E11: Passive Investment Face-Off: Build-to-Rent Battles Mid-Size Multifamily

On today’s episode, Jesse Dickens and Ruben Greth square off to decide which rental investment model is the best - build-to-rent single family homes or mid-size multifamily complexes.

Fighting out of Denver, Colorado, we have Jesse Dickens. With over 10 years of experience in healthcare, Jesse made the transition to real estate investing through multifamily properties. He currently focuses on small to mid-sized value-add multifamily deals in Colorado and Arizona through his firm Wealthcare Capital Partners. 

His opponent,Ruben Greth,  comes to us out of Phoenix, Arizona, and is a developer specializing in build-to-rent (BTR) housing. Ruben is currently developing several build-to-rent subdivisions in high-growth Southeast markets. He also hosts the Capital Raisers Show podcast.

Here are some power takeaways from today’s conversation:

[01:42] - Introduction of Ruben and Jesse

[04:08] - Ruben and Jesse’s beginnings in real estate investing

[11:43] - Small to mid-sized multifamily vs. build-to-rent housing

[26:04] - The risk and reward differences between the two, for investors

[28:29] - ROI profiles across the investments

[36:52] - What forcing appreciation looks like in BTR

[40:01] - The pros and cons of each model

[50:05] - Targeting opportunity zones

[1:02:34] - Who’s today’s winner?

 

Episode Highlights:

[11:43] Mid-Sized Multifamily Value-Add Properties vs. Built-to-Rent Development

Jesse discussed his approach to small to mid-sized multifamily value-add properties. He looks for underperforming assets that can be improved through renovations, better management, and driving rents higher. This allows him to increase the net operating income and property value.

Ruben then explained his build-to-rent model. He partners with experienced developers and general contractors to acquire land, obtain entitlements, and construct entire subdivisions of single-family rental homes. Ruben discussed raising capital in phases - first for infrastructure, then vertical development. Build-to-rent aims to provide the home experience to renters while cash flows for investors.

Both guests also touched on financing. Jesse emphasized flexibility and avoiding variable rate debt. Ruben noted being able to force appreciation at each stage of the build-to-rent process through incremental value creation as infrastructure and amenities are added.

[40:01] The Pros and Cons

For small multifamily (Jesse's model)

• Pros: It's a very proven asset class that has historically performed well through economic cycles due to rental demand. Properties can often be acquired below replacement cost. 
• Cons: Individual properties have more vacancy risk. Scaling the business is challenging due to financing complexity with a large number of small properties. Cash flow can vary with tenant turnover. Amenities are generally more limited.

For build-to-rent (Ruben's model)

• Pros: It allows for large returns through multiple exits and appreciation forced at each development stage. Renters prefer the home experience it provides. Strong demand from institutional buyers. 
• Cons: It carries more development risk that investors may not fully understand. Locations need to support rapid growth. Expenses like maintenance may rise over time with many individual housing units.

[1:02:34] Today’s Winner: Ruben’s Build-to-Rent

• The build-to-rent model emerged as the clear winner due to its significant potential upside, flexibility in exit strategies, alignment with the growing demand for housing, and effective risk mitigation through partnering with experienced operators and builders. Overall, it offers attractive opportunities for investors seeking larger returns, adaptability, growth, and secure investment paths.

Resources Mentioned:

Jesse Dickens:

• Wealthcare Capital Partners
• Email: jesse@wealthcarecap.com 
• Phone Number: 720-229-9899 

Ruben Greth:  

• Legacy Acquisitions