What are the benefits of the build to rent model?
Africrest Properties on converting commercial space for residents12th Jul 2022
A greater demand for quality, purpose-built rental accommodation, especially among young professionals and the over 50s has raised the need for alternative development models like buy to rent. It is a burgeoning sector in places like the UK where more than R50 million has already been invested.
In South Africa, it has been largely ignored by developers, but a few are dipping a risky toe in the domestic market with some very favourable returns, especially during the pandemic.
Africrest is one such developer, with several successful buy to rent developments in Johannesburg alone, including the 700-unit Apollo in Sunningdale. Their director, Justin Blend, talks us through some of the main benefits of this innovative model for both developers and tenants.
THREE BENEFITS FOR THE DEVELOPER
Greater control of your investment
Nothing is more attractive than the capacity to control your investment. As both owner and property manager, we can closely monitor everything from our tenants happiness, the type of tenants we choose to have and the breath of services we offer.
Reliable long term rental income
Built to Rent apartment rentals continue to remain stable and this makes the build to rent model especially attractive to developers and investors due to the non-volatile, high-quality long-term benefit of having a continual flow of rental income.
We are known in the industry to pour a lot of effort in creating optimal community living environments for our tenants. This is because happy tenants allow us to achieve above industry average lease renewal rates. It is really a win win all round.
We have been operating in the Sunninghill area for some time now and had seen many commercial tenants leaving the area. The 30,000 square meter Apollo development was previously the PwC head office, and we pursued the property for over two years before the owners decided to sell it at a price that made sense to ourselves, during the hard lockdown no less. Converting it into a residential unit was a complex process but it has done wonders to revitalise an otherwise underutilised commercial space which would have remained derelict.
There is likely to be some great financial rewards to investing in similar buy to let projects post pandemic, with so many vacant commercial spaces available because of the lockdown. The bonus here is these properties are in prime metropoles. Sunninghill for example is situated in a great area, minutes away from Sandton, Woodmead, Bryanston, Fourways, Waterfall, and Midrand and close to major interchanges.
THREE BENEFITS FOR TENANTS
All the frills with no fuss
A major differentiator with this model is the fantastic amenities on offer for residents. At the Apollo for example, every tenant has free membership to resort style leisure facilities including a fully equipped professional gym with swimming pool, yoga and meditation area, a sports viewing theatre, braai areas, recreational centre, area, games rooms, private movie theatre, and a clubhouse.
There is also free uncapped high-speed fibre available in every unit, and common areas, a 24-hour concierge, convenience store, laundromat, a business centre for those working from home as well as in-house maintenance team so that all tenant issues are repaired within 24 hours and 24-hour security and CCTV surveillance.
We have found that the community living aspect has become very prevalent post pandemic with more people now spending more time in their home. At the Apollo, we have a full-time community officer who is on hand to welcome new tenants and ensure they are well integrated with the wider community. A host of activities are available throughout the year including braai days, soccer tournaments, quiz nights, movie nights and talks from health experts and investment advisors.
Highly efficient management
Another benefit of having one owner as the landlord is the absence of a body corporate. As everything is done in house by the developing company, we eliminate the need to have regular meetings to action simple things like approving a quote. Things tend to happen much faster and efficiently in an owner managed development, and as always, we act in best interest of all the tenants as a community.
On average, we have up to three times more onsite employees to help with residential matters than regular apartment blocks and as we are not reliant on the income of one tenant alone, if they become disruptive, we are able to remove them immediately. This is often not possible in other sectional title developments, which have more than one landlord, each with their own vested interests.
Quality purpose-built housing
As we do not sell our apartments, we only build using the best quality materials and finishes, as we are responsible for maintaining them in the long term. This ensures that our residents get the greatest quality that money can buy, with additional trimmings like built in appliances and top end furnishings. We especially pride ourselves in building sustainable properties with some of the best environmentally friendly water heating system and LED lighting as the long-term savings far outweigh their initial costs.