What is build-to-rent?
If you’ve been paying attention to the real estate market recently, you might have heard the term ‘build-to-rent’.
Touted as one of the possible solutions to the current rental and housing affordability crisis, it’s a phenomenon attracting increased media attention.
But what exactly is build-to-rent and how does it work?
What it is
Basically build-to-rent involves constructing larger-scale developments that are purpose built for rental occupiers.
Rather than being owned by individual investors, build-to-rent properties are owned by a single entity, such as a company, consortium or real estate investment trust, which retains the property and rents it out, while also looking after maintenance.
More often than not these developments are apartments, and while it’s a fairly new phenomenon in Australia, build-to-rent is a well-established concept in places like the US and UK.
At this stage, build-to-rent developments are predominantly in the major capitals of Sydney, Melbourne, Brisbane and Perth, with Melbourne leading the charge.
Advantages for renters
Build-to-rent is touted as offering advantages for both rental occupiers and investors. For renters, build-to-rent developments are all about putting the renter first.
For example, rather than the developer constructing a property with the aim of selling it, their goal is to attract renters.
As a result, build-to rent properties often boast sought after amenities, such as gymnasiums and swimming pools, and also have longer-term rental agreement options available.
Due to the fact the apartments are designated rentals, there’s also greater security of tenure for the renter.
In other words, there’s no chance the owner is going to want to move in, and often there’s the option of making minor changes to the property such as painting walls or hanging pictures.
Another advantage of build-to-rent that many people report is a sense of community, and in build-to-rent developments you can often upsize or downsize within the same complex.
Drawbacks for renters
With premium locations and premium facilities, build-to-rent properties often incur higher rent than what you could get on the open market.
There are also potential fees if you need to exit your rental agreement early.
Advantages for investors
Investing in a build-to-rent property is very different to purchasing a residence that you own and rent out.
Rather than being something you individually own, the investment usually occurs through consortium, whether that’s a real estate investment trust, superannuation fund or something similar.
Meanwhile, it’s also very different to owning a property that you can improve, move into one day or sell for a capital gain when it suits. It’s more like holding a stock, which you can buy and sell your share of.
How it helps the market
Build-to-rent offers a potential solution to the rental crisis by adding stock to the market at a time when rental properties are in short supply and demand is high.
As a flow-on effect, increased stock could also potentially lead to reduced rental prices across the board.
How we can help
Our experienced property managers pride themselves on establishing great relationships with both rental occupiers and owners.
We manage every property as if it were our own and you can learn more about our property management services here.
Alternatively, if you are looking to rent a property, you can view the properties we currently have available here.
