‘This is why built-to-rent will outperform BTL in the long term’

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Property management professional David Goldberg recently revealed that in the long term, investing in so-called ‘build-to-rent’ developments will prove to be more profitable for investors than buy to let.

He claimed that “built-to-rent looks to be a win-win for both tenants and investors alike and with more than £75 billion forecasted to be invested in this sector by 2025, it’s showing no sign of slowing down”.

Given the provocative nature of this viewpoint, we asked Goldberg, who is CEO of property firm POD Management, to explain how he has come to this conclusion.

“Yes, I believe that returns are greater in the build-to-rent sector, as opposed to buy-to-let, but only when compared over the long-term,” he tells LandlordZONE.

“The speed of acquisition and relatively low capital outlay in buy-to-let typically offers greater returns in the short-term.

Impact returns

“But factors like spread of the portfolio (i.e. where they are) and dealing with each tenancy in isolation, plus individual maintenance requirements – both reactive and proactive – impact returns.

“Also, a buy-to-let landlord can’t adapt to the changing needs of the tenant, for example moving from a 1 bed to a 2 bed apartment, or generally offer amenity, which can increase the likelihood of voids.

“Build-to-rent developments can be built to a higher quality and standard (of course depending on the individual project), provide flexibility, and often have more competitive facilities, which means landlords can demand higher rents (as they deliver tenants exceptional value), generating stronger financial returns.

“Professional landlords can offer greater security to renters and likely provide more flexible options on deposits and rental terms.

Buy to lets

However, in the short-term I believe returns are stronger for buy-to-lets.

“They can deploy capital quickly, will have less of an initial outlay on refurbishment, and quickly secure rental income. Within the build-to-rent sector, the asset owner has to acquire the land, refurbish all of the properties, and stabilise the asset, although they will continue to hold the asset, meaning they can spread this cost over a longer period and, given the advantages outlined above, achieve higher rents and thus great returns.

“Although, there are of course many factors which can affect returns, such as the operator, provided amenities, the quality of the build, and the landlord.”

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