Each of the single-story detached units in an Avilla Homes community is "right-sized" for its rental demographic, with one- to three-bedroom floor plans ranging in size from 635 square feet to about 1,250 square feet.
Temi Kennedy Each of the single-story detached units in an Avilla Homes community is "right-sized" for its rental demographic, with one- to three-bedroom floor plans ranging in size from 635 square feet to about 1,250 square feet.

For the most part, the recent boom in the single-family rental market was built around small and large investors buying up existing single-family homes—starting in the late 2000s with homes foreclosed on during the Great Recession—and offering them back to the market as rentals. Many of these homes were not originally built as rental properties and may be strewn across communities of owner-occupied homes.

While this poses a great solution for single-family hopefuls, traditional detached home options—built to rent or otherwise—are not feasible for many renter profiles: A full-size family home may not work for a single person, and an isolated rental property may not offer the community and amenity prospects that some renters want. In response to this need, a growing number of companies—including AHV Communities, BB Living, and NexMetro Communities—are taking a different approach to the single-family rental model with entire communities built to rent.

While these communities encompass a range of home types, Phoenix–based NexMetro Communities has chosen to focus on rental demographics that usually go for attached multifamily. The Avilla Homes model is made to mix the best of many residential property worlds, offering the structure and lifestyle of a “right-sized” single-family home with the flexibility and financial structure of a rental property, plus the benefits that come with a professionally managed community like maintenance-free living. NexMetro has 10 open and leasing Avilla Homes communities across Dallas, Denver, Phoenix, and Tucson, Ariz., with new communities in progress in Orlando, Fla. The firm has completed, started, or developed over 3,300 rental units, with another 1,000 units in predevelopment, and more than $1 billion in total assets under management or in escrow across the country.

A New Niche

The Avilla Homes model got its start in 2010, when Diamond Ventures started building single-family rental communities in Tucson. When the communities proved successful, Diamond Ventures partners Ken Abrahams and Donald Diamond formed NexMetro Communities to scale the community concept to markets across the Sunbelt.

The partners had thought their main demographic would be former homeowners in need of transitional housing, according to Josh Hartmann, NexMetro president and COO. “They thought it was a great product for people who were losing their homes … but what they realized was that the consumer was not who they expected,” he says. “They were seeing new consumers who had great incomes, great credit scores, and could certainly afford to buy a home, but didn’t want to have the burden of a mortgage. They also didn’t want to live in an apartment, a traditional three- or four-story walk-up where you’ve got people above you and beside you and you don’t have your own private space.”

Hartmann was NexMetro’s first outside employee, hired in 2013 after 10 years with PulteGroup. As a civil engineer, he has developed residential, commercial, and industrial projects, with specific focus on home building, land operations, and master-planned community development with PulteGroup and Sunbelt Holdings.

“From that background I knew there was a missing space in the continuum of housing product that wasn’t really fitting these consumers,” Hartmann says. “We don’t think that Avilla Homes is going to take over the world. Not every single customer wants this type of lifestyle. But for those who do, it provides the hybrid of worlds from apartment living and single-family living.”

The exterior elevations and landscape features of NexMetro's Avilla Homes, including this community in Plano, Tex., are modeled after the natural surroundings and local architectural styles.
Shoot2Sell Photography The exterior elevations and landscape features of NexMetro's Avilla Homes, including this community in Plano, Tex., are modeled after the natural surroundings and local architectural styles.

Unlike traditional single-family home communities, Avilla Homes’ communities make use of multifamily zoning, with a single site plan and no individual lots. All Avilla Homes neighborhoods are gated and ideally located close to employment, retail, and service centers in desirable geographic locations.

On the financial side, each of the communities is priced competitively with nearby Class A apartments and managed by a professional multifamily-style management company. Residents are not charged mortgage or HOA fees.

The floor plans are all for one-story homes, with one to three bedrooms and one to two baths, and exterior elevations are designed to emulate local architectural styles. The homes’ consistent design allows for greater construction efficiency, NexMetro says, and the finished units may be occupied even as construction continues on the site.

Each unit includes luxury-level features and furnishings: 10-foot ceilings, quartz countertops, stainless steel appliances, full-size washers and dryers, and a private backyard and covered patio. Hartmann describes them as “apartment-sized spaces, but they’re fully detached.” All units are pet-friendly, with up to three pets allowed in each home and no restrictions on dog sizes or breeds.

Each home also includes reserved covered parking, with optional garage parking available, and charging stations for electric vehicles. Community residents share landscaped recreation areas and a neighborhood resort-style pool. All maintenance needs, inside the homes and out, are performed by management at no added cost to the renters.

“The main advantage for the owner is that we are able to maintain and manage our homes a little easier if we have 200 or 250 homes in a single neighborhood,” Hartmann says. “We have an on-site, full-time maintenance person, so they can be very responsive to our residents and give them the feeling that they have someone they can go to personally to help them address any issues they may have. Of course, because we build them all, we know what goes into them and we can control the quality of the homes.”

Unexpected Demographics

Renters in need of transitional housing are still one of NexMetro’s main demographics—particularly those who are moving for jobs or have gotten divorced. However, the product has appealed to a broad range of renters for a variety of reasons. Given the “right-sized” format of the single-family homes, the communities’ largest demographics are high-income young professionals, usually without children, and downsizing retirees.

Often, Avilla’s residents have the wherewithal to buy, but have chosen instead to rent for one of many reasons. According to Hartmann, younger renters want to live in a single-family home but don’t want to tie themselves down with a mortgage.

“For young professionals, young families, people who are living together but maybe don’t have kids yet, it gives them flexibility,” he says. “Maybe they’re looking for a place they want to settle in, and we give them the option of being able to live that kind of lifestyle in a neighborhood that they maybe wouldn’t otherwise be able to get into at that time. Or they’re deciding what they want to do in their career and they’re not sure they want to tie themselves down to buying a home and having a mortgage, but they want to live in a home.”

The strongest appeal to older renters is the maintenance-free lifestyle, which frees them from the responsibility for the home’s upkeep. “We hear that all the time, that one of the most appealing attributes of our model is that hassle-free, carefree lifestyle,” says Jacque Petroulakis, vice president of marketing and investor relations at NexMetro Communities. “Not just no burden of a mortgage, but no burden of having to change a lightbulb.”

They’ve also found themselves serving renters with “unusual” schedules, including pilots, nurses, and public service workers like firemen and police officers. “They’re people who want to live in a home, who can afford to live in a home, but really need something that’s maintenance-free,” Hartmann says.

All Avilla Homes feature 10-foot ceilings, stainless steel appliances, quartz countertops, and a private backyard with a covered patio.
Michael Keatley All Avilla Homes feature 10-foot ceilings, stainless steel appliances, quartz countertops, and a private backyard with a covered patio.

Strategic Moves

Over the past eight years, NexMetro’s housing model and business plan has proved popular with its private investors and “disrupted the concept of home” for its renters, according to Hartmann. “We take calls from new residents all the time, saying, ‘I can’t believe that this never existed before, but it’s so perfect for me and for my lifestyle and how I want to live,’” he says.

The firm is expanding the Avilla model into new markets, including Georgia, Nevada, North Carolina, Tennessee, and Washington state. It also anticipates growth from its existing offices, such as moving into San Antonio, Austin, or Houston from the Dallas office in Texas, for example.

“We use a combination of macroeconomic trends, employment trends, and our existing 2,000 residents to understand who exactly our customer is and where they are in these markets,” Hartmann says. “Our business model is to enter a new market, build up to about 500 homes per year, then we’re looking to move into different markets. We’re very disciplined, and we feel like we can effectively deliver 500 homes per year. And it doesn’t oversaturate the market, but it does give us a brand presence.”

The company has recently made heavy investments in the Denver metro area, with 500 new units across three sites coming online in 2019 and 2020. The first, Avilla Buffalo Run in Commerce City, opened in early 2019 with 123 homes on 12.5 acres. Avilla Prairie Center in Brighton will open 136 homes in mid-2019, and Avilla Eastlake in Thornton will open with 244 homes by mid-2020.

In a January release, Reed Ruck, managing director of NexMetro Denver, described the Denver metro as “an ideal market for Avilla Homes neighborhoods given its exceptional employment expansion, continued population growth, supply issues, and the resulting demand for high-quality rental homes.”

In Texas, Dallas has been another strong home market for NexMetro. Its latest development, Avilla Heritage, opened in Grand Prairie in July, and new communities are currently underway in Arlington, Celina, and Fort Worth.

NexMetro also made its first asset sales in July 2018, selling three of its Phoenix-area Avilla Homes communities to three different buyers for $98 million. Avilla Palm Valley set a cost-per-door sales record in the West Valley submarket at $200,800 per door, while Avilla Heights and Avilla Grace placed second and third for the Chandler submarket at $240,000 and $232,000 per door.

Hartmann believes that, in this current economic environment, single-family home communities built for rent are an attractive option for households who want to live in single-family homes, but do not fit into the traditional purchase structure. In his view, single-family rentals are here to stay given the ways in which both American household demographics and single-family home prices have shifted.

“The demographics of our country aren’t going backward,” Hartmann says. “For years we’ve been seeing people getting married later, we’ve seen people starting families later, and we also see the housing cost to purchase going up much more quickly than incomes are going up. Unless there’s a dramatic change somehow in demographic trends, which I don’t see happening, I don’t see how it’ll become a thing of the past. I think it’ll always be a part of our world.”