Why this “lazy” investing loophole may get a presidential pass

When Bruce McNeilage bought his first rental property in Nashville, TN, “I figured out I didn’t want to fix things,” he admits. “I wasn’t handy.” He realized that the easier way to own rentals was to buy a brand-new house.

Since then, McNeilage’s need for ease has turned out to be a business strategy. He has since bought—or built—more than 1,000 properties through Kinloch Partners, capitalizing on the rapidly expanding build-to-rent (BTR) market. Though most new homes in the US are still purchased as primary residences, over 321,000 homes have been built specifically as rentals since 2012 (more than three-quarters of those in the past five years), according to John Burns Research.

This real estate sector has attracted attention lately due to President Trump, who has been cracking down on large institutional investors buying up houses but has given an indication that there may be exemptions for certain groups such as build-to-rent. Builders are also in talks with the White House about erecting 1 million “Trump Homes” that would start out as rentals and offer a path to ownership in three years. Trump’s support of build-to-rent boils down to the fact that builders expand the housing supply rather than competing with buyers for existing homes. According to Richard Ross, chief executive of build-to-rent developer Quinn Residences, “Build-to-rent is part of the solution to the US housing crisis.”

A new type of rental

About one-third of Americans rent their home. Although “rental” might conjure visions of high-rises packed with apartments, a growing number of today’s rentals are free-standing single-family homes, nestled in suburban communities with top-notch schools. Buying in these areas often requires deep pockets, but BTR communities make them accessible to renters for significantly less upfront cash—often 40% to 50% less, according to Ross.

Long before Trump’s loophole was announced, institutional investors like Blackstone, Invitation Homes, and Pretium Partners had already shifted more of their business toward build-to-rent communities because it made financial sense (new construction requires a lot less maintenance). A growing number of mom-and-pop investors have also hopped on the BTR bandwagon, shopping investor-friendly marketplaces like Lennar or Rent To Retirement.

“We’re huge believers in new construction because it limits capital expenditures and attracts quality tenants who stay longer,” says investor Zach Lemaster, who started as a typical landlord, got overwhelmed with repairs, and launched Rent To Retirement to offer more “turnkey investment” opportunities to investors. “All my friends were coming to me saying, ‘Hey, we want to invest, but we don’t want the headaches.’ That’s the problem we solve.”

Rentals have changed, but so have renters. “Twenty years ago, 100% of my tenants had to rent,” says McNeilage. “Now, a large portion of our business is people choosing to rent. Our average tenant makes $126,000 a year.” Part of this preference may be due to job mobility, or the simple fact that rentals are cheaper than owning and less of a headache. Like McNeilage himself, today’s renters increasingly share a simple philosophy: They don’t want to fix things.