WHAT IS SERVICED ACCOMMODATION & HOW CAN INVESTORS PROFIT?
Jordane Thompson
November 25th, 2020
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What is serviced accommodation?
What does serviced accommodation include?
What is the difference between serviced and non-serviced accommodation?
Does service accommodation offer a good investment opportunity?
What are the positives of serviced accommodation?
Start your property portfolio today!
Serviced accommodation is not something that is spoken about enough in the world of property investment, but it’s a strategy that can generate exceptionally high returns. It’s a somewhat new strategy for the buy to let industry, so we’re going to take a look into it and find out exactly what serviced accommodation is, what it includes, and just about everything else.
Serviced accommodation is similar to a normal buy to let, and not at the same time. These types of lets are typically done on a shorter-term basis so as opposed to a 6 month AST you can rent the property out for literally day, weekend or week – although it can sometimes span a longer period and in essence is extremely flexible.
The properties themselves are very similar to what you would generally use as a buy to let so it’s a very similar kind of market when you come to purchase the property, however, the returns are generally speaking a lot higher as the turnover of tenants or guests is much higher. The best way of explaining it is in the difference in price between a night in a hotel compared to a night in an apartment that you rent.
Your typical serviced accommodation is similar to that of a hotel, as a landlord you are expected to fully furnish the house, including all your standard amenities including a bed, couch or seating area, TV, laundry facilities, housekeeping services, Wi-Fi, parking, and a fully equipped kitchen. The more that you have on-site, typically the more you can command in regards to the rental price. Some serviced accommodation might have communal areas such as on-site gyms, pools, restaurants or conference rooms.
It’s a home from home, and everything is to be included within the overall rental price, which is another reason it’s typically more expensive than your standard buy to let property.
The main difference is that a serviced accommodation is when a tenant or guest gets looked after and the room, house or apartment is fully furnished. In contrast, non-serviced is when someone rents out a property with no furnishings, or anywhere that a guest or tenant has to do everything themselves.
That’s the difference in the terminology, but you might be more concerned with the difference that means to you as an investor. Essentially serviced property is a lot more labour intensive, you need to constantly be on the lookout for new tenants, maintain and manage the property, it’s more comparable to running a business and is a lot more hands-on than a buy to let property.
Yes, and no.
Serviced accommodation offers much higher returns, or yield, than its counterpart, but as mentioned is a lot more hands on to the point that it’s almost a full-time job so if you’re wanting to be a hands-off investor, this probably isn’t one for you.
If you have time to dedicate, however, it can be exactly that, a full-time job, with full-time lucrative wages, as long as you do it right and are able to consistently get tenants.
What are the positives of serviced accommodation?
As we’ve touched on throughout the article there are several positives to serviced accommodation, but to summarise, here are a few:
- You get to let for a shorter term, meaning problem tenants are much less of an issue
- It’s extremely flexible
- You achieve a much higher rent
As with everything, there are also downsides to serviced accommodation, so we’ve summarised those for you as well:
- You might not be able to fill the property every night
- The cost of set up is more, as you will need to furnish it and pay for cleaning
- It’s much more hands-on, your really creating a job for yourself
We’ve mentioned throughout the article that serviced accommodation is very similar in a lot of ways to a standard buy to let property, and it may not be something you search for specifically because any property can be a serviced property.
Now in saying that, you should always look for a higher quality buy to lets that are in areas that are going to attract the kind of people who would be interested in serviced accommodation, such as professionals or tourists.
Before jumping in and buying a property, you need to make sure that you know your target audience well. There are different types of tenants which might be attracted to serviced accommodation, so you need to get to grips with exactly the kind of property they are going to want.
Always keep in mind, that if you go for a property that you intend to be a serviced accommodation property, but it doesn’t exactly work out to plan, it’s not the end of the world. You can always reverse the property somewhat back to a buy to let and still make a steady income from it with a tenant over the longer term.
Navigation
What is serviced accommodation?
What does serviced accommodation include?
What is the difference between serviced and non-serviced accommodation?
Does service accommodation offer a good investment opportunity?
What are the positives of serviced accommodation?
Start your property portfolio today!
Serviced accommodation is not something that is spoken about enough in the world of property investment, but it’s a strategy that can generate exceptionally high returns. It’s a somewhat new strategy for the buy to let industry, so we’re going to take a look into it and find out exactly what serviced accommodation is, what it includes, and just about everything else.
Serviced accommodation is similar to a normal buy to let, and not at the same time. These types of lets are typically done on a shorter-term basis so as opposed to a 6 month AST you can rent the property out for literally day, weekend or week – although it can sometimes span a longer period and in essence is extremely flexible.
The properties themselves are very similar to what you would generally use as a buy to let so it’s a very similar kind of market when you come to purchase the property, however, the returns are generally speaking a lot higher as the turnover of tenants or guests is much higher. The best way of explaining it is in the difference in price between a night in a hotel compared to a night in an apartment that you rent.
Your typical serviced accommodation is similar to that of a hotel, as a landlord you are expected to fully furnish the house, including all your standard amenities including a bed, couch or seating area, TV, laundry facilities, housekeeping services, Wi-Fi, parking, and a fully equipped kitchen. The more that you have on-site, typically the more you can command in regards to the rental price. Some serviced accommodation might have communal areas such as on-site gyms, pools, restaurants or conference rooms.
It’s a home from home, and everything is to be included within the overall rental price, which is another reason it’s typically more expensive than your standard buy to let property.
The main difference is that a serviced accommodation is when a tenant or guest gets looked after and the room, house or apartment is fully furnished. In contrast, non-serviced is when someone rents out a property with no furnishings, or anywhere that a guest or tenant has to do everything themselves.
That’s the difference in the terminology, but you might be more concerned with the difference that means to you as an investor. Essentially serviced property is a lot more labour intensive, you need to constantly be on the lookout for new tenants, maintain and manage the property, it’s more comparable to running a business and is a lot more hands-on than a buy to let property.
Yes, and no.
Serviced accommodation offers much higher returns, or yield, than its counterpart, but as mentioned is a lot more hands on to the point that it’s almost a full-time job so if you’re wanting to be a hands-off investor, this probably isn’t one for you.
If you have time to dedicate, however, it can be exactly that, a full-time job, with full-time lucrative wages, as long as you do it right and are able to consistently get tenants.
What are the positives of serviced accommodation?
As we’ve touched on throughout the article there are several positives to serviced accommodation, but to summarise, here are a few:
- You get to let for a shorter term, meaning problem tenants are much less of an issue
- It’s extremely flexible
- You achieve a much higher rent
As with everything, there are also downsides to serviced accommodation, so we’ve summarised those for you as well:
- You might not be able to fill the property every night
- The cost of set up is more, as you will need to furnish it and pay for cleaning
- It’s much more hands-on, your really creating a job for yourself
We’ve mentioned throughout the article that serviced accommodation is very similar in a lot of ways to a standard buy to let property, and it may not be something you search for specifically because any property can be a serviced property.
Now in saying that, you should always look for a higher quality buy to lets that are in areas that are going to attract the kind of people who would be interested in serviced accommodation, such as professionals or tourists.
Before jumping in and buying a property, you need to make sure that you know your target audience well. There are different types of tenants which might be attracted to serviced accommodation, so you need to get to grips with exactly the kind of property they are going to want.
Always keep in mind, that if you go for a property that you intend to be a serviced accommodation property, but it doesn’t exactly work out to plan, it’s not the end of the world. You can always reverse the property somewhat back to a buy to let and still make a steady income from it with a tenant over the longer term.
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