A 39-storey residential tower located at the southern entrance of Sydney Metro Pitt Street Station is the first build-to-rent project in the Sydney Central Business District (CBD).
The tower has 234 apartments with amenities like gyms, pools, and an entire floor dedicated to home office spaces.
What is build-to-rent?
The build-to-rent model is when one developer is responsible for the residential development, and the apartments are managed by an investment trust and leased out to tenants.
This differs from the build-to-sell or build-to-buy model, in which a developer builds and sells apartments to individuals who can either live or rent them out as an investment.
- Build-to-rent developments are large in scale and specifically designed for long term ownership and rental.
- These developments should generate long term rental income for developers.
- These build-to-rent projects are targeted towards renters seeking secure and long-term rentals. As the entire project is operated by one developer or investor, it provides cohesion across the entire building and should minimise disputes.
The argument for the model is that it helps rental affordability and provides luxury options for those who can’t buy in CBD locations.
The build-to-rent model can also be used for affordable housing. A developer will build an entire block and rent them at a reduced rate, usually subsidised by the government, for low-income tenants.
How does build-to-rent affect investors?
Build-to-rent projects don’t offer much for investors as the building is owned and operated by a developer, not sold to individual investors.
However, it can offer a niche investment strategy for rentvestors.
The development in Sydney will be top-end and aimed at people who have a lot of money available for rent.
For investors who desire that high-end lifestyle but can’t afford to buy a luxury apartment, this is a great option to achieve the lifestyle and continue investing in other areas that will return better rental yields or capital gains.
If we see more of these build-to-rent developments, it will likely drive more rentvesting too.