While Build to Rent (BTR), sometimes abbreviated as B2R, has gained traction in recent years, it remains a relatively fresh concept in the broader landscape of real estate. Unless you're deeply entrenched in property development, you might have encountered the term in media discussions and pondered its significance.
The essence of Build to Rent is straightforward: it's a property development strategy crafted specifically to cater to the rental market, diverging from the traditional focus on long-term home ownership.
Although Build to Rent is currently in the limelight, its roots stretch back several years. Originating in 2012, it gained prominence through initiatives linked to that year's Olympic Games, notably the conversion of Stratford's East Village from athlete accommodation to private rentals. Since then, numerous large-scale developments have emerged, yielding thousands of new rental properties. Many of these projects have received backing from the government and its Home Building Fund, marking a significant shift in housing dynamics.
The surge in rentals is multifaceted, prompting diverse perspectives and theories from various quarters. From shifting perceptions of rental living to a dearth of affordable properties for sale, and from the enhancement of rental standards to the influx of transient workforces, each viewpoint sheds light on facets of this rental surge.
Distinguishing themselves from conventional residential projects, Build to Rent (BTR) developments are tailored to cater to a distinct segment of the property market: those inclined towards renting rather than owning.
Beyond merely meeting contemporary living standards, BTR sites are redefining the concept of residential living. While high-quality homes remain a cornerstone, developers are pushing boundaries by fostering mini-communities within their projects. This entails the integration of communal spaces where residents can interact and forge connections.
These communal areas are diverse and innovative, ranging from conventional amenities like gyms and lounges to more unexpected features such as game rooms and shared dining spaces. In essence, many BTR developments emulate the ambiance of hotels rather than traditional residences, with some even offering dedicated concierge services to tenants.
Beyond the alluring features previously highlighted, Build to Rent (BTR) initiatives offer a spectrum of advantages, extending beyond the tenants themselves. Surprisingly, local communities stand to gain significantly from these developments in various ways.
Consider the transformation witnessed at the Ferry Lane site in Walthamstow, spearheaded by Legal & General. This endeavour has revitalised a dilapidated segment of E17, introducing 2,000 square metres of communal and commercial space that promises to invigorate the local economy. However, the impact transcends mere economic gains; the regeneration project has introduced 200 new trees and incorporated diverse landscaping and ecologically sustainable planting areas.
While opposition to large-scale developments is inevitable, it's important to acknowledge the undeniable merits they bring. These projects address the urgent need for better housing quality and offer long-term stability—a respite for renters weary of arbitrary evictions. Nonetheless, the crux of the matter lies in affordability. Despite the array of benefits, the price tag attached often surpasses the means of many local residents, posing a significant challenge in the quest for accessible housing solutions.
When looking for development finance it is important to identify the type of project being planned by the developer in order to access the correct funding product. Types of works can include:
New builds nearly always require development finance loans. Once the project is completed, developers may use development exit finance as a more cost-effective solution, but this cannot be done before the project is watertight.
For this type of project, refurbishment finance is typically the correct type of loan to use, however if the project is larger than the norm, development finance may be a better alternative.
A refurbishment loan, which is a type of bridging finance, is generally used for property renovations. It can be used for various improvements including, installing a new roof, general structural changes, building an extension, refurbishment, and decoration.
Property investors or developers may want to buy property which needs development or completion work still doing and are unable to get funding from their bank. This is a typical scenario when a bridging loan is a suitable alternative.
Development finance loans are typically paid in one of the following three ways:
The total loan amount is paid in full, using the profits, when the project is complete, and the properties have been sold.
This usually happens when the developer wants to keep the development for either personal use or for rental purposes.
This type of short term loan is often used to fund a new development project before the current project is sold. It can also be used to give developers a bit of breathing space to complete minor works and find buyers.
Build-to-rent refers to a housing development model where properties are constructed specifically for the purpose of being rented out to tenants. These properties are often managed by a single entity or landlord, and the design and amenities are tailored to meet the needs and preferences of renters. Build-to-rent projects are typically large-scale developments that offer modern amenities, communal spaces, and professional property management services.
Buy-to-Let, on the other hand, involves purchasing a property with the intention of renting it out to tenants to generate rental income. Unlike build-to-rent developments, buy-to-let properties can be individual houses, apartments, or commercial spaces that are bought by individual investors or landlords. Buy-to-Let investors are responsible for managing their properties, including finding tenants, handling maintenance issues, and ensuring compliance with rental regulations.
The cost comparison between build-to-rent and buy-to-let properties depends on various factors, such as location, property type, amenities, and market conditions. Here's a breakdown:
Build-to-rent properties often feature modern amenities, such as gyms, communal spaces, and on-site management services, which may command higher rental prices. However, these properties may offer greater convenience and a higher standard of living for tenants, which could justify the higher rental costs. Additionally, build-to-rent developments may have longer-term leases, providing stability for both tenants and landlords.
Buy-to-let properties can vary widely in terms of rental pricing depending on factors such as location, property condition, and amenities. Investors may choose to offer competitive rental rates to attract tenants and remain competitive in the rental market. However, buy-to-let properties generally require individual landlords to handle property management tasks, which could incur additional costs and time commitments.
In summary, while build-to-rent properties may initially appear more expensive due to their premium amenities and services, the overall cost comparison depends on various factors and market dynamics. Both the build-to Rent and buy-to-let options offer distinct advantages and considerations for investors and tenants alike.
Having access to funds for property development purposes allows borrowers to take on bigger projects than they would usually be in a position to finance.
The purpose of the facility is to provide the developer with additional time to sell their completed development, while keeping costs as low as possible.
Qualifying for finance as a first-time developer can be challenging. This is why it is advised to seek support of an independent broker at the earliest stage.
Our products are suitable for large and small hotel development projects of all types, from repurposing existing properties to building new hotels from scratch.
Joint venture development finance works similarly to conventional development finance. However, no deposit needs to be paid and rates are typically higher.
Mezzanine finance, aka mezzanine funding, effectively enables property developers to 'top up' their first-charge development finance facility to access extra funding.
No Personal Guarantee (PG) development loans are effectively a form of unsecured funding for major property development and construction projects.
Whether your goal is to maximise the value of a property you plan to sell or to boost rental income long-term, a refurbishment finance loan could be just the thing.
Senior debt development finance is the primary source of funds in the form of a first-charge loan. It is considered a lower-risk facility on the part of the lender.
Stretched development finance can be the perfect choice for investors and developers looking to stretch their own equity as far as possible with borrowing for up to 90%.
'Light refurbishment' is used for cosmetic upgrades and minor improvements. 'Heavy refurbishment' is used to raise funds for structural improvements.
Commercial property development finance can be used to fund, build or develop a property or be used to expand your current business property or space.
Permitted development funding emerges as a financial solution tailored to specific projects where prior planning permission is not needed.
No matter the scale or scope of your ground-up development, lets work together to breathe life into your vision.
Working with developers nationwide, we provide access to flexible funding enabling the inception and realisation of high-value student accommodation projects.
Build to Rent is a property development strategy crafted specifically to cater to the rental market, diverging from the traditional focus on long-term home ownership.