The build to rent phenomenon in Spain is in full growth; partly due to the increase in demand for rental housing and partly due to the benefits provided by this real estate investment model.
Next, we show you what the build to rent is based on, what its advantages are and how you can access the necessary financing for its development.
Build to rent: meaning
Build to rent is an Anglo-Saxon term that can be translated as “build to rent”.
As its name indicates, it is the construction of real estate for the purpose of long-term lease; unlike the traditional model based on the construction of houses for their subsequent sale.
In addition, there is a note that characterizes the build to rent: the design of real estate properties is usually carried out taking into account the needs and preferences of the tenants. Therefore, it provides an experience adapted to the current lifestyle (such as common spaces, shared work areas, advanced connectivity, gym, maintenance, etc.).
What are the advantages of Build to rent?
Which are the keys to the growth of build to rent in Spain? Apart from the fact that it is a real estate investment model that facilitates access to housing, mainly for young people and certain groups, it allows renting a home in an area and with a higher quality than what could be achieved through purchase.
It also presents advantages for the property developer. For example, in the event that there is an investor who acquires the property and is in charge of operating the homes, the promoter is assured of the sale (he only has one client and the commercial risk is considerably reduced).
However, if the developer himself is in charge of leasing the homes, he has the ability to obtain attractive returns. Mainly this is due to the following factors:
- Stable income: In contrast to the uncertainty of real estate sales, rental income is predictable and recurring.
- Growing demand: according to the Survey of Essential Characteristics of the Population and Housing (ECEPOV), the number of Spanish households residing on a rental basis increased from 13.5% to 15.9% from 2011 to 2021.
- Simplified management: it is common in build to rent that the administration and maintenance of the property is entrusted to a specialized company. In this way, not only are the concerns that often accompany renting multiple properties eliminated, but tenants also see increased comfort and perceived quality.
Existing financial solutions
Built for rent is well established in the United Kingdom (where it originated) and other European countries where there is a culture of renting. In Spain it has burst into force and is setting trends. As investors increase, a paradigm shift in the real estate market is likely to take place.
However, there are still some challenges to overcome, especially those related to regulation and financing.
Real estate projects require a high initial investment. It is necessary to acquire the land, obtain licenses, study the land, architectural project, Health and Safety coordination, construction management, material execution, taxes, notary, registration, etc.
The main problem It lies in the rigidity and formality of the banking entities to process the corresponding developer credit.
For this reason, property developers who need resources at any stage of the project turn to a Bridge Loan for Developers: a high-value, short-term loan granted by specialized investment funds. At the time the developer credit is processed with the bank, the loan is cancelled.
In Alter Finance We are specialists in the processing of this type of financial solutions. Whether you want to materialize a build to rent project or any other real estate initiative, you can contact our team and we will study your case.