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Beginners’ Guide To Build To Rent

Build to rent (BTR) has been one of the biggest changes to the private rental sector in recent years. It's received millions of pounds in government funding and has seen new developments across the country. Though the majority of build to rent properties are in London.

What is build to rent?

It's pretty much what it seems. Properties are built, or redeveloped, specifically to be rented out rather than sold. Each development includes multiple units. A single company manages all the properties rather than each home having an individual landlord.

Build to rent developments can be huge. Wembley Park is a multi-billion-pound project in north London. It includes 5,000 rental homes. It will eventually be home to 15,000 people.

Figures suggest there are already 30,000 build to rent homes in the UK. But that number is about to explode. Government and private companies are investing heavily in BTR. Including current construction and planned developments, another 110,000 rental homes will soon be available.

Why is build to rent a thing?

The rental sector in the UK is growing at a massive rate. So much so that it will provide homes for 22% of all households by 2023. An increase from the current figure of just over 20%.

The difficulty in scraping together a deposit for a mortgage accounts for this increase. Many young people now don't expect ever to be able to buy their own home. All of which provides more opportunities for private landlords.

Yet, despite the growing number of renters the number of buy to let mortgages has declined. The changes in the tax laws have discouraged many would be landlords and possibly prevented others from expanding their property portfolio. But whether private landlords service the need or not the UK requires more and more rental properties.

Build to rent can provide those properties for the increasing numbers of renters. But BTR will also provide quality homes. Developments have extra amenities including gyms and other communal spaces. As such the government have thrown their weight behind build to rent with a £1billion fund. And that investment is likely to increase.

Private investors too are seeing the benefits of BTR. Their developments produce a regular and immediate income stream rather than having to rely on one-off sales from traditional housing developments.

How does build to rent affect private and first-time landlords?

Unless they are a developer too private landlords won't be able to cash in on the build to rent boom. Specialist management companies run BTR developments. And tenants are not able to purchase and resell their homes. This means there is no opportunity for buy to let landlords to purchase a BTR property.

BTR will result in traditional landlords facing more competition. This time from well-financed management companies rather than other buy to let landlords. And, as BTR often offers lets on longer tenancies than most private landlords are willing to do those coveted long-term tenants may be harder to attract.

Is build to rent working?

It depends on your point of view. BTR has brought more rental homes to the private sector. And many tenants are happy in their new homes. But, part of the philosophy behind BTR was to provide affordable housing. In many cases, this hasn’t happened with build to rent properties.

A South London BTR development insists tenants have an annual income equal to 30 times the monthly rent. With rents at around £2,000 per month, renters need a £60,000 yearly household income. This is obviously very far from being an affordable home for many tenants.

But in other ways, BTR is working. It provides renters with nice homes, professionally managed with all the amenities of a serviced apartment. And even the top end developments like Wembley Park have a number of designated ‘affordable’ homes available at 60-80% of market value.

One thing is for sure. With the government and private investors pledging billions of pounds of investment build to rent is here to stay.

Private landlords can find tenants fast by listing their property with MakeUrMove the online letting platform bringing landlords and tenants together.

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