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Should You Invest in Regenerated Buy-to-Lets or New-Builds in 2024?

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    Can Regenerated Properties Outshine New-Builds for Investors?

    Over the last few years, as bills skyrocketed and people became more eco-aware, energy efficiency has become a key factor to consider when investing in property.

    As a result of the ongoing cost-of-living crisis and increased interest in sustainability, tenants are now more likely to seek newer properties that take advantage of the latest eco-technology.

    With amenities like solar panels and air source heat pumps, buy-to-let properties like this are renowned for drastically reducing energy bills – for tenants and landlords alike.

    For this reason, new-build and off-plan property investment has surged in popularity, with specific areas seeing considerable ROI for investors. As well as capitalising on this increased demand and wider tenant pool, investors can “future-proof” their assets against any potential future EPC regulations.

    However, according to recent research from property consultancy Fisher German, investing in newly renovated or regenerated buildings as a buy-to-let could see higher returns for investors.

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      Can Renovation & Regeneration Lead to Buy-To-Let Success?

      According to the insights from Fisher German, both the commercial and residential markets have seen a shift towards the regeneration of older, historic buildings to transform them into new homes instead of constructing brand-new developments on the land from scratch.

      These regenerated buildings see reduced carbon footprints compared to the older, undeveloped ones and a quicker turnaround time on completion compared to new-build developments. This could be particularly advantageous for property investors, as it allows their property to become available to tenants sooner than with new-build or off-plan developments.

      Chares Warrack, a partner at the firm, said: “Sites like this, where historic buildings can be converted and new buildings created, offer the best of both worlds to buyers, assuming consent has been secured. It is often more energy-efficient to work with what you have rather than building it from the ground up.

      “However, the scope to also build on-site alongside a conversion gives a buyer a chance of additional income after they have finished their renovation on the existing building. When borrowing and the cost of materials improve, we expect demand for these kinds of opportunities to rise significantly.”

      Warrack also says that many developers will likely pay a higher premium for sites with pre-existing change-of-use planning permission or those with permission to build further units on existing land. With the ongoing planning backlog, this could be lucrative for developers as sites such as these could offer “ready-made deals”.

      He added: “While regenerated buildings and sites with consent for changes have always been more desirable, we are seeing this demand increase as 2024 begins, and we think it will only increase further when borrowing costs come down.

      “In the past, conditional offers subject to gaining permission may have been suitable for particular sites, but now it is almost always worth it to get that change-of-use permission first. The time and money needed to secure consent is almost always paid back from the sale.”

      Read More: Want to invest in off-plan property? Take a look at our recent insights to uncover the latest buy-to-let costs and how to get into real estate investing!

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      Eco-Revamped Rentals or Discounted New-Builds?

      Regardless of your route, energy efficiency will likely dominate the housing market. Despite the government’s decision to scrap the minimum energy efficiency requirements for rental homes, there is still value in properties with solid energy performance ratings. In fact, recent data has revealed that many buyers now favour energy efficiency and sustainability over the charm of period properties.

      Investing in a regenerated older building could be an option for those looking to engage with eco-investments but with a shorter turnaround.

      However, new-build/off-plan property investment can offer the same environmental benefits while allowing investors to secure development at a much earlier stage of its construction at a discounted price.

      Off-plan developments are mainly concentrated in major investment cities, such as Liverpool, and prominently feature sustainability at the forefront of their design.

      For example, The Gateway Liverpool – one of the latest properties from Legacie Developments – will take advantage of cutting-edge eco-technology (such as PV array solar panels and mechanical ventilation heat recovery systems) to generate its own electricity and significantly reduce heating bills. This means the development will have a low service charge for investors while also appealing to the growing population of eco-conscious tenants.

      Delve deeper into the broader UK rental market with some of our helpful buy-to-let guides:

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        Reece Pape

        Reece Pape is a property writer at RWinvest. Reece is passionate about keeping property investors updated on must-have information and housing market news, utilising the latest property market statistics and data.

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