The private rented sector can provide an attractive opportunity to generate returns through stable contractual income.
We have been researching the Private Rented Sector ('PRS') property market as an investment opportunity and have produced an investment case providing:
What is PRS?
The Private Rented Sector refers to ownership of residential property developments to cater for long-term rental tenants. Developments are purpose built, professionally managed and designed to take advantage of economies of scale.
What are the benefits to investors?
Attractive Yield and Income Focus - Contractual income distributed during both the construction and operational phases of developments is expected to form a significant proportion of total returns.
Long Term Opportunity - Market supply and demand imbalance expected to remain for some time and continue to drive the opportunity.
Diversification - Historically low correlation of investment returns to both commercial property and traditional asset classes.
What are the key risks of investing in PRS?
Excessive Vacancy - Uncertainty around resident take-up of developments is a risk.
Political/Regulatory Risk - There is a reliance on free market rental pricing which could change via government policy. Additionally, external political shocks such as Brexit could have a negative impact.
Construction Risk - Assets are not immediately operational with time taken to deploy capital and develop sites.
We view PRS as an attractive opportunity for individual clients looking to generate returns primarily through stable contractual income. Large and growing supply-demand imbalances in the UK residential property market coupled with high housing prices are the main drivers of the opportunity. Clients should only consider allocations if they are comfortable with the level of risk, illiquidity and transaction costs in the asset class.
Please download our guide for more information.