Single-family homes built to rent are emerging as the hottest corner of the U.S. property market. Investors respond to booming demand from home-seekers priced out of housing for sale. Average risk-adjusted annual return for built-to-rent investments is now about 8%.

The expected risk-adjusted annual return for built-to-rent investments in the private market is now about 8% on average. New household formation is also increasing the demand for rentals, as more young people get their own places. Historically high housing prices and steep down payment requirements for homes are driving more people to keep renting, even as rents rise.

Close to 100,000 built-to-rent homes will have started construction this year. Investors have poured about $30 billion in debt and equity into the sector in 2021. Traditional home builders like Lennar Corp. and D.R. Horton Inc. have made building rental houses a major component of their business.

The U.S. mortgage market involves some key players that play important roles. Here’s what investors should understand and what risks they take when investing in the industry. Crow Holdings, a company with a background in apartment construction, is considering testing the sector, starting with two proposed Texas projects.
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