Key Takeaways:
- Understand the benefits, from higher rental income potential to flexibility in tenant duration.
- Gain insights into the future of buy-to-serviced accommodation and how to navigate the evolving landscape.
Are you looking to diversify your property portfolio?
Have you heard about the rising trend of diversifying with buy-to-service accommodation in the UK?
The UK’s serviced accommodation sector is not just thriving; it’s setting new benchmarks. As of May 2022, the serviced apartment sector in the regional UK recorded a 9% growth in RevPAR compared to the same month in 2019, with a RevPAR of £74.40.
But what’s causing this surge? And how can you, as an investor, ride this wave?
Don’t worry. We’ll unpack everything you need to know about buy-to-service accommodation and how it could be a game-changer in your property investment journey.
So without further ado, let’s get started.
Benefits and Challenges of Investing in Serviced Accommodation
Diversifying your property portfolio with serviced accommodations can be an effective investment option. But like any investment, it comes with its pros and cons.
Pros
Higher Rental Income Potential
Consider serviced accommodations as a blend between a hotel and a rental property. You can charge higher rates because they offer more amenities than a typical rental.
For example, if a regular flat in London rents for £1,500 a month, a serviced apartment with cleaning, Wi-Fi, and concierge services might fetch £2,000 or more.
Flexibility in Tenant Duration
With serviced accommodations, you’re not tied to long-term leases. You can have guests for days, weeks, or even months.
Imagine having the flexibility of a hotel where guests can book for just a weekend or an extended stay.
Rapid Market Growth with Platforms like Airbnb
The popularity of platforms like Airbnb has skyrocketed. These platforms make it easier for property owners to list their spaces and reach a global audience.
It’s like having your mini-hotel listed on an international booking site!
Seasonal Rate Adjustments for Maximising Profits
Just like hotels, you can adjust your rates based on demand. You can hike your prices if there’s a big event in town or peak tourist season.
For instance, if you usually charge £100 a night, you might bump it up to £150 during a popular city festival.
Cons:
Increased Costs Due to Amenities and Services
Offering services like…
- Cleaning
- Wi-Fi
- 24-hour check-in
…is a cost.
Think of it this way: if you were running a mini-hotel, you’d have to pay for things like laundry, internet, and maybe even a receptionist.
Potential for Longer Void Periods
While you have the flexibility of short-term tenants, this can also mean gaps between bookings. Imagine having a flat in a touristy area that remains vacant for weeks during the off-season.
Risk of Property Damage
Short-term tenants treat your property with different care than long-term renters. It’s like lending your favourite toy to a friend for a day versus a year. The friend who has it for a day might need to be more careful since they’ll return it soon.
Marketing Costs to Maintain Occupancy
You’ll need to market your property to keep a steady flow of tenants. It could mean professional photos, listings on multiple platforms, and even paid advertising. Consider it the cost of getting your property to stand out in a crowded marketplace.
Understanding the benefits and challenges helps in making informed decisions. Serviced accommodations offer a unique blend of opportunities and hurdles.
As we move forward, we’ll delve deeper into the key considerations every property investor should know.
Key Considerations for Property Investors
Are you considering investing in serviced accommodations? But before you jump in, here are some things you should think about:
1. Evaluating the Demand in Your Area
Where you choose to invest is super important. Look around your area. Do you see lots of tourists?
Are there big events or business meetings happening often?
If yes, then it’s a good sign!
2. Financial Viability and Potential Returns
Think about money. How much will you spend to set up your property?
How much can you earn back? You want to make sure it’s worth it!
3. Importance of Market Research and Understanding UK Property Market Trends
Things change all the time. What’s popular today might be something else tomorrow.
So always learn about the latest trends.
4. Strategies for Property Diversification and Ensuring Investment Property Growth:
Don’t put all your money in one place. You could invest in different types of properties.
If one doesn’t do well, the other might save the day.
With these points in mind, you’ll be better prepared to make smart choices.
So, what’s next on the horizon for serviced accommodations?
The Future of Buy-to-Serviced Accommodation
The world of serviced accommodations is evolving fast. More and more, people want the comfort of home with hotel-like perks. Think about it: a cosy sofa, a handy kitchen, and someone to tidy up. It’s the best of both worlds!
For investors, this spells opportunity. Why? The demand is soaring. Everyone’s seeking that extra touch, whether it’s families on vacation, business travellers, or locals on a short stay.
Location remains crucial. A property near popular spots or transport links? That’s gold. It’s like being the only ice cream van on a sunny beach day.
Tech advancements are also reshaping the scene. Imagine unlocking your property with a phone or having a kitchen that guides guests in cooking. And with growing eco-awareness, green properties are gaining traction.
Given these trends, buy-to-serviced accommodation’s future seems promising. For the proactive investor, it’s a wave worth riding.
If you want to dive deeper and ensure your serviced accommodation venture is built on a solid foundation, consider exploring PA Property Sourcing’s comprehensive serviced accommodation business plan.
It’s more than just a guide; it’s your roadmap to creating spaces that don’t just house guests but create unforgettable experiences.
Contact us now to learn more.
FAQs
How can I finance a buy-to-serviced accommodation property?
Consider approaching traditional banks, exploring government-backed schemes, or partnering with other investors to finance a buy-to-serviced accommodation property.
What kind of property is best suited for buy-to-serviced accommodation?
Look for properties in tourist hotspots, close to business hubs, or in areas with frequent events. The key is to ensure a steady stream of potential tenants for buy-to-serviced accommodation investments.
Peter Juhasz is the founder of Pluxa Property, the biggest property investment company in UK and Group CEO of AIP Capital Group and a property investment expert with over a decade of experience in the UK market.
He built a successful property company using innovative cashflow strategies like Serviced Accommodation and HMOs, scaling to 200 units in four years.
Peter leads a team specializing in property and business acquisitions across various sectors. A former co-host of “Cashflow With Property,” he shares his expertise in real estate investing and business scaling.
He is committed to continuous learning and helping SME owners and investors maximize their returns, driven by his passion for empowering others to achieve their financial goals.
To learn how Pluxa Property can help you in UK property investment, contact our experts.
