Following hot on the heels of the success that multi-family housing (MFH) has presented to institutions, it is fair to say that single family housing (SFH) is currently going through a period of significant investment. Recent interest rate increases have resulted in would be house purchasers reconsidering their position, whilst unfavourable tax conditions have resulted in a slowing of Buy to Let (BtL) acquisitions. On the ground we are seeing an ever growing percentile of our tenants sourced from BtL landlords exiting the space.
This set of circumstances has resulted in a more open appetite from housebuilders for collaboration and bulk sale where once it wasn’t required. The fundamentals of an under supply of stock and a potential for rental premium for professionally managed stock, in an otherwise amateur market, lends itself to a match made in heaven.
Of course there are many facets that come together to form the perfect scheme - location, demand, affordability, brand, marketing, specification and, perhaps most importantly, the right team of people.
Allsop is in a fortunate position of having mobilised, launched and stabilised a number of SFH schemes for the likes or Packaged Living and Savills IM. We have also taken on pre-existing assets and implemented significant Asset Improvement and Capex programmes for those portfolios. All of this has placed us in a unique position to advise in this space, working closely alongside our specialist Build to Rent (BTR) agency team.
In terms of rental income we have regularly witnessed the ability for SFH with professional management to outperform the perceived rental glass ceiling by upwards of 15%. Is this the BTR premium of SFH? Perhaps. This premium is justified and clearly helps with investment modelling. However, it is vital to ensure the rest of the key elements of the site stack up.
Allsop has the capability to research local rental demand. We understand the demographic market we are targeting, where they will be coming from, where they want to travel to for work, what they can afford, as well as what the makeup of typical households may be.
Scale varies widely, anything from circa 50 units to 200 units with increased scheme sizes expected to follow. The higher the unit number, the more efficiency you will get in your operating budgets. However for larger schemes you need to be comfortable with expected demand in the area. A contiguous site is obviously preferred from an investor perspective, but also by the operator - control is key.
Related to scale is the house type mix. What mix of 2, 3 or 4 bed units is the right blend? The answer is that every scheme is different and it will depend on your demographic research. Ultimately this is where the housebuilder relationship and ability to work with them to flex their site layouts can come to the fore.
Building a community relies on good relationships, from developer to investor, to operator, to agent, to customer and everyone in between.
Time of year is important for lease up. Over delivery in winter and under delivery in spring and summer can significantly impact the success of a scheme, at least in year one. Again there will be elements of this beyond an investor’s control, but it is something worth considering. The traditional slow-down in the lettings market in November / December takes place every year. That said, Allsop has yet to receive a scheme where we can’t lease quicker than the builder can hand the units over.
Branding spend can often be significant, so is it worth it? My opinion is that it creates product differentiation – we have customers wanting to move into Allsop sites because they know we are HomeViews Operator of the Year.
Although sentiment is extremely difficult to measure, the feedback we get in dealing with our customers is that they “feel good” about moving into a branded community. The reassurance it provides them in terms of flexible and hopefully long term renting, as well as the security they sense from their home being professionally managed, shouldn’t be underestimated.
Specification is also important, but perhaps not in the way people may expect. While complementary design is important and aesthetics from kitchen units to bathroom tiles need to be right, from an operational and occupation perspective the most important elements are the structure, layout, heating and hot water installation, outside space and energy efficiency.
We are seeing a lot of our clients increasing their commitment to ESG, which in terms of specification can range from solar panels to air source heat pumps and beyond. The key is to create (where possible) a portfolio and operational consistency. From the investor perspective these homes need to be efficient in terms of space and layout.
But what really makes Allsop’s sites a success, is our people and their understanding of the requirements of both the investor and most importantly of our customers. The relationship between Property Manager and customer and the customers’ relationships with each other have to be right from the start of their renting journey. Building a community relies on good relationships, from developer to investor, to operator, to agent, to customer and everyone in between. We put people at the centre of everything we do and are extremely proud to have been voted ‘Top Rated Single Family Housing Operator’ at the HomeViews Resident Choice Awards 2024.
