Perhaps you’ve heard the term ‘rent to serviced accommodation’ before – if you’re interested in property, then this is probably the case. Maybe you’ve been wondering just what it means and why it could be an excellent investment for you. Let’s look more deeply into this.
Firstly, this is an information piece, we always advise you speak to a qualified financial advisor before making and financial or investment decisions.
How does Rent to Serviced Accommodation work?
Unlike a single-let buy-to-let, rent to serviced accommodation allows you to rent out a home on a short-term basis. You rent out your investment property to people we’ll term visitors rather than tenants since you normally rent it out by the night or for a short length of time.
So, rather than a buy-to-let, where you have a six-month or a one-year tenure, you might be leasing out your serviced housing for one night, a weekend, or you could even have long-term short-term lettings. There are many individuals in the serviced accommodation industry who get are happy to let their properties to a contractor who comes along and wants to take the property for six months. That is something you can do as well.
So with a rent to serviced accommodation option, you do have a lot more flexibility than with a standard rental agreement. It’s not as strict as a buy-to-let, where you must have a six-month AST, assured shorthold lease at the very least. However, this can mean downsides since you have to find more visitors than you would tenants; one tenancy could be as many as fifty or more short-term visitors in a rent to serviced accommodation.
Quite frequently, the kind of property used for serviced accommodation is the same type of property used for buy-to-let or single-let. However, when put to use as a serviced accommodation, the kind of property, although the same, will provide substantially better profits. Why? Because the rent that you can charge per night or per short stay will be significantly more in relation to the amount you can charge for a six-month or a year tenure. As you can see, there are a variety of different pros and cons to rent to serviced accommodation; it’s not going to be the right choice for everyone, although it might be perfect for you.
What are the Pros and Cons to Rent to Serviced Accommodation?
In many respects, serviced accommodation is more of a business strategy than a property plan since the effort required is considerably more than if you are a standard landlord. In fact, if you think about it, serviced accommodation is similar to a small B&B, but without the breakfast. In fact, another word for serviced accommodation could be vacation rentals, since they are extremely similar, if not identical, to the whole notion of a holiday let in many aspects.
As a result, you’ll probably want to set out your lodging in the style of a hotel. You’ll have to furnish your buy-to-let property if you’re going down this route anyway, so it may as well look the part. On top of this, you will be responsible for supplying bedding. You’ll be giving towels, tea, coffee, milk, and even snacks for your visitors when they come.
Every time your visitors depart, you’ll need to clean the rooms and replace the sheets, much like a hotel. Alternatively, if they are staying for an extended amount of time, you will need to have a cleaner come in and replace the bedding on a regular basis while your long-term short-term visitors are there.
All of these aspects need to be considered, especially if you’re accepting reservations via a site like booking.com or Airbnb, where someone might book only minutes before they arrive. How will someone get into your serviced accommodation if they reserve it at 10 p.m.?
The serviced apartment business has developed significantly in recent years, exceeding hotel room investment. While serviced apartments were not fully immune to the decline in demand caused by Covid-19, the sector is expected to rebound the fastest, with a 41 percent increase in serviced apartment RevPAR (revenue per available room) over the course of the year. Overall, reduced running expenses coupled with longer average guest stays strengthen the argument for serviced apartments as a solid investment.
Guests often notice the value in serviced apartments since rates are typically approximately 20 percent cheaper than those of a comparable hotel stay. Furthermore, there are seldom any hidden expenses, such as the minibar or room service, that will be added to the bill at the end of their stay. They are more confident in booking this kind of accommodation because of this.
You are the only one who can determine if an investment in rent to serviced property is warranted or not, just as you are with any other prospective investment. Before making your final selection, you should thoroughly examine all of your prospective investment possibilities and ensure that a serviced apartment investment is the best option for you.
Whatever you decide, you do need to ensure you have adequate insurance cover for any property you own. We specialise in helping property owners and developers in making sure they have the very best cover at affordable and cost effective premiums.