A changing mindset is needed for BTR lettings
While Spain is in the a complete BTR boom, Italy is still 2 years behind in terms of players active and pipeline.
Only a months ago a large residential project in Milan owned by an assurance announced the start of a new digital experience to let their units, permitting some customization and pushing the exclusiveness in the advertising.
Intrigued by the hype, i decided to experience the rental journey. First thing that i noticed was that the lease up was managed by a traditional letting agency, so outsourcing the process. I started to raise my eyebrows. Then I got a call with the agent: no empathy, poor knowledge of the building, few marketing skills, scarce preselection questions, poor information and transparency (omitting IVA). The biggest surprise was that the tenants was in charge of 2 months rent more a year to cover utilities etc.
I don't want to digress more on the value of the offer compared to price, what disappointed me was that the landlord launched the products more or less correctly, also with a nice digital portal, but totally missing the training of the commercial network.
I'm constantly learning, studying and exploring what's happening in the English markets and how a completely new mindset is needed for the correct lease up of the assets.
While many in Spain are getting on board due to FOMO, i think that they focus too much on the financial and on the products, without being conscious of the intricacies of setting a rental department able to comunicate, advertise, lease and manage the pre and post experience of tenants.
A lot of strategic questions need to be answered: how to manage the trade off between velocity of lease up and the quality of the tenants without sacrificing the economics per unit?
This is particularly difficult when units are often commanding rents premium fo more than 20% above local market rates. Building a brand and community around a development is also becoming a necessity to stand out from competitors.
Traditionally, there have been 3 ways to market a development. However, more and more operators have to adopt new and proven Build to Rent lettings strategy to become winners of the BtR sector.
In order to reach the volume of prospective residents needed to fill a BtR development, owners and operators traditionally had just three options:
1. In-house approach
2. Local agencies
3. Large national or regional agencies
More hybrid solutions are needed and everyones has its pro and cons. A lot need to be tested in terms of incentives for agents, how to manage PRS compared to BTR (Local branch managers’ preference will always be to place high quality applicants in higher paying private properties) and how to setup fees and incentives.
How to manage, internalize, outsource and track the customer journey, integrating the brand experience and creating a measurable standards is a complex job for everyone jumping in the operational residential segments.
The final and fundamental point is to be conscious that the availability of good quality tenants able to pass narrow credit ratios is not huge and these type of tenants are also the one able to move to the house ladder (govt policies incentives the ownership): the challenge will arrive when before or later the operator will have to manage credit risk to attract a larger segments of tenants, relaxing some criteria and balacing with the potential vacancy ratios. New generations live with unstable contracts, temporary job and scarce savings: this is the reality that drive people to rent (other than changing lifestyle) so benefiting BTR but at the same time is a profile that have to be accounted for.