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Lease Option to Buy Serviced Accommodation: A Beginner’s Guide

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The property industry in the UK has always been an attractive sector for investment, boasting an average yield of 5.31%, making it a standout choice compared to other key European countries. 

But with the myriad investment strategies available, choosing the right one that aligns with your financial goals can be challenging. 

One strategy that has been gaining attention in recent years is the lease option to buy serviced accommodation. It combines the convenience of leasing with the potential profitability of owning serviced accommodation. 

The flexibility it offers and the rising demand for serviced accommodation opens up a new avenue for property investors to generate a stable income while benefiting from potential capital appreciation.

Let’s deep dive into the concept of a lease option to buy serviced accommodation and understand the trends and opportunities you can avail in the UK real estate industry.

Trends and Opportunities in Lease Option to Buy Serviced Accommodation

With changes in lifestyles and work patterns, there’s a growing demand for serviced accommodation. These trends offer attractive opportunities for investors considering the lease option to buy. 

Here are the key trends shaping this investment strategy:

1. Rising Demand for Serviced Accommodation

The demand for serviced accommodation in cities like Birmingham is surging. As per the Savills UK Serviced Apartment Report 2022, the sector saw an 8% year-on-year increase in demand. 

The shift is due to people seeking more flexible and comfortable living arrangements that provide various services not typically found in traditional rentals. Examples of these services include cleaning, maintenance, and often concierge services, which add value to the tenant’s experience.

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2. Increasing Popularity of Lease Option to Buy

Lease options have become popular for investors looking to secure property without a large capital outlay. This strategy allows you to lease a property with an option to purchase it later. 

According to a report by Property Investor News, lease options have seen a 15% rise in usage over the past two years. The rise makes it an attractive option for those seeking passive income and looking to enter the property market with less financial risk.

3. Boost in Birmingham Property Market

Birmingham, the UK’s “second city,” is experiencing a property boom. It is an ideal location for investment due to its strong economy and increasing population. 

According to a report by PwC, Birmingham is one of the UK’s fastest-growing cities, with an annual economic growth rate of 1.8%. This growth and a rising population drive the demand for serviced accommodation.

4. Stable Rental Income

Serviced accommodation offers the potential for higher rental income compared to traditional rentals. This is because tenants are often willing to pay a premium for the convenience and flexibility of serviced accommodation. 

Statista indicates that the average rental income from serviced accommodation in the UK can be 30-50% higher than traditional rentals.

5. Potential for Capital Appreciation

The lease option to buy allows investors to benefit from capital appreciation. If property values in Birmingham continue to follow their current upward trend – Hometrack reported an annual price growth of 6.3% in 2022 – the value of your investment could significantly increase over the lease term.

6. Favourable Market Conditions

Low-interest rates and government initiatives to support the property market, such as extending the Stamp Duty holiday and introducing the Help to Buy scheme, create favourable conditions for property investment. These conditions make it an opportune time to consider strategies like the lease option to buy in the serviced accommodation sector.

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7. The Impact of Remote Work

The global shift towards remote work due to the COVID-19 pandemic contributes significantly to the demand for serviced accommodation. With more people working from home, the need for comfortable, well-equipped living spaces facilitating work requirements has risen. Serviced accommodations, with their inclusive services and facilities, fit this bill perfectly.

8. Tax Implications

The tax implications of the lease option to buy strategy can favour investors. As you’re initially leasing the property rather than buying it outright, you can offset some of your lease payments against your tax bill. It’s always important to consult with a tax professional to understand the implications fully.

9. Demand for Short-term Lets

The rise of platforms like Airbnb has seen a significant increase in the popularity of short-term lets. Serviced accommodation falls into this category and is often sought-after by tourists, business travellers, and those needing temporary accommodation. 

With a lease option to buy strategy, you could cater to this market, leading to higher yields.

10. Growth in Property Prices

This is a  significant opportunity for those considering a lease option to buy serviced accommodation. If you secure a lease option now, you could benefit from the property’s increased value when you buy, especially in high-growth areas like Birmingham.

Now that you understand that the lease option to buy serviced accommodation strategy is a compelling investment opportunity, it’s time to make the most out of it.

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Leverage Buy2SA Property Investment Strategy

From the rising demand for serviced accommodation to the promising Birmingham property market and attractive rental income potential, this strategy holds considerable promise for those seeking a sustainable, high-yielding investment path.

However, navigating this investment landscape can be complex, and that’s where Pluxa Property Ltd comes in. 

Specialising in serviced accommodation investments in Birmingham, we offer an exclusive bespoke VIP investor system. This means we do all the work, while you invest your faith and funds into prosperous Birmingham properties.

As one of the largest luxury serviced apartment providers in Birmingham, we have access to high-standard luxury apartments from multiple developers. We can help identify the best areas for a serviced accommodation business, ensuring you maximise your yield, ROI and monthly cash flow.

Moreover, we make the process simple and hands-off for you. From finding a property to managing tenants and units, their property experts handle everything. They even offer purchase options with a deposit starting at only 5% for some units, whether they are off-plan or already completed.

Contact our property investment experts to kickstart your investment.

FAQs

What are the most significant trends shaping the future of property investment?

Here are the most significant trends shaping the future of property investment in the UK:

1. Serviced accommodation demand
2. Sustainability and green living
3. Technology integration
4. Urban regeneration
5. Lease option to buy strategy
6. Pandemic-driven changes like increased demand for properties with home office spaces and areas with access to outdoor spaces.

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