McALLEN — Rhodes Enterprises is investing well over $100 million to develop hundreds of homes in eight build-to-rent communities across South Texas in the next few years, capitalizing on a national trend that’s become popular elsewhere but hadn’t yet been pioneered locally.

Build-to-rent communities are entire neighborhoods designed and built for home renters that essentially offer residents the amenities of living in a single-family home without the investment in time and money associated with becoming an actual homeowner.

A study earlier this year put the number of build-to-rent communities under construction nationwide at 613, totaling 110,727 single-family rentals.

More than 20% of those homes are being built in Texas, the report estimated.

A regional need

Nick Rhodes, president and CEO of Rhodes Enterprises, said his McAllen-based company started noticing a niche rental demand that wasn’t being served a couple of years back.

That niche: a more discerning class of tenant.

The market already had fourplexes and houses for rent, Rhodes said, but people with enough money to avoid sharing a wall with someone else generally want to avoid doing so. 

Rental homes tend to be older, he said, and landlords can be inconsistent about maintenance.

Other people who could conceivably buy a home may hesitate to pull the trigger on such a large purchase or are only in South Texas for work and don’t plan to stay forever.

“Some people just don’t want to buy a house,” Rhodes said.

At first, the company considered getting into the apartment business.

But Rhodes Enterprises doesn’t build apartments. It builds homes.

So it did that.

Rhodes Living

The company officially rolled out Rhodes Living earlier this year.

Under that brand, it’s currently leasing homes in two new McAllen communities and has plans to develop six more in cities where the company already has a presence, among them Brownsville, Corpus Christi, Mission, and Weslaco.

The brand has delivered more than 100 homes and has another 600 in the pipeline.

“So we’ll probably deliver 150 to 200 homes a year for the next few years,” Rhodes said.

Those communities represent a significant investment. 

Rhodes estimates each one costs between $20 and $30 million to build.

So far, Rhodes says the innovation looks like a sound investment.

“It’s gotten very popular in the United States, but no one’s really tried it down here,” he said. “So we kind of pioneered it down here. It’s been exciting. Demand’s been really good. We’ve leased them better than we thought we would. Rents are strong.”

McAllen Communities

The two communities Rhodes Living is already leasing homes in are both in McAllen: Belterra at Tres Lagos on the north side of town and Villas on Ware near the intersection of Ware Road and Buddy Owens Boulevard.

The three- and four-bedroom homes in Belterra are a minimum of 1,485 square feet and start leasing at $2,070 per month.

The two and four-bedroom homes in Villas start slightly more modestly, beginning at 960 square feet and leasing for at least $1,690 per month.

Homes in those communities have fancy-sounding names like “Allegrini” and “Lunelli.”

The brand’s website boasts about the amenities at Tres Lagos and the quality of life in McAllen, pitching potential renters on living in a newly built home without the hassle of pesky inconveniences like yard work and pest control and changing AC filters.

Rhodes says the description of the homes’ quality isn’t just marketing material. The communities represent a long-term investment so they’re built sturdy and intended to be pristinely managed.

“Because we know we’re keeping them,” Rhodes said.

Other incentives

Some of the homes at Villas on Ware flirt with an even more niche corner of the housing market: people downsizing from a larger home or are single and don’t need as much space.

A significant percentage of homeowners in America are single, and new home sizes are trending downward.

There may be a market for those sorts of renters who would otherwise likely be restricted to looking at something more modest with less amenities, Rhodes said.

“So the idea is for a couple of hundred dollars more, you get a covered patio, a backyard, a two-car garage, a gated neighborhood,” he said. “So we’ll see if people like these. We’re building like 10 [homes] as tests.”

Ultimately, Rhodes Enterprises’ core business is still selling houses.

“We really believe in homeownership,” Rhodes said. “We think it’s a great way to build wealth, for people to own a home.”

Rhodes says the rental communities are structured to fuel purchases.

Tres Lagos is on the outskirts of McAllen.

Rhodes says renting a home there can be a test run for a hesitant buyer unsure of living away from the heart of the city.

The company is also financially nudging its tenants toward buying. It will credit some of its tenants’ rent toward a down payment on one of its homes.

So far, Rhodes says, it looks like those incentives are working.

“In the first year, I think we’ve already had about 15% of the tenants buy a house from us,” he said.