Investing in Build to Rent
The UK property market is experiencing a surge of momentum in the form of Build to Rent (BTR), opening up exciting opportunities for both investors and developers. BTR allows them to develop housing that caters specifically to renters, offering an attractive way of creating rental options.
Build to Rent developments involve constructing purpose-built rental properties for long-term occupancy. with the aim of providing secure, quality affordable private rent homes.
This type of property development provides investors with more stable returns than traditional buy-to-let investments due to their longer-term tenancies.
With an increasing demand for rental accommodation in the UK, BTR offers investors the opportunity to benefit from rental income as well as capital gains. And in comparison to other investment options, it can offer a more secure return on their investments.
Build to Rent – Role in the housing market
The current UK housing market is characterised by strong demand for rental accommodation and tight supply. This has led to an increase in the cost of rent, making it difficult for many individuals to access affordable private rent homes.
As such, build to rent projects provide developers with a unique opportunity to address this issue and create much-needed housing in the rental sector.
Through these projects, property developers can build quality homes that offer tenants the features and amenities they need, while providing investors with a more stable return.
Regenerating local community areas
Furthermore, BTR developments are often built in areas where traditional housing is not possible due to infrastructure restraints or other challenges.
This provides developers with an opportunity to create affordable housing in areas that would otherwise remain undeveloped, therefore providing great community benefit.
Examples of this can be found across the country in industrial areas and other neglected districts, with BTR helping to regenerate local areas whilst providing much-needed affordable housing.
Build to Rent and its evolution
Build-to-Rent in its current format first began appearing in 2009 with the introduction of the ‘Private Rented Sector Initiative’ by the government. The initiative was a first of its kind in the UK, intending to attract private investment such as hedge funds and developers into the rental sector.
Since then, the industry has continued to see significant investment into Build to Rent projects such as the regeneration of old industrial sites and the development of new residential communities.
This has been driven largely by the increasing demand for rental accommodation in the UK, as well as a growing recognition that BTR projects can provide more attractive returns than other traditional forms of rented accommodation.
Why is Build to Rent so popular?
Build to Rent projects provide an attractive option for all stakeholders involved, offering tenants secure housing and investors a more profitable return.
For tenants especially young professionals, BTR developments have become increasingly popular due to their ability to offer secure, quality affordable private rent homes. Tenants benefit from the security of longer-term leases, as well as access to amenities such as fitness centres, concierge services and green spaces.
For investors and developers, those same long tenancies provide more stable returns in BTR projects than traditional buy-to-let investments.
Additionally, the trend is becoming increasingly attractive for developers as it allows them to quickly create housing in areas where traditional building may not be possible due to infrastructure restraints or other challenges.
What are the benefits for investors in Build to Rent schemes?
Build to rent schemes provide many additional benefits to other traditional investments in the private rental market.
Steady income stream
Build to Rent properties offer investors a stable and consistent rental income stream, as the properties are designed and managed specifically for long-term rental purposes.
The length of a tenancy agreement in a BTR typically ranges from three to five years, with features such as communal facilities and amenities helping to attract prospective tenants.
Lower vacancy rates
Due to longer tenancies, build to rent projects see reduced vacancy rates compared to traditional buy-to-let investments. The properties are also purpose-built for the rental market.
This provides investors with a more secure return on their investment, as they are less likely to experience periods of low or no rental income.
Higher rental yields
BTR properties can often generate higher rental yields than traditional residential properties due to their purpose-built design and focus on tenant needs.
Facilities within the properties such as gyms, communal areas and shared facilities can also help to attract prospective tenants, all contributing to increasing rental yield in comparison to other private rental homes.
Another of our current BTR projects is on Swan street, Manchester.
Lower maintenance and repair costs
Build to rent homes are typically newer and have modern amenities and features, reducing maintenance and repair costs for investors.
Furthermore, BTR developments often have building management teams and staff on site to take care of any maintenance needs, meaning investors don’t need to hire external contractors or oversee repairs.
In addition, due to the properties being managed as a single entity, repairs and maintenance are usually more cost-effective than if they were managed separately by multiple landlords.
BTR properties offer investors the opportunity to scale their portfolio quickly due to the large number of units in a single development, leading to economies of scale and potentially higher returns on investment.
Diversification of investments
Investing in Build to Rent provides investors with a diversified portfolio of properties, which helps to mitigate risk and protect against market fluctuations.
Is Build to Rent the same as PRS?
Whilst both provide affordable private rent units, Build to Rent (BTR) and Private Rented Sector (PRS) provide two different ways of delivering private market rent homes.
The main difference between BTR and PRS is that Build to Rent properties are purpose-built for the rental market, with communal facilities and amenities designed to attract prospective tenants.
PRS homes are typically apartments or houses which have been converted into private market rent property. They are not always situated in a single development and typically have multiple landlords across the buildings.
Build to Rent Summary – Is it worth investing in?
With longer tenancy agreements, higher rental yields and greater scalability, it is no surprise that Build to Rent developments are seen as an attractive investment.
The UK rental market has experienced consistent rental growth, which has been in correlation with the significant lack of rental homes in comparison to the demand.
The increase in rental growth has also protected asset values in an economic downturn, making Build to Rent properties a worthwhile long-term investment for investors and property developers looking to secure higher returns.
RG Group – Build to Rent construction experts
We’re experts in Build to Rent construction and have delivered several successful projects for leading investors and property developers in several major cities across the UK.
Our team understands the complexities of designing and constructing BTR homes and is committed to making sure each project is completed to the highest standards.
As a trusted Main Contractor with a valuable reputation in this market, RG can offer our knowledge and experience of Design, Construction and Commercial advice from RIBA stage 1 to help deliver your BTR aspirations.