In February 2024, Legacy Partners, a privately held, full service real estate company, announced they are working with The Resmark Companies to develop two single-family built-to-rent (SFR BTR) communities in the suburbs of Melissa and Aubrey, both located north of Dallas beyond Frisco and McKinney. Both communities are already under construction courtesy of Provident General Contractors. The communities are projected to be completed by the end of 2025.

Legacy's current portfolio is geographically diverse: the bulk of its exposures are spread between the DFW Metroplex, Los Angeles, the San Francisco Bay Area, and Seattle. They have built more than 1500 apartment units in North Texas alone since 2022. However, Legacy has historically focused upon multifamily developments rather than SFR. Matt Brendel, executive managing director at Legacy, discussed the thesis behind the new strategy:

While we historically have developed multifamily properties, we made the decision to pivot to single-family homes after analyzing the surrounding communities and recognizing the need to accommodate families who desire this lifestyle. Both communities are in fast-growing suburban communities with easy access to major employers throughout the Metroplex.

Resmark has worked with Legacy on numerous projects in the past, including a 336-unit multifamily development in Forney, an outer Dallas suburb that may prove comparable to Melissa and Aubrey. In addition, Resmark has previously completed investments into four different SFR communities, offering experience within the space to help Legacy break in. Ziv Cohen, CIO at Resmark, spoke to the strength of the two companies' working relationship:

Legacy is a valued partner with strong development expertise and a strong reputation of execution. We are excited to extend our partnership into the BTR sector and deliver a sought-after housing product to these vibrant communities.

An apartment-style clubhouse offers amenities many renters would not have access to as homebuyers. This rendering is of Highland in Melissa.Source: Legacy Partners

Both properties will feature shared amenities similar to a traditional apartment building, hoping to entice renters with the "best of both worlds", combining the privacy of a single-family home with the flexibility and amenities of a rental community. These amenities include:

  • Gaming rooms
  • Co-working space
  • Conference rooms
  • Fitness centers
  • Swimming pools with cabanas
  • Outdoor kitchens with grills
  • Dog parks
  • Green space

Highland, designed by UD Architects, will host 133 homes between one and two-stories with area ranging from 780 to 1500 SF and bedroom count ranging from one to three. Additionally, most offerings will feature attached garages. Monthly rental rates are projected to start at $2100.

Oak Grove, designed by Architecture Demarest, will host 134 homes, similarly between one and two-stories from one to three-bedrooms. The area of these homes will range from 770-1625 SF and monthly rental rates are projected to start at $2000.

A monthly rate of $2000+ for a ~800 SF home in Melissa or Aubrey certainly elicits a feeling of sticker-shock. While there were not comparably sized homes listed on Zillow at the time of writing, it certainly seems pricy even when accounting for the flexibility enjoyed and lack of maintenance costs incurred by renters. The developers hope to justify these high rental rates by offering a high-quality product in each of the two communities. Granite countertops, upgraded appliances, smart home technology, and (of course) private yards offer renters the enjoyment of their own homes without the commitment and potential costs associated with homeownership.

SFR BTR has become very popular among investors within the past few years, largely coinciding with a red-hot housing market and rising interest rates. These communities' sensitivity to declining interest rates, however, remains to be seen. SFR renters may be simply "punting" their homebuying in the hopes of more favorable market conditions.

Relatively small interest rate changes can drastically affect home affordabilitySource: FRED

Given SFR BTR's direct competition with homeownership, a decrease in interest rates or increase in home supply could leave investors with a choice between lowering rents or declining occupancy. However, the SFR BTR market could very well prove resilient, perhaps relying on young families forgoing a "starter home" and choosing to rent before buying their "forever home" later on.