Institutional investors are showing increased interest in the build-to-rent (BTR) housing sector, but traditional joint venture models common in multifamily and single-family rental markets don’t easily translate to this emerging asset class. Vice-Chair of the Real Estate practice group Tim Zwerner spoke with GlobeSt.com about why BTR projects require a different approach to capital staging, governance, and risk management.

“Sponsors are the people running around, beating the bushes, trying to find opportunity and create value,” Tim said. He explained that while many sponsors begin with smaller investors, such as friends and family, those relationships often limit their ability to grow. To scale, sponsors typically seek out institutional investors with deeper experience and capital resources. “The flexibility they provide is a big advantage,” Tim added, noting that while single-asset joint ventures are familiar and lower risk in traditional multifamily, BTR developments introduce a broader set of variables.

“Conventional multifamily has been around forever,” Tim said. “Because the investment strategy is so much better understood and so much less risky, and, most importantly, so much lighter on construction, the joint ventures are very familiar to use.” In contrast, BTR ventures often involve land purchases, securing entitlements, and full ground-up development. “If you think about multifamily or single-family rental like a highway, you start at purchase and end at sale, there are fewer off-ramps and less that can go wrong. With build-for-rent, you have a nascent asset class,” he explained.

Tim emphasized that while BTR is not necessarily more difficult than other real estate sectors, it remains less familiar to many investors. “There is a lot that can go wrong,” he cautioned, urging dealmakers to approach the space with greater diligence and flexibility. As the market evolves, he expects the learning curve to ease, but for now, sponsors and investors alike should plan for added complexity and careful oversight.

To read the full article, click here.