Step 1: Vetting a Build-to-Rent Investment OpportunityNov 13, 2021
A clip from the podcast episode, "Calculating Income/Expenses for a New Construction Rental" via The Build-to-Rent Podcast.
Watch the full episode here: https://youtu.be/mTuftETWOUI
When you buy an existing asset, it's a known quantity. You've got to give a better return to your investors on build-to-rent because it's not a known quantity.
There's a lot of things that you can go out there and you can vet out. You can discover that would make a compelling case for why your build-to-rent property is good.
But is it really good?
One thing that I've done in the past to quickly vet out, do some due diligence on whether a project is worth exploring more or not is to just use a generic what's called expense ratio to say, I'm going to take 35% or 40% or more of the rental income and reserve it for expenses.
Then based on my financing and everything else. I can back into whether this is a good cap rate, whether it's a good return or not correct, but that doesn't always necessarily work in that, that for an amateur, isn't going to be the way you make the final decision on a project.