Single-family BTR: managing success

Adam Stephenson, Operations Director of Ascend Properties discusses the importance and effectiveness of professional property management within single-family Build to Rent portfolios.

Real estate is often a world of fine margins, where fractions of a percent matter and net yield dictates a venture’s success or failure. It is one of the reasons the sector is so open to external expertise; from agents to asset managers, investors can see the value in bringing in specialists to sweat every pound out of the properties they own while providing best-in-class service to residents. This need for outside resources is particularly acute in emerging sectors, where experience is relatively concentrated and many new entrants are, to a greater or lesser degree, feeling their way.

Which brings us to single-family Build to Rent, one of the most in-demand asset classes in the UK today. A wall of capital is targeting the sector, and for good reason. With an undersupply of rental homes, particularly for families seeking a quality of product and security of tenure that the buy-to-let sector has struggled to provide, the fundamentals are strong. A glance at similar portfolios in more mature markets such as the USA and Germany highlights the potential importance of single-family Build to Rent as a key part of the UK’s housing mix.

The risk with single-family Build to Rent is to view it as another branch of the wider Build to Rent market that has taken such great strides over the past decade. Expertise has grown, and city centres are peppered with Build to Rent schemes that meet a proven demand and, as a rule, are performing well. Why not move into single-family too? How different can it be?

Single-family v multifamily

To a certain extent, the similarities are there. Both city centre apartments and single-family homes are all about servicing a need. Build the properties, find tenants, collect the rent, repeat. But look deeper and the differences are manifest. In particular, single-family Build to Rent presents management challenges that simply aren’t there for traditional ‘multifamily’ Build to Rent apartments.

The amenities required by single-family Build to Rent – schools, health, green spaces – differ greatly from the bars, restaurants, and gyms that young professionals prioritise within multifamily developments. Where families want security of tenure and a sense of community, twentysomethings put a higher premium on vibrancy and proximity to where they work and play. In parallel, the more diffuse nature of single-family housing schemes, compared to the single or clustered blocks that Build to Rent apartments occupy, presents additional management challenges.

As such, managing single-family Build to Rent assets requires a specific and bespoke set of skills. These aren’t limited to lettings and maintenance; successful management encompasses all aspects of the residents’ experience, including onboarding processes, compliance, inspections, day-to-day liaison and site presences across a wide geographical reach. For investors, specialist external management expertise is vital.

Gross to net

Ascend has an absolute focus on single-family Build to Rent that makes it the leading lettings and property management firm in the space. Of an asset class currently estimated to be around 10,000 homes, Ascend manages more than 7,000, working with many of the sector’s leading platforms. From pre-build consultancy to lettings and ongoing management, either under the Ascend banner or a client-brand, we provide an end-to-end service.

Crucially, this expertise translates into improved performance: homes under our management secure better rents, have lower void rates and deliver greater returns than the industry average. Over the past 18 months, our single-family Build to Rent portfolios have seen an average 17% increase in re-let rents, 9% rise in lease-up rents and 8% growth in renewal rents, while 99.3% of rents due have been collected. Within the same period, 2,700 new leases have been signed, contributing to an average occupancy rate of 98% across all portfolios.

The on-the-ground impact of this expertise is a ruthless focus on ‘gross to net’ – minimising the difference between gross rental income and net revenue once all costs have been taken into account. That means using our specialist lettings insight and economies of scale to deliver more effective and efficient management, all underpinned by proprietary technology. In the past two years alone, we have invested more than £2m into bespoke systems and technology to create one of the sector’s leading lettings and property management tech platforms, capable of automating end-to-end management processes and bringing in major efficiencies at scale.

Most important of all, it means taking these problems off the hands of the institutional investors that own the assets, leaving them to focus on the asset and investment management that they excel at. At heart, it’s about understanding how effective property management is the key to a portfolio’s performance, especially when operating within an emerging sector.

The attractiveness of single-family Build to Rent is clear, and institutional capital targeting the sector is both entirely understandable and to be encouraged. But it remains an emerging marketplace, and one that requires specialist insight to genuinely capitalise on the opportunities available. Ascend’s capabilities, delivering heightened returns for investors and exceptional service to residents, show just how important external expertise can be.

Effective property management is key to a successful single-family Build to Rent portfolio, but it is a unique sector requiring specific understanding. It’s all about gross-to-net.

- Adam Stephenson, Operations Director of Ascend Properties