What does build to rent mean for buy to let?

According to the British Property Federation, the number of build to rents (BTR) in construction rose by 40 per cent last year. As the name suggests, BTR properties are large developments of flats, built specifically for renting out. Unlike private rented sector buy-to-let (BTL) properties, they tend to be owned and managed by companies rather than independent landlords.

The rise in BTR can be seen as a response to the increased number of people renting long-term in the UK. As we’ve talked about previously, more people are renting than ever before. And 30 per cent of renters are never expected to make it onto the property ladder. This has created an opportunity for investors to capitalise on potential long-term revenue.

It has also led to a shift in renters’ tastes and expectations. BTR offers (or claims to offer) high levels of service, quality furnishings, long-term leases and shared on-site facilities such as gyms and even restaurants – all of which are appealing to renters who may be renting for years to come, if not for their entire lives.

 

Should private rented sector landlords be worried about BTR?

That depends on a range of factors, including where your properties are, your tenant profile and what rent you charge. However, all landlords should be up-to-speed with the latest private rented sector trends if they want to make the most of their investment. In this piece, we’ll explore BTR in more detail and look at how landlords should respond to this major new player in the private rented sector market.

Get a landlord insurance quote

Get a quote online in under 4 minutes

The ‘co-living’ ethos

Co-living is a key part of the BTR model. In fact, the two concepts are often used interchangeably. London’s Old Oak development – the largest co-living development in the world – is a good example of co-living. Alongside rented flats, Old Oak boasts a roof terrace, a spa, a gym, a cinema, a secret garden and an on-site bar. The shared facilities are there, in part, to create a sense of community. The residents of Old Oak don’t just live near one another; they live together. Co-living is part of BTR’s appeal to younger renters who want somewhere to socialise as well as sleep.

As you can see from the branding on Old Oak’s website, BTR properties tend to be targeted at Millennial and Gen Z renters. And a key difference between BTR and BTL is that BTR offers residents an aspirational lifestyle that BTL private landlords might struggle to match. After all, how many HMOs come with on-site spas and cinemas?

 

Where are they being built?

The trend was previously confined to London. However, BTR properties are now springing up in major cities across the country, particularly Manchester, Liverpool, Bristol and Birmingham. In fact, these other regions overtook the capital for BTR properties under construction last year.

They tend to be found in central locations near amenities like restaurants, bars and other social settings, all of which contribute to BTR’s trendy, Millennial positioning.

 

How much do they charge?

They may target younger renters but BTRs certainly aren’t cheap. In fact, they can be quite pricey. A study by JLL (a real estate services company) found that BTR properties were, on average, around 11 per cent more expensive than other rental properties nearby, while another study found they were 10 per cent more expensive than similar properties.

Get a landlord insurance quote

Get a quote online in under 4 minutes

Are they just for the young and single?

Not necessarily. As discussed recently on this blog, 35-49 year olds now make up the majority of the UK rental market. And BTR developers are tailoring their services to meet the needs of young families as well as young professionals.

For instance, Get Living’s East Village development has three and four bedroom townhouses with long leases designed with families in mind, as well as the ‘outstanding’ Chobham Academy and plenty of leafy parks in walking distance. There are also after-school clubs and meetup groups for new parents.

Hamilton Fraser CEO, Eddie Hooker, believes that BTR developers will broaden their offering as the market matures.

“I expect development schemes will start to evolve to include lower income tenants. The student market for example has shown that ‘lifestyle’ blocks are becoming more attractive even for the lower income students. Larger blocks or schemes can include a range of units that will be attractive to differing income tenants but retaining the benefits of shared services and lifestyle options. The market is evolving.”

– Eddie Hooker, Hamilton Fraser CEO

Too good to be true?

If there’s one thing BTR does really well, it’s branding. Most premium co-living spaces have glossy websites full of professional photography that do a great job of selling the ‘co-living lifestyle’. However, there’s more to being a successful landlord than getting people through the door.

In fact, the East Village development mentioned above recently attracted the attention of The Financial Times for its poor service. 

Following a story about the boom in BTR construction projects, an East Village resident wrote in to tell his side of the story,

complaining of unexplained rent increases, maintenance issues and general poor practice. Residents of other co-living spaces complained of operators using Airbnb to fill empty premises during void periods. The paper even conducted a short survey, finding that nine out of twelve BTR residents had problems with their tenancies, from damp to vermin infestation.

“I won’t ever rent from a large company again. Individual private landlords have been infinitely better and more accommodating,” said one respondent.