Is build-to-rent the new buy-to-let?

 In Property

Legislative changes have caused build-to-rent to grow in popularity among specialist landlords.

But, what is this new technique? And, is it set to completely eclipse the traditional buy-to-let model?

What is build-to-rent?

Build-to-rent is a model conceived as a result of a change in both the political landscape and average tenant mindset. These changes dampened the profitability of buy-to-let and have caused many landlords to look for alternatives.

The concept has grown steadily in popularity over the last year, receiving a significant boost in light of the decision to leave the EU.

Whereas buy-to-let has traditionally been primarily comprised of individual, part-time landlords with small property portfolios and a hands-on approach, this new method tends to focus on purpose-built apartment blocks managed by a third party.

Build-to-rent can be an effective alternative

Build-to-rent boasts numerous potential benefits for landlords and tenants alike.

5 million of the new generation of renters are unsure about whether they ever want to own their own home, and so are looking for increased property standards and tenant security.

Build-to-rent facilitates this long-term security, and shields landlords from both unreliable tenants and a lack of income in-between tenants. This helps to optimise both demand and returns.

Possibly the strongest financial pull is the model’s exemption from the 3% stamp duty hike now levied on buy-to-let landlord property purchases.

Many build-to-rent schemes are already being supported by investors, pension funds and insurance companies looking to enhance security and mitigate risk related to their investment portfolio.

According to estate agent Knight Frank, £15 billion has already been invested in the sector, with a total of £50 billion to be invested by 2020.

Buy-to-let might be surviving for the time being, but build-to-rent looks like it will comprise a vital part of the industry for years to come.

Find out how 3 Wise Bears can help you keep up to date with the latest buy-to-let industry changes.

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