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Maximising Yield in Build to Rent Properties

Property Technology Blog

Introduction: What is Build to Rent?

The UK build to rent (BTR) sector, comprising purpose-built rental homes that are professionally managed and institutionally owned, is booming. Recent research carried out by Savills showed that within a decade, there could be over 1.7 million households in BTR properties, that's over a third of the private rental market.

Demand is high, with more people renting than ever. 46 per cent of UK population aged between 25 to 34 currently rent, up from 27 per cent a decade ago.
This is partly driven by choice, with more millennials opting for flexible lifestyles, but also a result of home ownership becoming increasingly unaffordable as a result of tougher mortgage lending restrictions (especially for first-time buyers), the continued undersupply of new homes and wages flatlining. 

Institutional Investment in Build to Rent

This growing rental market demand makes BTR an attractive investment opportunity for large institutions, such as pension and insurance funds which may be looking to generate long-term revenue and diversify their investment portfolios.

Extensive research will be undertaken which will inform every aspect of any potential scheme including where to build; what to build and (for) how much to build. Much investigation needs to take place around the design of the scheme, amenities offered to residents; the management strategy and of course, the potential rental income. All these elements will go to establish the viability of a scheme and, once built, these will determine its occupancy and rental yields. Maximising occupancy and rental yields, and minimising churn rate and voids will be the ultimate goal for every operator.

How to Minimise Voids and Maximise Yields

The challenge all operators face when it comes to building schemes is to make them appeal to a wide demographic. One can only do so by providing compelling resident offers and amenities without compromising the affordability of its rental levels. Recent ideal flatmate research showed that based upon a single average London salary, a one-bedroom BTR property is outside the recommended affordable range in every single London borough!

Perhaps unsurprisingly then, according to Knight Frank's recent Tenant Survey, nearly 20% of the rental population in the UK are sharers, a figure which is higher still in London at 27%.  This is also  the biggest proportion of the rental demographic at the time of writing.

Why Build to Rent Should Target the Sharer Market

More and more investors are now embracing this demographic as a key target market. Most BTR schemes are perfectly designed for sharers, with dumbbell apartments a common feature (equal-sized bedrooms and en-suite bathrooms positioned on either side of an open plan lounge) and coming through planning stages now are hybrid co-living BTR schemes with two-dios, more often associated with student accommodation, comprising a significant percentage of the overall configured unit mix.

The opportunity the sharer market presents to BTR operators is huge for two key reasons:

1. It widens the available potential resident target market and it provides the opportunity to boost rental income, with some operators now netting a higher rental premium by charging a higher divisible room price than the cost of renting the unit as a whole.

2. There is an attractive liquidity with sharers that can help minimise voids. Often when one resident chooses to vacate the other resident(s) will want to stay and using flatmate finding platforms like ideal flatmate, it is easy to find a new flatmate quickly rather than having to relist the entire property. 

 

ideal flatmate is working with a large proportion of the UK’s build to rent developers at both the lease-up and steady-state phases of their developments, directly marketing their schemes to the sharer demographic. Get in touch to find out how they can support the lease-up of a BTR scheme. 


TPO Checklist for Repairs and Maintenance

 

Jo Green

Written by: Jo Green

Jo Green is Sales Director for ideal flatmate, the fastest-growing rental sharers site in the UK. Following two years of rapid growth in London, Jo is responsible for the national roll-out of the London based start-up as well as the growth of the company's specific BTR channel, ideal flatmate ‘Select’. The Select channel provides BTR developers with a platform to market their schemes to the circa. 3 million sharer demographic and offers a unique tool to support initial and steady-state lease-up.

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