What is Build-to-Rent?
Build-to-rent (BTR), a lucrative segment within the private rented sector (PRS) is a relatively new term used to describe a growing trend in the property rental market.
In this blog, you will learn everything you need to know about build-to-rent and how it is changing the property management game.
What is build-to-rent?
In simple terms, BTR refers to the development of residential properties that are designed and built specifically for the purpose of renting out to tenants. Unlike traditional property development, which is often focused on selling properties to individual buyers, BTR developments are designed with renters in mind from the outset and focused on providing the optimum tenant experience.
Who owns build-to-rent developments?
Working in conjunction with large scale property developers, BTR developments are typically owned by large institutional investors such as pension funds, insurance companies and financial services organisations, who view them as a long-term investments. These investors are attracted to the stable income streams that BTR properties can provide, as well as the potential for capital growth over the long term.
How build-to-rent is different from other residential rentals
With each scheme required to incorporate at least 50 homes, all the housing units within a build-to-rent development are owned by one landlord as opposed to many private landlords which is often common with other residential rental schemes.
Build-to-rent is very much focused on building communities within each development by including shared spaces and creating a lifestyle and a high quality of living for its tenants, through state-of-the-art home design and architecture, security, comfort and luxury.
With such high-end living, it may not be surprising that build-to-rent properties commands a higher rental fee than other residential rented properties and typically targets specific demographic sets such as young professionals.
Key features of build-to-rent developments
BTR properties offer many attractive features and are becoming more and more sought after. Below we explore some of their key elements:
Flexible lease terms – one of the key attractions of build-to-rent properties from a tenant’s point of view is the longer tenancy agreements that are made available. Having the flexibility to lock in 3+ year lease terms if desired, provides tenants with more stability in the long term as opposed to the uncertainty of short-term leases often synonymous with other residential rentals.
Shared facilities – BTR developments focus on creating high-quality, well-designed properties that are specifically tailored to the needs and preferences of tenants. The inclusion of shared facilities plays a large part in creating communities and social relationships within buildings.
Typically included common spaces where residents can meet up with each other outside of their apartments include lounges, cafes, gyms, swimming pools, roof terraces and gardens. In addition, build-to-rent properties usually include other useful facilities such as work from home pods/spaces, car and bike parking, laundry rooms and parcel storage.
Services – another aspect of build-to-rent which sets itself apart from traditional residential rentals are the onsite services often made available to residents in a drive to provide a first-class tenant experience. Such services could include concierge, high speed broadband, dry cleaning and car hire.
Location – BTR developments are usually located in prime locations, close to transport links and amenities, making them attractive to a wide range of tenants.
Professionally managed – BTR properties are typically managed by professional property management companies who are responsible for the day-to-day operations of the building. This can include everything from maintenance and repairs to tenant screening and rent collection. By using a professional property management company, BTR landlords can ensure that their properties are being managed effectively and efficiently and crucially, that they are providing the unrivalled level of service expected from their tenants.
How affordable is Build-to-Rent?
Due to the high-end nature and specifications of build-to-rent properties in terms of design, build, facilities and services, the rental fees are typically upwards of 8% higher than other residential rental properties within the same area. However, there is far more transparency associated with the BTR lease terms and contracts with some offering zero deposit options or no upfront fees, and in many instances the utilities and wi-fi bills are included within the rent.
Why build-to-rent is an attractive option for investors
One of the main benefits of BTR developments is the potential for stable, long-term rental income. Because BTR properties are owned by institutional investors, they are often designed to provide a stable, predictable income stream over a period of years. This can be especially attractive to investors who are looking for a reliable source of income to fund their retirement or other long-term financial goals.
Another benefit of BTR developments is the potential for capital growth over the long term. Because BTR properties are designed to be high-quality, well-designed properties, they are in high demand among renters. This can help to drive up the value of the property over time, providing investors with a potentially valuable asset that can be sold or leveraged for future investment.
What does the future of build-to-rent look like?
Whilst the BTR sector has grown at pace over the last five years, it still represents a very small percentage of the overall rental property market. According to the British Property Federation’s latest data, the number of BTR homes either completed, under construction, or in planning now stands at over 242,500 but with more than 4.5 million rental properties in the UK, there is huge opportunity for further growth over the coming years.
In terms of location, to date, over half of the completed BTR developments are concentrated in London, however, this landscape is changing quickly with a significant increase in regionalised BTR properties in the planning and build phase to support increasing demand.
How the use of technology can elevate your build-to-rent operations
At MRI Software, we’re passionate about helping you leverage technology to drive greater operational efficiency and a better client experience. Build-to-rent software can automate your operations and support every element of the BTR life cycle from property management and accounting, CRM and lease agreements to maintenance management and resident engagement and community building.
As the first in the UK to deliver a build-to-rent solution, contact us today to find out more about how our solution can help your business grow.
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