Building A Rental Property

by Ronel Forbes

January 5, 2022

Build to Rent developments are new construction developments that are expressly meant to be rented. They come with a number of benefits, including longer lease terms, a dedicated on-site manager, and purpose-built communal spaces, as well as a higher price tag. Everything you need to know about Build to Rent is right here.

There are drawbacks to renting. Four out of five renters are stuck in cold, wet apartments that their landlords refuse to renovate, according to our 2021 Annual HomeOwners Survey, conducted by YouGov.

Meanwhile, 17% of renters are on short-term leases with no assurance that they will be able to stay in their current residence in the long run. While reforms to the rental industry are slowly being implemented, the difficulties raised in our study are likely to remain a part of the private rental sector for many years.

Although buying a home eliminates many of the anxieties and unappealing features of renting, it is not for everyone. So, how can the relatively new Build-to-Rent movement help?

What is Build to Rent?

Build to Rent refers to newly constructed apartment buildings designed specifically for renters. They must consist of at least 50 residences, all of which are owned and managed by the same landlord.

They were developed to address a variety of issues that tenants experience, such as short-term leases, unscrupulous landlords, and exorbitant rates.

The number of Built to Rents currently accessible is minimal (20,800,000 worldwide), however, it is a rapidly rising market. An additional 118,000 000 are being built or are in the planned phases. According to the Property Federation, 200,000 000 Build to Rent plots will be created in the next two years.

Given that each country has an estimated 25 million rental units, Build to Rent represents a modest percentage of the total, but it is expanding.

What are the benefits?

Renters experience a list of challenges in the private rental market, according to the Homeowners Alliance’s 2019 Annual Home Owners Survey. Many of these issues could be addressed with Build to Rent.

PROBLEMS WITH RENTING	BENEFITS OF BUILD TO RENT
One out of every six renters is on a short-term lease.	Longer tenancy options of over three years are available in Build to Rent residences.
One out of every six renters claims their rent was increased unfairly.	The rent is explicitly stated, as is any reason for growth, which should be based on a formula.
More than a third of tenants have trouble getting their landlord to make necessary repairs.	The developments will be managed by a single landlord who will be responsible for on-site management.
Over a third of tenants are hit with large upfront fees, such as for inventories or references.	Except for deposits and rents paid in advance, they don’t charge any upfront costs.

The main advantage of Build to Rent is that the entire development is managed and operated by a single landlord. This should make it easier for tenants to contact their landlord and have their issues fixed swiftly.

However, the landlord must have a complaints mechanism in place and be a member of a recognized ombudsman network as an extra benefit. This means that if something goes wrong, tenants should have a clear avenue to express their dissatisfaction and have their concerns handled.

Will Build to Rent improve the lives of renters?

According to findings, the advantages of Build to Rent could be significant. Almost half of the renters said that paying no further up-front expenses other than a deposit and rent advice would improve their rental experience significantly.

Furthermore, 40% indicated that renting directly from a responsible organization or housing provider rather than a private landlord or letting agent would be preferable.

Over a third of respondents indicated that renting a high-quality home that met safety and energy efficiency criteria would greatly improve their rental experience. That’s hardly surprising given that, according to our data, more than a third of renters are unable to get their landlords to do basic repairs or provide them with a warm, dry home.

Negative aspects

So, what are the disadvantages? Yes. To begin with, there are insufficient projects, which are focused in metropolitan regions.

There was 15 million Build to Rent residences around the country as of March 2021, with 12% of those in European countries.

Second, you might not be eligible to live in one of the current Build to Rent communities. That’s because many of the existing ones are geared toward specific demographics, such as over 55s, young professionals, or pet owners.

Finally, and most importantly, renting a Build to Rent house is not inexpensive.

Is Build to Rent a Cost-Effective Option?

All of the advantages of Build to Rent are not inexpensive. Because of the additional amenities and services, the average rent in these complexes is greater than the national average. According to Data’s Build to Rent Report 2020, the average rent on a Build to Rent house was 9.3 percent more than the local average rent. Build to Rent residences in London are 8.4% more expensive than other rental properties.

It’s not surprising that many of them charge a premium because they provide communal workplaces, laundry facilities, concierge services, event spaces, and gyms. However, only high-earning young professionals are likely to be able to afford this high-end lifestyle.

Final Thoughts

There’s a reason why building-to-rent is so popular. Build-to-rent houses provide an access road to comfort and community for people who don’t feel ready for homeownership or are struggling to save. They provide investors with a way out of an extremely competitive market.

However, if you’re thinking about building-to-rent as a tenant or a builder, it’s important to evaluate all of the potential drawbacks. Traditional homeownership and apartment renting both have significant advantages, yet build-to-rent may just be too risky and expensive for individual investors.

Owners of build-to-rent houses should ensure that their homes are insured to provide a safety net in the long run. At the same time, these efforts will encourage renters and investors to take advantage of your offers for such safety measures.