HOW TO INVEST IN BUILD TO RENT, THE MOST EXCITING NEW ASSET CLASS IN AUSTRALIA
Build to rent (BTR) has been a hot topic in global real estate circles for the last few years.
In the United States, Build To Rent (“BTR”) is generally referred to as Multifamily real estate, which is a widely held and strategic commercial real estate asset class.
At roughly 25% of the U.S commercial real estate stock, the multifamily sector accounts for the second-largest share of institutional investors’ real estate holdings, lagging only the office sector.
In the United Kingdom an increasing number of projects coming to market In recent years has meant Build To Rent is no longer restricted to industry insiders, but in Australia Build to Rent is just beginning and opportunities for individual or smaller investors are restricted.
Build to Rent may be a growing global phenomenon but it’s still very new in Australia. Build to Rent was thrust into the spotlight in Australia 2019 as a part of the 2019 federal election campaign Labour proposed taxation reforms for Build To Rent in Australia.
PRIVATE INVESTORS WOULD NEED AROUND AU$500K PLUS TO BE ABLE TO INVEST DIRECTLY IN BUILD TO RENT, UNLESS THEY INVEST IN A PROPERTY FUND OR REIT, HOWEVER, THESE INVESTMENTS WOULD BE AN INDIRECT INVESTMENT SIMPLY INTO A FUND.*
<AN ANALYSIS OF 749 EQUITY FUNDS REGISTERED IN HONG KONG SHOWED AVERAGE RETURNS FOR THE 5 YEARS ENDING IN 2020 OF 4.41% PA, AND FOR TEN YEARS OF JUST 3.03% PA. THESE RETURNS - WHILE BETTER THAN CASH DEPOSITS - ARE STILL LOW YIELDING COMPARED TO BEING ABLE TO INVEST DIRECTLY WITH A DEVELOPER>
HOWEVER, WITH THE GROWTH POTENTIAL OF THIS ASSET CLASS, FOR INVESTORS WITH THE CAPITAL REQUIRED,DOUBLE DIGIT RETURNS ARE POSSIBLE FOR CAREFULLY PLACED INVESTMENTS IN PRIVATE EQUITY DEALS DIRECTLY WITH PROPERTY DEVELOPERS.
Build To Rent in Australia: What is a build to rent scheme?
WHAT IS BUILD TO RENT: Build to Rent describes the process by which residential properties are purpose built for the private rental sector.
In most cases, Build To Rent is done by large property development companies, investors and commercial landlords. Build To Rent refers to a residential development in which all apartments are owned by the developer, often a managed investment trust, a listed property developer, a property fund, a bank or pensions company and managed by a professional property management company, and leased out to tenants.
Build To Rent is opposed to the common build-to-sell method, where a developer builds a residential development and sells the apartments to individuals to either live in or rent out as an investment. Build to rent is part of a growing institutionalised housing market and is particularly attractive for institutions, both local, international and sovereign funds that want reliable, steady income as well as exposure to the residential property market.
Build To Rent in Australia is set to rapidly grow, with companies like Mirvac already involved in Build To Rent in Sydney.
Experts predict a build-to-rent (BTR) revolution coming to Australia
*New $1 billion fund to boost build-to-rent sector
Vellum Funds Management is partnering with Urban Property Group to launch a $1 billion fund to develop build-to-rent properties, as momentum continues to grow in the fledgling sector. The companies this week launched The Places Build to Rent Fund, inviting investors to participate in a $132 million capital raising that has attracted $66 million in pre-commitments.
Australian Groups Move on $1 Billion Big Apple Build To Rent Market
Developer Lendlease has partnered with Aware Super, the rebranded First State Super, to launch its first major urban regeneration project in New York. The Australian groups, which have partnered previously on a residential projects across the US, have secured a prominent waterfront site in Brooklyn, and will now move ahead with plans for a $1 billion build-to-rent project.
0Residential development sectors are gaining traction in Australia, with completed co-living units up by 46 per cent and build-to-rent up 38 per cent during the past 12 months.
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Ideal information for private investors or family companies with AU$500K + looking to understand this asset class.
BUILD TO RENT REPORT