Why Invest in Build to Rent? Commercial Landlord Guide

Thinking of investing in Build to Rent but not sure how to go about it or if it’s right for you? Our guide on why to invest in Build to Rent explores the risks and rewards of getting involved in the sector.

Build to Rent developments are growing across the UK thanks to higher demand for quality, purpose-built rental accommodation among young professionals and the over 50s. This burgeoning sector has great potential for property investors and commercial landlords, as long as you do it right.

What is Build to Rent?

Build to Rent, or (BTR) describes the process by which residential properties are purpose built for the private rental sector. In most cases, this is done by large property development companies, investors and commercial landlords.

Build to Rent developments commonly contain 50 homes or more, all managed by one landlord. They often feature desirable perks such as in-house gyms, entertainment facilities and sophisticated security systems.

The Build to Rent Trend

The Build to Rent sector in the UK is on the rise. According to property experts, Knight Frank, £50 billion will be invested into the sector by 2020 to accommodate for the growing demand in the private rented sector.

We’re now well aware that the rental sector is growing. Rising house prices and new working trends have resulted in a wider pool of tenants looking for suitable, long-term rental properties.

The demise of home ownership has resulted in a slightly older, professional tenant group looking for quality rented accommodation, complete with all of the modern conveniences.

How Does Build to Rent Work?

Typically, a Build to Rent development is owned by a large institution, such as a bank or pensions company and managed by a lettings agency.

Funding comes from investors keen to take advantage of reliable rental returns and long term growth. Some Build to Rent Schemes are also being supported by the Government to help with the building process and supporting infrastructure.

The main players in the Build to Rent process are;

• Build to Rent investors
• Build to Rent developers
• Build to Rent letting agents
• Commercial landlords

To invest in Build to Rent property, there are a few routes to go down, one of the easiest being through one of the large private rental developers.

The Benefits of Build to Rent Properties

According to Savills, Build to Rent investment came to £2.6 billion in 2018, suggesting that it can be a lucrative option for commercial landlords. There are many exciting opportunities for landlords investing in Build to Rent. Here are some of the benefits;

• Longer tenancies are common (3 years +)
• High tenant demand
• Higher rent rates (around 11% higher than standard rental accommodation)
• Reliable rental income and likely growth
• Landlords retain control over their investment
• Long term investment rewards

There are also many benefits for tenants which will make advertising and filling vacant rental properties much easier;

• Greater choice of housing
• Quality, purpose-built buildings with special amenities such as gyms and entertainment facilities
• Access to convenient services such as security, laundry and concierge
• Modern, sustainable buildings
• Bills usually included
• Furnished
• On-site management
• Encourages regeneration in surrounding areas

The Risks of Build to Rent

With all investment comes potential risk. Before going ahead, it’s important to understand what these risks are and how to manage them.

Construction Risks

Construction is a risky business, and all sorts can go wrong or take longer than planned, leading to greater financial costs.

Planning Permission Issues

As a relatively new phenomenon, planning permission for Build to Rent can take longer, resulting in growing costs and a reduction of rental income.

Void Periods

As the landlord, you may experience delays in receiving the full rental income as the development fills up. To avoid long void periods, you could implement a tenant sign-up scheme while the building is still in progress. Alternatively, you could plan the development in stages to ensure some rental income is coming in throughout the process.

Drawbacks for Tenants

It’s also important to consider the disadvantages for tenants when it comes to Build to Rent, as this will help you determine your target tenant and mitigate any risks.

Some drawbacks for tenants include;

• Many Build to Rent developments target elderly tenants or young professionals and may not appeal to families or lower income renters
• This type of accommodation can be more expensive for tenants

Homes UK Event

From incorporating affordable housing into your Build to Rent project, to attracting institutional investment, Homes UK: The Future of Living will be answering the pressing questions in the sector today.

Taking place at Excel in London 27-28 November 2019, the event is a great place to meet important players in the industry.

Protect Your Investment

Keen to take advantage of this fast growing sector? Here at No Letting Go, we supply a specially designed range of Build to Rent services to ensure compliant reporting, no matter the size of the development.

We offer;

• Inventory management
• Property visits
• 360 virtual property photography for use in marketing, reporting and Build to Rent projects
• Check in and right to rent
• Legionella risk assessment and water testing
• Central account management for national, corporate or large regional clients
• Fully insured, qualified and professional clerks, surveyors and inspectors
• 24 hour turnaround for reports

With our national and local services you get consistency, accuracy and efficiency delivered by our 65 offices across the UK.

Find our full list of Build to Rent services here.