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10.4 Building purpose built Build to Rent developments will increase construction costs and some features
may be seen as frivolous or costly, if effectively applied, they form the heart of a commercially savvy
model. The extras (amenities, service, community) are aimed at improving returns by attracting more
customers, commanding higher rents and securing tenants for longer. In financial speak, it is about
maximising initial gross yield, reducing management costs, the gross to net yield leakage and reducing
voids. There are three main factors over and above bricks and mortar that underpin value. In the
‘build to rent’ market these are:

(1) establishing ‘operating income’
Quantification and justification of this emerging market and value creation necessitates a commercially
savvy approach to additional ‘operator income’. This means bringing forward a strategy for each facility
and amenity as well as a model for use and income and the ‘operator’ being a stakeholder in the
income model and site staff incentivized likewise. (see chapter 3, page 37).

(2) establishing rent strategy & ‘premium rents’
‘Quality maintained, branded ‘build to rent’ will dictate a market premium, insufficient developments
to date means a shortage of empirical data; also many early schemes are little more fully rented ‘blocks
of flats’ rather than ‘concept led serviced communities’, some have not had all ‘amenities’ in place
before starting to rent units leading to homes being rented at normal levels with funds intending to
increase rents after. The considerations are:
 early market evidence,
 ‘all-inclusive’ or not?
 premium rent differentiators including the female mind-set,
 utilities,
 apartment fit out - insofar as ‘standard’ or a ‘rent differentiator’,
 furniture strategy options,
 appliances,
 rent structuring ‘premium’ or ‘affordable’.

(3) diligent modelling of the ‘gross to net’
Apartments: By nature, successful Build to Rent has certain requirements for mix and the now
established equal bedroom dumbbell layout, and, repeatable quality, great services access and
enhancements to drive different rents for essentially the same unit (in much the same way a hotel
offers standard, premium and deluxe rooms). Jack and Jill bathrooms add desirability to one bed
apartments. Consider bathroom and shower room off the corridor on two bedroom flats, or two x en-
suite bathrooms, pricing pressure and the cost of living dictates that sharers is the most likely market.
Breakfast bars can save the cost and expense of dining table and chairs, or consider a slim line movable
unit within the kitchen on wheels that doubles up as a dining table or extra workspace.

10.5 Charging structure – what is included/excluded in rent
The answer to this question again depends on the scale of the development and whether facilities
beyond the basics are to be provided. Whilst the ‘all inclusive’ holiday concept is a winner one has to
remember that the main draw is unlimited alcohol and food, neither of which form part of the ‘build to
rent offering’.

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