Is the built to rent model a good one for the UK?

With an increasing number of households living in rented property, it’s easy to see how the term “generation rent” has grown.

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Following the rise of “generation rent” Build To Rent (“BTR”) property numbers have risen, that is purpose-built properties for rental markets.

But whilst increasing BTR properties attempt to meet the need of renters, are they good investments?

Potential

As many people today are renting rather than buying, there’s no shortage of renters to fill these purpose-built properties. With the BTR market expected to double over the next five years, this market offers huge potential.

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Government-backed

Unfortunately, the UK is still amid a housing crisis: with multitudes of people struggling to get by. For this reason, the government is offering tax incentives for those involved in BTR schemes.

Income and capital

Whilst most investments involve choosing between income or capital growth, the BTR model offers both, with accumulating rent alongside opportunity for capital growth and future sales.

Long tenancies

This could be a pro or con, depending on your outlook. Due to BTR properties requiring a large upfront budget, you’ll want longer tenancy agreements.

The positive is by securing the right tenant, you secure guaranteed income for the duration of the contract. On the other hand, finding tenants able to commit to a 3+ years’ lease could be difficult.

Upfront cost

BTR models require a significant upfront investment and it may be more difficult to obtain loans when compared to standard buy to let mortgages.

Although there’s potential to start getting returns as soon as your tenant’s secured, you’re unlikely to receive much capital back for some time, due to repaying loans or any other capital initially invested.

Management

As BTR properties are often multiple flats, they can be a lot to manage. Using CRM for property management simplifies this by storing and managing contacts, properties and documents. With a property deck account, you can maintain databases filled with people, properties and reminders to easily manage multiple homes.

Expense for tenants

Although the idea behind BTR schemes is to create accessible rental properties, studies found London’s BTR “communities” roughly 11% more expensive than nearby rentals. Due to risks for investors, some require huge household incomes for tenants putting this out of reach for many households.

 

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