Zach Lemaster, founder and CEO of Rent to Retirement, is pushing a contrarian play in today's choppy rental market. New-construction rentals with just 5% down payments are generating cash flow even as mortgage rates hover above 7%, according to Lemaster.
The strategy targets investors spooked by the turnkey rental collapse that followed the rate spike. Traditional buy-and-hold math broke when financing costs jumped. Cap rates compressed. Monthly rents couldn't keep pace with debt service. Most operators walked away.
Lemaster's model works differently. New construction offers advantages older properties can't match. Builder financing programs, sometimes coupled with seller concessions, drop the effective down payment requirement to 5%. Lower acquisition costs immediately improve cash-on-cash returns. New homes come with builder warranties, minimal repairs, and predictable tenant profiles. Construction quality means fewer vacancy gaps and maintenance headaches that drain older rental portfolios.
The rental demand remains strong in secondary and tertiary markets where Lemaster operates. Single-family rentals in these areas command steady rent growth. A $250,000 property renting for $1,800 per month still pencils out, even with today's financing environment.
This approach appeals to passive investors burned by the turnkey rental industry's collapse. Instead of buying stabilized assets at inflated prices, investors acquire properties still under construction with locked-in prices and financed through builders who carry decades of liability exposure.
The catch exists in execution risk. Construction delays happen. Markets shift. Tenant demand in secondary markets can evaporate faster than coastal metros recover. Investors also shoulder concentration risk if they pile capital into one builder or region.
For landlords seeking steady cash flow without the turnkey rental middleman markup, the 5%-down new-construction model offers real numbers in a market where most plays don't. Rates remain elevated,