That’s the kind of optionality a single-family property gives you.
From Slab to Finished House
On the build we walked through, we’d recently passed our inspections, poured the monolithic slab, framed the house, and shingled the roof. The next steps were installing windows and exterior doors to secure the house, then bringing the rough trades back in for the top-out, where the plumbing, electrical, and HVAC get run from the slab up. Watching a build-to-rent come together step by step is one of my favorite parts of this business.
At Apex Professional Construction, we find land, build single-family and build-to-rent homes, and help investors put together profitable projects across Central Arkansas. If you want to build rentals or you’ve got land you’re trying to figure out, give us a call at 501-500-5177 or request a quote.