With demand as high as it is in rental property, will the build-to-rent market become the shining star of rental?
At the start of 2016, build-to-rent was first thrust into the mainstream when a number of major companies across the UK and the wider world made their intentions clear with regard to investing heavily in purpose built rental properties that help meet demand and provide a higher quality of rental home constructed specifically with tenants in mind.
With the UK facing a shortfall in homes of some 264,000 according to the most recent estimates, and demand for rental properties climbing all the time as generation rent becomes more prominent, the need for this sector to thrive has become more and more obvious. But what other benefits does build-to-rent offer in the modern world of rental property? We take a look at just a few of its fantastic positives.
Buy cheaper and make high returns
For investors, build-to-rent is a particularly good investment, largely because of the savings they can make when purchasing, which pushes their rental returns higher. Most off-plan property projects will rely heavily on money coming in from investors, so it’s mostly always the case that deals will be on offer. This means investors being able to get their hands on rental stock for around 80 per cent of what they would pay for the same rental homes if they were already built.
The cheaper route of entry should mean that we see a rise in the volume of homes being invested in in this way in years to come, which will mean the number of rental properties rising, helping the sector to better meet demand from tenants.
Stock more often meets demands of modern tenants
The market is changing in terms of who is renting property, and quite often we now see younger people who would have previously aspired to purchase their own homes instead choosing to rent. This so-called generation rent has demands, however, that are not often met by older existing stock, and this is where build-to-rent can come into play.
The build-to-rent sector has the distinct advantage of being able to focus on aspects of property that will expressly attract potential tenants, so features such as spacious rooms, modern interiors and fast internet connections can all be included by design, giving them the best prospect of appealing to modern tenants.
Buying where rental homes are most needed
The building of new homes for the rental market has one major benefit for the sector in that it helps to meet demand in places where it is at its highest. For example, when Manchester became the Northern Powerhouse, the regeneration of Liverpool and Leeds city centres and the rise in student numbers in places like Bristol and Birmingham, there was a rise in demand for quality rental homes in each of these areas.
What build-to-rent has the ability to do that the wider rental market does not is to target such areas and demand, and to make sure that properties are being built where they are needed most, meaning there will be higher occupancy rates, and as a result, far better levels of return for landlords.
Assured returns
Another way to attract investors to purchase, thusly helping to boost the number of rental homes that are available on the market at present, many developers operating in the build-to-rent market will offer buyers an assured return for a set number of years in order to help them mitigate against risk.
Because they are buying off-plan property, developers typically offer anything between five and eight per cent for up to three years, giving buyers peace of mind and helping to boost rental stock levels at a time when it’s really needed.
Opportunity to tap into property management
For tenants, one of the main gripes that can come with renting a home is that it can be difficult to get in touch with a landlord to get something done; be it a repair, maintenance or other job. However, in build-to-rent properties, the developer or property manager is normally in charge of everything, from the lettings process to repairs, meaning that there is a stress-free process for owners and tenants alike.
This helps to overcome some of the problems that the rental market has seen in the past, where there were perceptions that landlords were difficult to deal with, and that homes were of a low quality. This shift in sentiment can only help to increase demand for rental properties for years to come.
This article has been provided by Experience Invest.
For details on buy to let opportunities please visit their website: www.experienceinvest.com
