The rental housing market in the United States continues to evolve. Alongside traditional apartment properties, the build-to-rent (“BTR”) sector—single-family homes or townhomes constructed specifically for rent—is attracting increasing levels of institutional capital. Although both sectors address the growing rental demand, the distinct nature of the assets and the associated risks may create significant differences in how joint venture agreements are structured and drafted.

Traditional multifamily investments involve the acquisition of garden-style, mid-rise, or high-rise apartment communities. These properties are often stabilized or near stabilization at the time of acquisition, which allows investors to underwrite relatively predictable cash flows. While approaches may differ – from core-plus deals with minor improvements to more ambitious projects with heavy renovations – at the center of each traditional multifamily investment, the goal remains the same: to lease and operate an existing property.

BTR communities, by contrast, require a different approach. BTR transactions often begin with a raw land acquisition and infrastructure development, followed by phased vertical construction. As a relatively new asset class, BTR offers investors less performance history than traditional multifamily, and projects generally demand a greater degree of upfront planning, capital staging, and risk allocation between the parties. These structural and operational differences naturally extend to and influence the joint venture agreement.

One of the most obvious differences lies in capitalization. A multifamily joint venture is usually capitalized at closing, with investors contributing the equity needed to fund the purchase price and reserves for improvements or operations. Beyond that, capital needs are relatively modest, and funding schedules are straightforward. By contrast, a BTR joint venture must account for a long development timeline and multiple stages of capital deployment. Equity is often called in tranches to support land, infrastructure, vertical construction, and contingency reserves. A BTR joint venture agreement must therefore address capital defaults, remedies for non-funding, and other protections with more detail than in a traditional multifamily joint venture agreement.

Governance also looks different across the two structures. In multifamily ventures, the sponsor typically manages day-to-day operations, with investors retaining approval rights over significant matters such as refinancing, major capital expenditures, or a sale or disposition of the asset. Because the operational risks are relatively well understood, dispute resolution and buy-sell mechanics are often simpler. In a BTR context, however, the governance structure must account for development risk. Investors are more likely to insist on approval rights over construction budgets, contractor selection, and material changes to schedules or plans. Phased development creates multiple inflection points where disagreements may arise, so BTR joint venture agreements often need more robust deadlock and exit provisions.

Risk allocation is another dimension where the nature of the asset class may drive meaningful differences in the relative joint venture agreements. In traditional multifamily acquisitions, the risks revolve around occupancy, rental growth, and operating expenses. Lenders may require limited carve-out guarantees, but sponsors are not typically exposed to extensive personal obligations. BTR projects introduce construction risk, lease-up risk, and cost overrun exposure, in addition to operational issues. It is common for lenders and investors to require completion guarantees, repayment guarantees, or specific cost overrun backstops from the sponsor. As a result, the joint venture agreement must carefully spell out who bears responsibility for delays, overruns, or contractor defaults among the parties.

Exit strategies also tend to diverge between the asset classes. In multifamily ventures, the most common path is a sale of the property after a three-to-seven-year hold. Multifamily joint venture agreements typically include provisions to coordinate exit timing, such as drag-along, tag-along, or buy-sell rights. BTR joint ventures, however, may pursue different monetization paths, including bulk sales of entire communities, retail sales of individual homes, or refinancing once the project reaches stabilization. Because construction phasing and absorption rates can extend the hold period of a BTR asset, investors and sponsors must align early on whether the venture is targeting retail dispositions, bulk dispositions, or a hybrid approach, and the joint venture agreement may give investors a voice in how those decisions are made.

Even the operational phase reflects differences. Multifamily operations are well-established, with professional third-party managers and institutional best practices guiding leasing, maintenance, and expense management. BTR operations are still evolving. Managing single-family homes across larger geographic footprints can present logistical challenges, and many operators rely on technology platforms to centralize leasing, maintenance requests, and rent collection. Because service standards and operating costs are less predictable, BTR joint ventures often devote more contractual attention to defining management practices, service levels, and allocations of operating costs, responsibilities and revenues among the venture partners.

These differences underscore why a single ‘one-size-fits-all’ joint venture agreement cannot effectively serve both traditional multifamily and BTR assets. Traditional multifamily joint ventures generally require a focus on operational oversight, simple capital deployments, and predictable exit strategies. In contrast, build-to-rent joint ventures typically demand meticulous development planning, greater investor approval rights, more intricate risk allocation, and adaptable exit provisions.

As the institutional appetite for BTR continues to grow, the market may converge toward more standardized structures. For now, however, joint venture agreements in this space remain more complex and bespoke than their traditional multifamily counterparts. Sponsors and investors entering into these ventures should ensure their agreements reflect the realities of the asset class—particularly around capital staging, control rights, guarantees, and exit strategy—to help align expectations and protect all parties of the venture.