Are you looking to make your first move into the property investment market? Or are you a current investor looking to expand your portfolio? Then one thing you will encounter early on in your investment journey, is whether to invest in the Private Rented Sector, or go for a Build to Rent property. Although both areas of the property sector have their strengths. Here will we look at what are the advantages of the Build to Rent sector are.
What is Build to Rent?
Build to Rent is all about designing and developing a scheme that is specifically for the rental market. This is contrary to the vast majority of the apartments that have been built in Liverpool City Centre over the last 20 to 25 years.
Every aspect of the development is aimed towards satisfying future, and current tenant demand. The size, design, specification, aspect and price are all geared towards the goal of an attractive rental property.
Whilst the concept is still in its relative infancy. Built to Rent schemes have generally been focusing on the upper end of the market, with properties that are packed full of desirable amenities. This follows the American Build to Rent model. Which leverages building communities into encouraging long term rentals.
This is different from the Private Rented Sector where we expect to see more transient style tenants. These tenants move more often. This style of tenant is predominant across most of the main UK Cities.
Why Does it Attract Tenants?
One of the most attractive points from a landlord perspective, is that that living in a Build to Rent property is an easy sell. Most Build to Rent schemes have amenities you simply can’t match in the Private Rented Sector.
For young professionals and those who are moving into rented accommodation for the first time. The attraction of living in a modern building, incorporating features such as an onsite gym, is more than worth the increase rental cost over a traditional property.
When you add in the benefit of having an onsite team focused on “front of house”. Day to day maintenance and management which is visible and readily available. You can see why tenants can have a much improved living experience relative to the Private Rented Sector.
Why Build to Rent is a Great Investment
Modern developments full of features sounds great for a tenant. But these schemes exist, and are working, because they have great investment potential. The attractiveness of the properties leads to the ability to sign tenants to a longer tenancy agreement. It is not uncommon to see agreements reaching 3 years in length. This long term occupancy is something the Private Rental sector just cannot match.
As will all things in life, this standard of living comes at a cost. However, this again is great news for investors. The premium which can be charged due to the onsite facilities is a plus point for landlords. Build to Rent properties can often result in higher yields. Due to the premium which can be charged over a traditional apartment or flat.
Higher yields with long term rental agreements makes it easy to see why Build to Rent is a great investment proposition.
What Do You Need to Consider?
The only downside to the high level of quality, amenity and service is the higher rental price. The only problem you could face is pricing yourself out of the market. Until the market matures it will be difficult predict the sort premium that will be charged, and renters will pay.
However, it is likely to be in the region of 10-20%. This is will of course be dependent on city, location, and level of supply and demand in that area. As many of these Build to Rent schemes are also well located in prime positions. The differential between the average Private Rented Sector and Build to Rent rent, should continue to be sizeable.
This is where it is important to use an agent who has strong ties to the market, and years of industry experience. City Residential are perfectly placed to assist anyone wishing to enter the Built To Rent sector for the first time, or are planning on adding new assets. If you would like to discuss your plans in more detail, you can call us on 01512316100 or email us at [email protected].