When everyone is fighting over the same tired inventory, the smartest move is often to stop competing and start creating. Two strategies let you do exactly that, and most investors never touch either one: building brand-new units, and a little-known program that delivers a guaranteed 0% vacancy rate.
I've used both for years. Here's how each works. (If you want the bigger-picture case for why new construction is suddenly so attractive, with zoning reform opening up backyards, I made that argument in the build-to-rent pivot. This is the how-to.)
Build-to-rent: create the supply
I love this strategy because it produces exactly what I want in a property: recouped capital, high cash flow, and high equity, on a brand-new building that's easy to rent and highly desirable. New 2-4 unit construction is genuinely rare, and scarcity is power. When everyone's fighting for existing deals, builders own the only real scarcity that matters: supply. New units also command a rent premium, around 6% on average nationally.
Here's the process, step by step.
Step 1: Find a builder or a lot. Some builders know of available lots; others just build and want you to bring the land. To find a good builder, call the city or county planning department and ask who's submitted the most permits for multifamily, or search the Master Builders site, Yelp, or Angi. The builders I work with engage once I've found a lot zoned for multifamily, then we meet on site to discuss excavation, site challenges, and costs.
Step 2: Determine what can be built. You may pay a permit tech for a feasibility study ($65-75 an hour), read the municipal code online, or sit down with a planner in person to understand what your zoning allows.
Step 3: Build a preliminary budget. Account for course-of-construction insurance, the builder's fee, excavation and site prep and drainage, utility connection fees, the actual building cost ($80-200 per square foot depending on what and where), loan fees, professional services (engineers, planners, designers), and mitigation fees (parks, schools, roads, traffic).
Step 4: Get construction financing. Construction loans are typically one-year, interest-only (5-7%) with an origination fee. I use the same local bank every time. They review the plans, budget, and my financial statement, order an appraisal based on the plans, and finance 75% of total construction cost as long as it appraises at 75% of cost. You can fund the rest of the capital stack the same way you would any deal, which I cover in how to finance a rental portfolio with other people's money. The loan pays out in draws against invoices, with a bank rep inspecting progress before each release.
Step 5: Refinance to long-term debt. The construction loan only lasts a year, so the moment you get the certificate of occupancy, start the refinance. The new lender orders a fresh appraisal at up to 75% LTV. If the property is four units or fewer, a conventional loan is usually cheaper than converting to a portfolio loan.
A few hard-won tips:
- Keep total project costs at or under 75% of the finished value and you'll recoup your initial investment, the same recycle logic as BRRRR, just on new construction.
- Watch utility connection fees, which can be steep. You get credit if you're tearing down an existing structure, but budget the sewer and water connection plus excavation carefully.
- Negotiate a flat builder fee with a bonus for coming in under budget or ahead of schedule, paid on a draw schedule with the final draw at certificate of occupancy.
- Know the duplex line. In many municipalities a duplex is treated as residential and allowed in single-family zones, while anything larger triggers commercial standards that cost more.
Supported living: the 0% vacancy strategy
This is one of my favorite strategies, and almost no investor has heard of it. There's virtually no information online. The supported living program means renting your property to adults with intellectual disabilities through state-funded providers, and I've owned supported living rentals since 2015 with multiple providers, both nonprofit and for-profit. It's available to landlords in all 50 states.
The background matters. In 1999, the Supreme Court's Olmstead v. L.C. decision held that unjustified segregation of people with disabilities violates the Americans with Disabilities Act, and that public entities must provide community-based services. As states have closed institutions, demand for community-based housing has surged. So this is a strategy where doing well and doing good genuinely overlap, you're providing needed long-term housing.
The landlord benefits are remarkable:
- A guaranteed 0% vacancy rate. The provider pays for any vacant rooms, so you're never carrying an empty unit.
- Residents' utilities are covered through providers who have checkbook control over residents' finances.
- State-paid, licensed caregivers handle care on shifts; they don't live at the property.
- No property management or tenant screening needed. The provider places residents and rents are guaranteed.
- Housing modification funds of up to $12,000 per resident (varies by state) pay for grab bars, walk-in showers, ramps, and fenced yards.
- Per-room rents of $400-800 a month, often above fair market, and no special certifications, zoning, or insurance required.
Net it out and rents are typically higher while you save roughly 15% in expenses (a 5% vacancy assumption plus 10% management you no longer pay). It's also a smart way to diversify a portfolio across strategies, which is part of how I decide when to buy, hold, or sell.
The ideal property is single-story (preferred, not required), with no more than four rooms per unit, close to transportation and shopping in a mid-sized city (not rural), and the more bathrooms the better. A single-story multifamily with 3-4 bedrooms per unit, or a 4-bedroom single-family in a lower-cost area, gives the best return. Demand is real: there's a 5-year waitlist for a 40-unit supported-living complex in my area.
It's not without downsides, and I'll be honest about them. There's more wear and tear, though residents often stay 10-plus years (so no frequent turnover costs), and the provider pays for severe damage. Caregiver turnover is high, so you may get a new on-site manager every year, and some staff lack basic property knowledge, producing minor or occasionally exaggerated repair requests. And you do depend on the provider: I once had a provider back out at the last minute on a new duplex I'd built specifically for the program, which forced me to rent it to regular tenants instead. So plan for that dependency.
The takeaway
Both of these strategies ask more of you up front than buying a turnkey rental. Build-to-rent requires you to manage a construction project and its financing. Supported living requires you to learn an unfamiliar program and work with providers. But both reward that effort with something the crowded market for existing rentals can't easily give you: premium, stable cash flow, and a moat of supply or guaranteed occupancy that your competitors don't have.
So if you've been fighting everyone else for the same overpriced inventory, ask whether the better move is to stop competing and start creating, by building the supply yourself, or by serving a tenant base that almost no other investor is set up to serve. The learning curve is real. So is the payoff on the other side of it.
This article is educational and reflects my own experience. It isn't financial, legal, or tax advice. Construction, zoning, and supported living program rules vary significantly by location, so verify the specifics and consult the right professionals before acting.
