The Build-to-Rent (BTR) sector continues to evolve rapidly, shaped by shifting economic conditions, increasing competition, and innovative development strategies. At the recent Build-to-Rent East conference, industry leaders shared insights into key trends affecting the market. Here are some of the major takeaways:
1. Rising Land Competition and Cost Pressures
One of the most pressing challenges facing the BTR sector is the intensifying competition for land. Multifamily developers and traditional homebuilders are increasingly moving into the space, driving up land costs and making site selection more complex. This competition underscores the importance of strategic location selection and creative deal structuring to secure viable land opportunities.
2. Evolving Development Strategies and Market Segmentation
Developers are embracing niche strategies to stand out in the BTR market. This includes tailoring floor plans to specific demographics, incorporating high-end amenities, and targeting high-demand locations. These efforts highlight the increasing segmentation within the BTR space, where differentiation is becoming crucial to attracting tenants and investors alike.
3. Adapting to Interest Rate Uncertainty with Flexible Financing
Uncertainty in the interest rate environment is pushing BTR borrowers to seek more flexible loan structures. Floating-rate debt and prepayment options with fewer restrictions are becoming more common as developers aim to navigate potential market shifts with greater financial agility.
4. Supply Pressures and Rent Growth Outlook
A surge in new BTR deliveries has temporarily put pressure on rents in primary markets. However, industry sentiment suggests this is a short-term challenge, as new build-for-rent (BFR) starts are declining. Once these new units are absorbed, rent growth is expected to resume, reinforcing confidence in the sector’s long-term stability.
5. Investors Moving Up the Value Chain
To enhance yields and mitigate market fluctuations, investors are increasingly partnering with homebuilders or even establishing their own captive homebuilding operations. While this strategy introduces construction risk, it also improves yield on cost, a critical factor in today’s evolving market where equilibrium cap rates are still being established.
6. Debt Market Dynamics: Spread Compression and Refinancing Opportunities
Significant spread compression in term and bridge debt has enabled cash-neutral refinancings, reducing the negative leverage impact on new acquisitions. This financial shift is providing developers and investors with more stability in structuring their deals.
7. Positive Sentiment Toward National Homebuilders
Despite challenges in land availability and broader macroeconomic uncertainties, sentiment toward national homebuilders remains strong. Their ability to deliver quality construction at scale continues to be a major asset for the BTR sector.
8. BFR Interest Outpacing Multifamily Development
Investor interest in build-for-rent (BFR) and for-sale housing is currently outpacing enthusiasm for ground-up multifamily development. One key driver of this trend is that lender spreads remain relatively close between these product types, making BFR an increasingly attractive option for developers and financiers.
Looking Ahead
The insights from Build-to-Rent East reinforce that while the sector is facing challenges, opportunities for innovation and growth remain strong. Developers, investors, and lenders are actively adapting to market shifts by refining their strategies, embracing flexibility in financing, and positioning themselves to capitalize on future demand. As the market continues to mature, those who can navigate these dynamics effectively will be best positioned for long-term success in the BTR space.
The 2025 National Private Lenders Association (NPLA) conference in Miami brought together key players across the private lending ecosystem to share insights, discuss market shifts, and forecast future trends. Here are the top takeaways from this year’s event:
1. Capital Is Still Flowing, But Borrowers Must Be Strategic
Private lender sentiment and deal volume remain strong, but the landscape has become more nuanced. A major theme at NPLA 2025 was the growing importance of borrowers understanding the capital source of their lenders. The era of “catch-all” lending is fading, especially with the noticeable pullback in DSCR multifamily lending.
For borrowers, this means a more strategic and informed approach is needed. Capital is out there, but accessing it requires clarity on your needs and alignment with the right lending partners.
2. Distribution Depth Is a Key Differentiator
Among private lenders, those with the deepest and most diversified distribution channels are performing the strongest. These lenders are better positioned to offer customized, flexible financing solutions, thanks to broader access to investors and capital markets on the back end. This depth enables them to weather market fluctuations more effectively and serve a wider range of borrower profiles.
3. Optimism Around Treasuries and Deregulation
Looking ahead, there is a strong sense of optimism among lenders and investors alike. Many are anticipating a decline in treasury yields over the next 12 months. Combined with expectations of further deregulation, this could significantly boost transaction volume and bring more liquidity into the market.
Final Thoughts
The private lending space is maturing, and NPLA 2025 made it clear that borrowers and lenders alike must adapt. Understanding capital sources, aligning with specialized lenders, and keeping an eye on macroeconomic signals will be critical to thriving in this evolving environment. For those willing to do their homework and build the right relationships, the opportunities are as strong as ever.
Success as a real estate investor requires you to move quickly. But one area where you can’t afford to rush is in choosing a lending partner. Unfortunately, many investors lock themselves into unfavorable terms simply because they don’t know how to spot loan clauses that could cause them problems down the road.
At Encore Finance, we believe that transparency and alignment with our clients’ goals are non-negotiable. This blog provides some tips on how to identify red flags before signing a loan, so you can protect your investments and stay on track to achieve your goals.
Inflexible Terms
Loan terms may appear good at the moment you sign, but what if the market shifts? Inflexible loan terms can limit your ability to pivot when market conditions change or new opportunities arise.
Watch out for:
- Rigid Amortization Schedules: Lack of options for interest-only payments or term extensions can easily create a cash flow crunch.
- Strict Collateral Requirements: Demands for overly restrictive guarantees that tie up your other assets can handcuff you and keep you from taking advantage of new opportunities.
- One-Size-Fits-All Structures: A loan that doesn’t consider your unique project timelines or goals can end up costing you big.
How to ensure adequate flexibility
Look for lenders who tailor their loan terms to your specific needs. At Encore Finance, we offer solutions like phased funding for Build-for-Rent projects, allowing investors to scale their financing as they go.
Vague Exit Clauses
An unclear or poorly defined exit clause can lock you into a loan for longer than you intended. This is especially critical for bridge loans, where the ability to refinance or sell is key to your strategy.
Here are a few warning signs:
- Ambiguous Exit Terms: Loopholes or vague language about penalties or timelines can set you up for a bad surprise.
- Limited Refinance Options: Restrictions on transitioning to long-term financing can cost you money down the road.
- Excessive Prepayment Penalties: High costs for paying off the loan early can easily derail your profitability.
How to ensure a profitable exit
Ensure the exit strategy is straightforward and aligns with your investment plan. A good lender will discuss exit scenarios upfront and work with you to create a seamless transition to permanent financing or sale.
Poor Communication
A lender’s communication style can be a strong indicator of their reliability. Poor communication often leads to misunderstandings, delays, and added stress.
Be wary of:
- Unresponsive Loan Officers: Getting timely answers to your questions should be non-negotiable.
- Overly Complicated Language: Terms and conditions that are hard to interpret can lead to costly misunderstandings.
Shifting Answers: Inconsistent explanations about rates, terms, or conditions is a major liability. You need to be able to trust what your lender tells you without a second thought.
How to avoid communication issues
Choose a lender who prioritizes transparency and collaboration. At Encore Finance, we pride ourselves on being relationship-driven, ensuring you’re informed and confident every step of the way.
Unrealistic Promises
If a lender’s offer seems too perfect, it probably is. Common tactics include promising ultra-low rates that don’t reflect your actual risk profile or offering terms that magically solve all your problems without compromise.
Specifically, look out for these:
- Bait-and-Switch Tactics: Attractive terms initially that change after you’ve committed.
- Lack of Transparency: Avoidance of detailed discussions about risks or downsides.
- Minimal Due Diligence: Failure to fully assess your project, which can result in funding delays or denials later.
How to stay grounded in reality
Work with lenders who balance optimism with realism. A credible partner will give you honest feedback and realistic terms from the outset. At Encore Finance, we’re invested in your long-term success, so transparency and honestly are at the heart of everything we do.
The Encore Difference
At Encore Finance, we’re more than just a lender; we’re a trusted partner in your real estate investment journey. Our team’s extensive experience, coupled with a commitment to transparency and client success, ensures that you’ll never face hidden fees, rigid terms, or vague clauses. We’re here to help you navigate challenges and seize opportunities with confidence.
Real estate investment is too important to leave to chance. By staying vigilant and asking the right questions, you can avoid common pitfalls and find the financing partner who’s truly invested in your success.
Ready to work with a lender who puts your goals first? Contact Encore Finance today to learn more about our investor-focused loan solutions.
Hear from the SFR/BFR industry’s leading experts during the Pieces of the Puzzle: What the Fed’s Rate Hike Means for the SFR/BFR Market webinar as they take a deep dive into how the Federal Reserve’s rate increases have affected the housing market. During this discussion, the panel of experts will discuss trends for home prices and economic growth, cap rate predictions, effects of higher deficit spending and higher long-term interest rates, and views on a future recession. Register today for this month’s Pieces of the Puzzle webinar, featuring SVN | SFRhub Advisors, John Burns Research and Consulting, Encore Finance and Pintar Investment Company.
America is in the middle of a housing crisis. There are only 1.08 million existing homes on the market, and the affordability of a single-family home is at its lowest level in several decades. One bid to close the estimated 3.8 million unit deficit in housing is by building new, single-family homes — but some are not for sale, they’re for rent.
This relatively new and growing segment of the housing market is called “build for rent” or BFR (or “build to rent” or BTR). Often constructed in suburban areas with low crime and near good schools, BFR homes attract those who want the lifestyle of a house — but the affordability or convenience of renting.
With an average rent of a BFR home at $2,039 a month, BFR properties are located mainly in the Sun Belt, including Texas, California, Arizona, Florida, North Carolina and Georgia, according to data from the National Rental Home Council and Yardi Matrix.
To view the full article click here.
Housing Market Predictions For 2023: When Will Home Prices Be Affordable Again?
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Though summer temperatures have been scorching hot across many parts of the country, housing market activity remains tepid.
The national average 30-year fixed mortgage rate ended in July where it started before edging near 7% the first week of August. A basis point is one-hundredth of one percentage point.
Meanwhile, existing monthly home sales dropped 3.3%, with all four major U.S. regions posting year-over-year sales declines, according to the National Association of Realtors (NAR).
To view the full article click here.
Built-for-rent housing may be the next big thing in multifamily living. It provides tenants more privacy than an apartment complex, with similar ease of care for landlords.
The housing market continues to be incredibly tight for home buyers, with just 2.7 months of available housing supply for sale as of November 2022, but it’s also not been a picnic for renters, who are fighting for units in an increasingly tightening (and expensive) market. Real estate investors have come up with a sort of middle ground solution to both of these issues: built-for-rent (BFR) housing. BFR has been getting a lot of attention lately, and for good reason.
To view the full article click here.
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