Serviced accommodation has become one of the fastest-growing sectors in the UK property market, attracting a diverse range of guests, including tourists, business travelers, and individuals seeking longer stays.
This innovative concept combines the convenience of hotels with the comfort and privacy of apartments, making it increasingly popular.
For savvy investors, serviced accommodation presents an enticing opportunity worth considering.
If you’re wondering how to invest in serviced accommodation, read the following guide to learn more!
What is Serviced Accommodation?
Serviced accommodation represents a fusion of long-term buy-to-let properties and hotels.
The idea is straightforward: fully furnished properties are rented out to tenants for short-term stays, offering hotel-like amenities.
Unlike traditional buy-to-let properties with fixed-term contracts, serviced accommodation provides guests with flexibility, allowing them to choose the duration of their stay.
These properties offer all the usual services you would expect from a hotel, including housekeeping, Wi-Fi, laundry, and concierge services.
Depending on the landlord and the property, these services can be tailored to create a bespoke experience similar to that of high-quality hotels.
This unique combination of hotel services and the privacy of an apartment appeal particularly to those seeking shorter stays, so it’s no surprise that this type of investment property is gaining significant traction with both investors and tenants.
While the term “serviced accommodation” may be new to some, you are likely familiar with one of its largest providers – Airbnb.
The platform has experienced tremendous growth in recent years and has led to the conversion of many buy-to-let properties, such as Houses in Multiple Occupations (HMOs), into serviced apartments.
Serviced accommodation can come in various forms, including apartments, houses, cottages, caravans, and even houseboats. As the popularity of this accommodation type continues to soar, property investors are considering its pros and cons to determine its suitability as an investment strategy.
Let’s delve into the benefits and drawbacks of investing in serviced accommodation.
Why Are Serviced Apartments Becoming Popular?
Serviced accommodations are gaining popularity among different classes of guests for several reasons:
- More space compared to a hotel room: Serviced apartments provide larger living spaces, offering guests greater comfort and convenience.
- Better value for money: With serviced apartments, guests can enjoy more room for similar prices to hotels, with some even offering lower rates.
- Extra privacy: The privacy of a serviced apartment appeals to those who prefer a more secluded and personalized experience.
- Proximity to city centers: Serviced apartments are often located near city centers, providing easy access to amenities and transportation. Many also offer parking facilities.
Given these advantages, serviced apartments have become an increasingly lucrative investment strategy to cater to the growing demand for short-term accommodations.
How to Invest in Serviced Accommodation
Investing in serviced accommodation follows a similar approach to investing in buy-to-let properties, with some specific considerations:
- Location: Identify an area that attracts a significant number of potential guests. While the options for serviced accommodation are diverse, properties in city centres often generate higher yields due to affordable purchase prices and high average short-term rental rates.
- Property Selection: Consider the preferences and needs of your target audience when choosing the type of serviced accommodation to invest in. Different types of properties appeal to different guest segments.
- Purchase: Acquire the property through a process similar to buying traditional buy-to-let properties. Take into account any additional stamp duty rates applicable to second property purchases.
- Property Preparation: Ensure the property meets the requirements of serviced accommodation before hosting guests. This involves furnishing the property, deciding on the amenities to offer (such as Wi-Fi, laundry, or luxury services like a gym or concierge), arranging housekeeping or cleaning services, and establishing a guest check-in process.
- Marketing and Advertising: Decide on the platforms and channels to advertise your property, such as booking.com or Airbnb. Prepare a comprehensive listing with appealing descriptions, high-quality photographs, and competitive pricing to attract potential guests.
- Operational Management: Determine whether you will manage the property yourself or hire a property management company to handle day-to-day operations, including guest communication, check-ins, cleaning, and maintenance.
- Ongoing Optimization: Continuously monitor market trends, guest feedback, and competitors to make necessary adjustments and improvements to enhance the guest experience and maximize rental income.
By addressing these essential steps, you can establish and run a successful serviced accommodation investment.
Conclusion
In conclusion, the serviced accommodation sector offers a promising investment opportunity for landlords seeking higher returns and greater flexibility. By capitalizing on the rising popularity of short-term stays and delivering hotel-like services, landlords can generate increased rental income. However, it’s crucial to carefully consider potential downsides, such as higher costs and more extended void periods.
Thorough market research, evaluating demand in your area, and assessing the financial viability is essential before venturing into serviced accommodation investments. With careful planning and execution, investing in serviced accommodation can prove to be a rewarding and lucrative venture in the UK property market.