Build-to-rent (BTR) properties are growing in popularity among investors and renters. They are a smart investment choice for those searching for a steady income stream. For renters, build-to-rent developments offer various housing options that allow tenants to enjoy a hassle-free experience with onsite management and maintenance services.
Build-to-rent developments are emerging as key players in the industry, providing an alternative to traditional rental options. They are an emerging sector if you are looking for an avenue to generate steady cashflow.
Features Of Build-To-Rent Developments
Single Title
BTR properties in a single development are held under a single title and are typically managed by professional property-management companies.
Modern Amenities With A Community Culture
These developments are designed to offer amenities like gyms, yoga studios, communal coworking spaces and lounges, community gardens and more. They might include maintenance services, concierge services, and community events and activities. These amenities provide tenants with a high quality of life and a sense of community.
Flexible Leasing Arrangements
BTR developers offer longer leases than traditional rental properties, providing tenants with greater stability and security. Tenants might get a longer lease term with different renewal conditions and low or no rental bond, and they can decorate the apartment or have pets without pre-approval.
Swapping Units In The Same Complex
BTR developments often allow tenants to move to a different unit within the complex, according to their living requirements; for example, tenants might choose to upscale their apartment when starting a family and might decide to downsize when using coworking space rather than a home office.
How Does BTR Differ From Traditional Property Investment?
| Build To Rent | Build To Sell |
|---|---|
| These properties are designed and constructed with the intention of renting them out to tenants. | These properties are designed and built with the purpose of selling them to a buyer. The buyer might use it as their own residence or as an investment property. |
| Focuses on creating long-term revenue from rental income. | Aims to generate a one-time profit from the sale of the property. |
| This model aims to provide a high-quality, community-focused living experience. It offers long-term leases to tenants with potential renewals, along with onsite management and maintenance services. | This model is marketed for buyers looking for a primary residence or investment property, so it may not offer the same level of services and amenities. |
Pros Of Build-To-Rent For Developers
Steady Source Of Income
The property provides a steady stream of income for the developers. It has multiple tenants paying rent, so the investor will get a steady cashflow even if one or two units remain vacant.
Better Returns
Developers have better control over the management and maintenance of BTR developments, leading to a higher level of tenant satisfaction. Moreover, they can offer better amenities and charge more rent, which gives them better returns.
Greater Stability And Scalability
Property is a more stable investment than many, since it is almost always in demand. Investors can scale up or down the property depending on the demand for rental housing, allowing investors to adjust to market conditions.
Easier Start-Up
BTR projects are easier to start, as they require only one sale to an institutional buyer, rather than different sales to individual buyers, which is the case with build-to-sell apartment projects.
Despite the challenges for BTR developers, they have competitive advantages over build-to-sell developers, as they don’t have a lengthy selling period where construction and finance costs are not locked in.
Cons Of Build-To-Rent For Developers
Cost
BTR properties are more expensive to build than units for sale. It is the construction of amenities like fitness centres, community spaces and outdoor areas that increases the cost. Moreover, developers must invest more upfront capital to build a project for renters. The greater expense makes it harder for first-time real-estate investors to enter the BTR market.
Delays In Project Completion
BTR properties might take longer to build than you think if you do not carefully and realistically calculate the construction time. Also, the cost of constructing BTR properties might increase due to unforeseen circumstances, directly affecting the return on investment. The longer the property takes to complete, the longer it will be before it can be rented out and start generating returns on investment.
High Maintenance Costs
Since BTR properties are bigger, they have higher maintenance costs, and investors should be prepared for more extensive repairs and renovations.
BTR Projects In Australia
State governments across Australia have recognised the potential of BTR properties to provide affordable housing. Governments have joined hands with the private sector on BTR projects, to deliver affordable rental homes at a discounted rate and maybe help them get a home near their job location.
- Queensland State Government has approved three BTR housing projects – in Fortitude Valley, Newstead and Brisbane. These three properties will have about 1200 rental apartments, out of which 490 dwellings will rent at a discounted rate. It is an important aspect of delivering affordable housing alternatives under the Queensland Housing Strategy Action Plan 2021-25.
- The Victorian State Government has introduced land tax concessions to stimulate the BTR sector, offering a 50% deduction on land tax and an exemption from any absentee owner surcharge. These are called ‘BTR Benefits’.
- The NSW State Government introduced a 50% land tax discount for new housing projects until 2040. The housing projects will also receive an exemption from foreign investor duty and land tax surcharges.
We Are Here To Help!
If you are ready to invest in build-to-rent property, Home Loan Experts is here to help. Our experienced mortgage brokers will help you get your finances in order for a commercial loan and get a step closer to your financial goal. We will assist in navigating you through the mortgage process and help you secure the best-suited loan. Feel free to contact us at 1300 889 743 or fill in our free online assessment form today!