Will build-to-rent developments impact rent rolls? 

Hundreds of rental homes could soon hit the market, following the federal government’s final sign-off on new build-to-rent (BTR) regulations.  

Announced by housing minister Clare O’Neil at the National Housing Solutions Summit in late March, the changes lock in key tax incentives for BTR developers, including overseas investors, who dedicate at least 10% of their projects to affordable housing. 

This news, as highlighted by Minister O’Neil, aims to “give you all the confidence to start investing” and is projected by Property Council modelling to potentially unlock 80,000 new BTR developments over the next decade.  

What is build-to-rent? 

BTR developments are purpose-built, large-scale residential properties that are owned and managed by a single entity and specifically designed for long-term rental, rather than individual sale.  

As BTR is designed for renters and not property investors or owner-occupiers, the developments are usually geared towards tenants, with long-term leases, on-site management and lifestyle amenities like gyms and communal gardens. 

In Australia, the BTR sector is still relatively new but growing fast. The new tax regulations will also encourage BTR developments to be a mix of affordable housing options and traditional rental models. 

Will rent rolls be affected? 

Rent rolls are likely to be affected in two ways. 

First, the primary impact of the new BTR regulations is likely to be an increase in the supply of rental properties. As more of these developments come online, the overall availability of rental accommodation will expand, particularly in urban areas where such developments are concentrated. 

Second, BTR developments typically have long-term owners. In fact, the new tax incentives encourage this as they are only eligible for developments owned by a single entity for at least 15 years. This consistency will suit rent-roll businesses that value predictable income and client retention. 

How can rent roll owners benefit? 

The growth of the BTR sector presents opportunities for existing and future rent roll owners. 

Potential for specialisation 

The unique operational demands of BTR developments, such as managing large communities, handling both affordable and traditional housing tenants, managing extensive amenities and engaging with institutional owners, might lead to a specialisation within the property management industry.  

Rent roll owners could find opportunities by adapting their services to cater specifically to BTR developments. This specialisation could allow them to tap into a growing market segment with potentially long-term management contracts. 

Additionally, agencies that can demonstrate a good track record of managing BTR assets may find themselves in high demand, not just from Australian developers, but from overseas investors who will also benefit from the BTR tax incentives. 

Growth in rent roll management 

The increase in BTR developments should lead to growth in the overall volume of rental properties needing to be managed. This presents opportunities for existing rent roll businesses to grow. You can do this by: 

-Expanding your service offerings to the BTR model 

-Buying new rent rolls 

With the help of a finance broker, you can secure a loan to purchase new rent rolls in this expanding market. 

As always, it’s important to know how the acquisition fits with your own financial goals and responsibilities. Consider your appetite for risk, cash flow position and long-term business strategy before making any purchase decisions.  

Equally important is conducting thorough due diligence when acquiring a new rent roll. Understanding the tenancy mix, management obligations and long-term ownership structure will help ensure the portfolio aligns with your business goals and capacity. 

If you’re looking to acquire a rent roll for your real estate business, Finance Advisory Co can help you secure the right finance.

Contact us by filling in this online form, calling 0426 236 007 or emailing ben@finad.com.au  

Credit Representative 541104 is authorised under Australian Credit Licence 389328.  Your full financial needs and requirements need to be assessed prior to any offer or acceptance of a loan product.