{"id":13941,"date":"2022-10-30T00:00:00","date_gmt":"2022-10-29T16:00:00","guid":{"rendered":"https:\/\/aurex-group.ap.applyflow.com\/build-to-rent-a-new-opportunity-for-real-estate-investment-managers\/"},"modified":"2024-11-21T14:03:07","modified_gmt":"2024-11-21T06:03:07","slug":"build-to-rent-a-new-opportunity-for-real-estate-investment-managers","status":"publish","type":"post","link":"https:\/\/www.aurexgroup.com\/insights\/build-to-rent-a-new-opportunity-for-real-estate-investment-managers\/","title":{"rendered":"Build-to-Rent: A New Opportunity for Real Estate Investment Managers?"},"content":{"rendered":"
If you\u2019re a real estate investment manager or real estate fund manager, then the steady rise of build-to-rent (or multi-family living) developments in Australia could represent a winning opportunity. In this article, we explain why that\u2019s the case.Although very few build-to-rent assets have been developed in Australia to date, those that do exist are showing tantalizing signs of shaking up the market.Indeed, a report by Charter Keck Cramer looked at rental asking prices for Mirvac\u2019s LIV Indigo build-to-rent development in Sydney Olympic Park. Otherwise known as \u201cmulti-family living\u201d properties, the results were clear:Build-to-rent apartments demanded higher prices compared to build-to-sell assets in the same suburb. Today, we\u2019re going to analyze this new development model and discuss its potential if you\u2019re a real estate investment manager.<\/p>\n

\u200bBuild-to-Rent: An Opportunity for Any Real Estate Investment Manager<\/h2>\n

Research from Savills states that almost 70% of local government areas within Australia\u2019s five major capital cities are in need of more rentals. This indicates the potential for the build-to-rent model to become a nationwide solution and a driver of growth in the rental market.<\/p>\n

Paul Savitz<\/b>, Savills director of operational capital markets, said:<\/p>\n

\u200b\u201cAs build-to-rent continues to mature as an asset class, we expect greater liquidity and economies of scale will put downward pressure on the sector\u2019s risk premium.\u201d<\/i><\/p>\n

Early signs suggest this is already happening. Not only that, but it\u2019s also having a positive impact on both property and job markets. In Brisbane, for example, Frasers Property recently developed its first project utilizing the build-to-rent model.<\/p>\n

This is the second development of this nature in the area, with Mirvac having begun construction of their own multi-family living project last year. Leeanne Enoch, Queensland\u2019s housing minister, is reported to have said that the two projects would create more than 500 jobs for the area. \u200b<\/p>\n

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Key Factors Behind Build-to-Rent\u2019s Potential<\/h3>\n

There are good reasons why this model\u2019s generating such excitement among people like real estate investment managers, real estate fund managers, and real estate market analysts. Here are 3 factors that explain its potential:<\/p>\n

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1. Lender Appeal<\/h5>\n

Firstly, and perhaps counterintuitively, banks tend to prefer the vast loans required for multi-family properties versus the smaller ones issued for single-family assets.<\/p>\n

Why? Because they\u2019re more likely to generate reliable income each month.<\/p>\n

After all, with single-family properties, factors such as a lack of tenants or late rental payments can have understandable implications for the repayment of the loan.<\/p>\n

The opposite\u2019s true for larger multi-family living projects<\/a>. Here, the scale of the build-to-rent model allows developers to ensure consistent cash flow, making them significantly more appealing to lenders.<\/p>\n

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2. Expedience<\/h5>\n

The second factor in play benefits property developers and investors alike<\/span><\/a>:<\/span><\/p>\n

These types of developments help save time. Rather than acquiring multiple loans for multiple rental properties, a real estate investment manager, for instance, could obtain a single loan for multiple properties.<\/p>\n

This a) is far more time-efficient and b) generates fewer bureaucratic obstacles. The expedience involved with the build-to-rent model also allows investors and real estate fund managers to scale their portfolios faster.<\/p>\n

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3. Financial Incentives<\/h5>\n

Thirdly, developers who adopt this model find themselves in an improved financial position that justifies the appointment of a property management company.<\/p>\n

Alas, with a single-family asset, employing a service to handle the day-to-day operations of the rental can cut too significantly into profit margins. With the multi-family model, though, the higher volume of monthly capital that\u2019s generated allows investors to absorb these costs without sacrificing their returns.<\/p>\n

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A Prime Opportunity for a Real Estate Investment Manager<\/h3>\n

The aforementioned benefits are driving interest in the build-to-rent model and creating new developments and jobs in the process.<\/p>\n

Whether you\u2019re a real estate investment manager in Australia or other real estate markets <\/span><\/a>around the world, the early signs suggest this model\u2019s an opportunity that\u2019s well worth pursuing.<\/p>\n

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If you are a company considering hiring, we welcome the opportunity to present our services and capabilities<\/a>. If you are a candidate, please check our jobs page<\/span><\/a> or contact us<\/a> to discuss your background, skills, and future aspirations. We always look forward to keeping in touch and exchanging ideas, insights, and opinions.<\/p>\n

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Sources:<\/h5>\n