A Build to Rent project is a major development that requires adequate funding, credible information, careful planning, and professionals available. The most important factors to consider before setting up a Build to Rent development are funding and credible information. Here we’ll discuss the role of whole life costing in a build to rent model.
These two factors go hand in hand and are especially important to any project of this stature. This is because having an accurate estimate of the amount that will be enough to carry out the project determines how successful the project will be in the long run.
Putting all the necessary factors on a building development into consideration and proper analysis; is where Whole Life Costing comes into play.
What is Whole Life Costing?
In common terms, Whole Life Costing can also be referred to as a “lifecycle.” According to the Royal Institution of Chartered Surveyors (RICS), the whole life cost (WLC) of an asset is defined as the present value of the total cost of that asset over its operating life (including initial capital cost, maintenance and replacement cost, energy cost and the cost or benefit of the eventual disposal of the asset at the end of its life).
For a better understanding, Whole Life Costing is an investment appraisal and management tool. It assesses the total cost of an asset over its whole life. It takes account of the initial capital cost, as well as operational, maintenance, repair, upgrades, and eventual disposal costs. (The Chartered Institute of Public finance and Accountancy (CIPFA))
The Relationship Between Build to Rent and Whole Life Costing
Acquisition, management, and ownership of property assets is a challenging endeavour. A lot of unforeseen expenses can arise along the way. Two things can have a negative impact on the development’s success and profitability. If you aren’t able to properly predict and cover costs connected to maintenance and operations. To prevent these surprises from taking one off guard, it is important to analyse or calculate the Whole Life Cost of the development before embarking on it.
Since Whole Life costing deals with the systematic appraisal of all the relevant costs and revenue connected with the acquisition and ownership of an asset, a prudent Build to Rent developer would consider carrying out the Whole Life Cost analysis of every project.
This is because having a trusted projection of the pros and cons of the development and the materials you are choosing to source enables the owners and managers to have a good grasp of the necessary expenses required to operate and maintain the development in the most efficient way possible. Calculating the Whole Life Cost of a Build to Rent development is certainly a necessary process for Build to Rent investors and developers who want to minimise the net operating cost (NOC) of their development.
When can you conduct a Whole Life Cost analysis?
Generally, you can carry out a Whole Life Cost analysis at any stage of building development. However, the best time to conduct this analysis is at the very beginning of the project.
For Whole Life Costing to work efficiently, researchers recommend that it should be integrated into the design process. Why? Because at the design stage, developers and engineers deliberate on various design alternatives. These design alternatives must be clear before proper analysis can be conducted.
What are the benefits of using Whole Life Costing in Build to Rent?
Conducting the whole life cost analysis of development, from the foregoing, clearly grants several benefits i.e., both short-term or long-term benefits. Ranging from getting accurate projections to a heightened focus on keys aspects. The following are some of the advantages of conducting a whole life cost analysis:
Enhanced decision making
One of the obvious benefits whole life costing confers is that it ensures the decision making is founded on a more accurate and realistic assessment of the expenses and revenues. Also, knowledge of the costs of the development over its lifespan, helps the developers and investors make the best decisions on design and pick the most suitable building materials.
Reduction in operation costs
Providing accurate information on development leads to better decision making; thereby, resulting in the reduction of the cost of operation. It minimises the wastage of time, materials, and funds. These things usually happen due to poor decision making or underperforming building materials or internal finishes.
Management efficiency
Whole life costs arms the management of development with forecast information about the development’s maintenance and costs, giving the management ample time to prepare a maintenance schedule that does not interfere with the operations of the development, thus, boosting efficiency. This is one of the long-term benefits of whole life costing.
Better public safety
The long-term benefits of whole life costing go beyond the completion of the development. It also encourages staff training, regulatory compliance, maintenance, and energy conservation, all of which make the development safer for residents, the public, and the environment as a whole.
More knowledge on property costs
Investors and developers gain more knowledge about their development through the whole life cost analysis. They are privy to important concepts that play a role in calculating whole life costs. Thereby, they receive a deeper understanding of their investment project.
Conclusion
Investors of a Build to Rent development can save themselves thousands in running costs if they scrutinise the whole life costs of the elements of their building from Day 1. Whole life costing is a long project that will need a full working team but will provide a competitive advantage that is not yet achievable or fully functional by anyone in the industry at the point of writing this article.
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