The build to rent industry is booming and will continue to grow, so we look at how BTR works and what are the benefits for investors and tenants.
What is built to rent?
Why is it so attractive to investors?
Why is it so popular?
What is built to rent?
The short definition of build to rent is a purpose built development of residential property designed for rent instead of sale. There are a total 131, 855 build to rent units either completed or planned across the UK, with 67,117 units in London alone, whilst studies show ‘the number of UK residents rent privately doubling over the past decade.
This shows the growth of the scheme and the prospects BTR has to offer. BTR has the potential to solve the supply of quality affordable houses, with a government-issued fund of £1billion set aside to support these schemes.
Why is it so attractive to investors?
The attractiveness comes from the opportunity for long-term income. Building to rent allows an investor to make money year on year compared to a build to sell scheme, and with no shortage of renters, there is potential for a high rent roll and an endless demographic of customers.
Though there are some downsides to a BTR scheme and this comes down supply and demand, which means that for growth in BTR brings more competition. However, thanks to the demand for quality affordable housing, prices will rise and this has happened mainly in London where a study found that London’s new private rent communities were, on average, 11% more expensive than rental properties nearby, with a one-bedroom flat costing £1,841 a month , this could eventually mean a long-term dip where renting will become unaffordable to an average person reducing the demand.
Why is it so popular?
With a lot of things in 21st-century living, people want reliability and ease of use. The amenities of a BTR are also popular with potential renters, with some investors offering luxury services like free gyms and tenant only discounts for bars and restaurants, while also offering the potential for all-inclusive bills including utility and council tax.
Build to rent schemes can be an answer for the lack of good quality housing, however it could be the cause of its own demise, with its exceeding growth leading to its downfall, investors in BTR must be careful to not oversaturate a certain area of land to otherwise bring prices too high which could lead to a crash.