902 920 516  |  
Wednesday, August 4, 2021
Buyers Real estate investment Urban plots Safire Real Estate Energy efficiency

Build to Rent Investment: What it is and why it works

Build-to-Rent is the current trend in investment in real estate assets and the reason is twofold: in Spain there is a lack of urban rental space and the global health crisis limits the purchasing power of former buyers. We explain why investing in these real estate assets offers high profitability.

Build-to-Rent is the current trend in investment in real estate assets and the reason is twofold: in Spain there is a lack of urban rental space and the global health crisis limits the purchasing power of former buyers. We explain why investing in these real estate assets offers high profitability.

As its name indicates, Build-to-Rent is the acquisition of developable land for construction for residential rental. The creation of new housing for rent is now a priority in this country. And it is estimated that currently, the residential rental housing stock in Spain requires almost one million new units to respond to changing and growing demand. but it is also an ideal occasion for the rehabilitation of private buildings for residential rental, where sustainable growth plays an important role, also in terms of energy efficiency.

And what is this growing demand for rental housing due to?

We can take into account several factors that affect the growing demand for rental properties. The Covid crisis, the real estate bubble of 2008 and demographic factors such as the growing aging of the population make Spain a country where it is necessary to buy and sell urban plots to build new homes: more and more people and with a more limited economy need a house to live.

But the demand for rental housing comes from further afield. Spain is a country where the consequences of the real estate crisis of the past decade are still dragging. A crisis that, like all crises, has also brought its good things: better and greater regularization of new urban construction projects and their rental prices. And the energy rehabilitation of buildings for rent is now in the spotlight of the Central government in terms of architecture and sustainability.

But if we talk about newly built homes for residential rental, we come up against the Covid health crisis. Confinement and restrictions, teleworking, the stress of not being able to do anything and being able to do everything in the same space... The health crisis has led us to rethink the way in which we relate to our environment, the spaces we use and about everything, how we use them.

A new changing demand: the challenge for rental home builders

The sum of these factors leads us to the new social needs in terms of housing. Tenants are now looking for new types of housing, for new uses, for new needs. The fear of confinement and teleworking have only made clear the gap between work and family reconciliation. Access to decent and flexible housing, and at a time when the population continues to age and in which millennials, heirs of the digital world and without barriers, are trying to make their way.

And in a country with little rental housing, with high and abusive prices and with an almost non-existent social rental item, the new rental law appears to facilitate growth and equal access to rental housing. Difficult to understand otherwise if we take into account that 30% of Spaniards live in rental housing. And it will continue like this, as long as the working conditions of these new segments of the population and the ease of access to mortgages do not improve as well.

So... why not become the solution to this problem?

Coliving: A guarantee of security and liquidity throughout the lease period

Coliving is a precedent for this new reality of residential rental. And it is based on the rent leased to different units that share the same dwelling. It usually occurs mainly in student and work environments, being temporary rental and for very specific uses: in the case of students, the search focuses on having a shared-use home, either with friends, acquaintances or simply strangers, who share a common interest: going to school. This rent can be annual or for several years, maybe just a few months, although it is common for the rental contracts to be modified either by change of tenants or by renewal.

In the case of renting for work reasons, the situation is similar, although it is about rental contracts with an even shorter duration than in the case of renting for students: these are contracts that have the same purpose as that for companies. to contact real estate agencies: the duration of the work, provision or service in a specific space. Although it is true that this rent is even more fluctuating than the student rent, it is more beneficial for the owners.

Factors to take into account in the Build-to-Rent

Seeing the background of the new modality of access to housing. And also looking at the factors that have led to this change. Why not become part of the solution and obtain the benefits that it entails? For this, it is important that the owner-lessor focus their new construction projects as a response to demand. Who is in charge now?

Although until a few years ago the real estate construction of residential homes was focused on profitability, now these urban projects must focus on demand: it is no longer as important as where. Profitability in the residential rental market based on flexibility and as a response to a real problem. And this change will be more profitable than projects in urban areas that are economically higher or of higher quality. A demand that is now interested in sustainable architecture and photovoltaic energy.

A second factor to take into account will be the spaces to be built. If we continue to think about flexibility and create homes for everyone, we must take into account the current need to have open spaces, environments that enable cooperation and why not coworking, collective activities... And that does not come from the times of COVID, Coworking has been successfully applied for years as a support and expansion measure for companies, freelancers for its multiple benefits, among which comfort, communication and flexibility are the most prominent. An example to follow for the owners of rental homes.

Flexible, adaptive and sustainable homes. The rental home of the future must adapt to demand, because demand now does not look for geographical areas, it looks for the space that best suits it, and if it is not your house, it will be the house of another owner, keep this in mind.

Investing in Build-to-Rent in Spain will provide high profitability

As we said at the beginning of this article, in Spain rental housing is scarce, prices are high and not affordable for everyone, especially with respect to housing for social rental and the construction of subsidized housing. Factor worsened in recent months as a result of the use of vacation rental apartments now converted into rental housing and with higher prices. The abusive conditions of the contracts in many cases did not help either.

In short, betting on the rehabilitation or construction of rental homes in areas of high demand is now a profitable investment option with a future. It is no longer about creating homes in the best locations that can be accessed from a good mortgage. The question now is to focus on the demand and its needs, creating spaces that facilitate communication and always designed according to the new trends that are gradually entering our country: sustainable homes that offer greater services will also be the ones that will be able to choose at a better price and become the high-yield asset that investors are looking for.

If you need advice on the purchase of urban land, we will inform you. We have land and plots for sale for all kinds of projects, yours too.