Serviced accommodation is the fastest-growing sector of the hospitality industry, and the massive demand for this kind of property is showing no sign of slowing down.

That means a lot of opportunities for property investors like you to make a lot of profit and build a successful portfolio.

In this article, I’m going to share with you:

·         What is serviced accommodation?

·         Why is serviced accommodation a great investment for you?

·         How much money can you realistically make from serviced accommodation?

·         Where should you invest?

·         The most common and mostly costly challenges, obstacles and mistakes landlords face.

·         How you can successfully manage a serviced accommodation.

So what is serviced accommodation?

As an investor in serviced accommodation, you will let out your property – usually an apartment – to tenants who will stay in most cases for a few weeks or months.

Unlike a typical rental property, you may be providing a lot of extra amenities, (depending on the serviced accommodation model you choose to implement) including kitchen appliances, towels and linen, TV and broadband, as well as a weekly cleaning service.

Let’s dive right in to my 11 essential tips for finding great tradespeople, and avoiding the not so great!

If you’re new to property investment, then have a read of my 9 Top Tips For Property Investing Beginners.

In this article I am going to tell you the biggest, most common mistakes that you need to avoid. These are the key mistakes to watch out for when:

·         Making an informed investment

·         Managing your finances

·         Renovating and refurbishing your property

If you want to learn more about some of the biggest mistakes in the property market, check out this video featuring myself and Anthony Gold Solicitors’ David Smith sharing how to avoid property conveyance mistakes and losing deals.

You have just taken ownership of your new property investment, and now it needs some love and attention to secure the best returns. This article will tell you everything you need to know about where to start, the most important work to consider and where your time and money might be wasted.

If you are interested in getting the most value out of your property investments, check out Premier Property’s proven strategy for building a successful portfolio.

That’s £700 a week, or £3000 a month.

To show you some real numbers, this table shows exactly what our cashflow was like for the first 3 months of one of our serviced apartments:  

And finally, here is a quick checklist of dos and don’ts to help you make the right decisions and be successful in serviced accommodation.

Don’t:

·         Convert an existing property.

Okay, so if it happens to be in the perfect location already this could work, but location is so vital for this type of investment.

If you picked a location for its potential as a traditional to-sell investment, is there demand for this type of property as serviced accommodation in the same location?

While you want to make sure your serviced accommodation will work at a traditional to-let so you have the security of a plan B, that doesn’t mean your successful rental property will also be a successful serviced accommodation.

·         Have more than 2 bedrooms.

Most of your tenants will not need more than this, and having more could put your property into HMO territory, and subject to HMO licensing and regulations.

Don’t get caught out!

I recently spoke to Archie Madden, barrister at 5 Pump Court, to get the latest information on the changes and what you need to know to avoid the fines:

Embed video: https://youtu.be/fDfnZnncFKg

·         Agree to a long lease.

If you agree to a long term on a leaseback property, you are in danger of being stuck with a fixed income when the property has proven it can give much higher returns.

Look for leases that last 6 months or a year. A long lease will also make it difficult to sell the property if you need to, as it effectively excludes the owner-buyer market.

Looking for more on the differences between freehold and leasehold properties? Watch this clip taken from our Premier Property Club Canary Wharf event.

Embed video: https://www.youtube.com/watch?v=Zj8o886ir2c

·         ‘Save’ money when creating a formal inventory.

An inventory clerk will only cost £50-£70 and gives you peace of mind in the event of any disputes.

I went into more detail on inventory and the other nuances of getting your paperwork in order at Premier Property’s event on serviced accommodation in the real world:

Embed video: https://www.youtube.com/watch?v=uYZ16ItL6Y4

Do:

·         Discounts and referrals.

Offering discounts to returning tenants or people booking longer stays can be a great way to keep your property occupied with little additional effort. Offering discounts for referring your property to friends and family can also drive business.

Here’s a tip to boost your hit rate:

Get to know your guests a little, ask why they are visiting the area and listen for reasons they might be returning to visit again, for example family or work.

Try to build a bit of a connection, so that next time they think about visiting the area, your property immediately springs to mind.

·         Add value.

This can be as simple as providing a fridge already stocked with food or vouchers to a local restaurant, or as luxurious as a bottle of champagne or chauffeur service depending on your market.

In addition to making a stay in your property appealing and memorable, there can also be opportunities to up-sell additional services.

·         Listen to feedback.

Serviced accommodation is an extremely review-driven industry, so wherever your properties are listed you need to make sure every review is read and responded to promptly.

No matter how great your property is, you will get the occasional negative review.

All of your glowing positive reviews will speak for themselves, so stay calm and do your best to address their each of their concerns politely.

·         Follow up with guests.

Asking guests if they enjoyed their stay and if you could have improved anything is a great way to get feedback that you might not get from a review, and could even prevent a negative review by enabling you to handle an issue there and then.

Showing that you care and taking note of the little details that are important to people will ensure they stay at your property again on their next visit.

Use online survey tools like Typeform to make the process quick and painless for your customers.

·         Provide on-site support.

If you have multiple properties in an area or multiple apartments in a building, investing in providing a reception desk or concierge solves the problem of getting your guests into the accommodation, and guests will be able to ask about the local area, shops and any questions they have about the accommodation.

·         Budget ALL your additional costs.

From the cost of having your property cleaned between tenants, to the ongoing costs of lettings agents and online listings, there are a lot of costs here you might not deal with in a typical BTL property, so you NEED to keep track of it all!

Looking for more tips on managing your time effectively as a property investor? Watch this quick video where I share with you how we run an efficient and successful property business at Premier Property.

Embed video: https://www.youtube.com/watch?v=XQUG-PzMHoQ

If you have questions about serviced accommodation or tips to share with your fellow property investors, join the discussion in the comments section below!

1.      Central London

London is the centre of business and tourism in the UK, so of course there is massive demand for serviced accommodation.

Focus on central locations with easy access to one of these 3 attractions:

1.      Tourism hotspots

2.      Business hotspots

3.      Conference venues

2.      Manchester

Manchester has a huge amount of property development going on right now alongside hundreds of new-build projects completed in the last few years.

The city still has many vacant plots ready to become shops, offices and restaurants, so your city centre properties are set to grow in value.

3.      Newcastle

Newcastle is a major business centre for technology, engineering and digital industries, and has a rapidly growing economy.

Comparatively low property prices make this a great city to invest in serviced accommodation.

4.      Liverpool

Liverpool is experiencing an economic boom with numerous regeneration projects across the city, one of the largest being the 90-acre Festival Park.

The city receives 54 million tourists each year and the majority of serviced accommodation properties in Liverpool are achieving more than 10% rental yield.

5.      Birmingham

Birmingham rivals London as a centre for business and a commuter destination.

Serviced accommodation focused toward professionals is in high demand, and regeneration is underpinning capital growth of properties in the city.

There are plenty of places throughout the UK where there is huge rising demand for serviced accommodation –

NOW is a fantastic time for you to start investing in serviced accommodation!

Finding the right location takes a lot of research, so to save you time I’ve put together a list of the top 5 cities in the UK to start your serviced accommodation investment:

Get EVERYTHING written down. From initial quotes to receipts and invoices, and every minor additional cost, no detail is too small to leave out.

If you always think about the previous 11 points you should have nothing to worry about, but there is no good reason for not protecting yourself with written records!

You WILL regret not having these if something does go wrong.

One of the biggest financial mistakes you can make is also the most obvious.

Make sure you have the cashflow to support the property!

Calculating your return on investment is a major part of this, and the only way to reliably compare properties.

Here are a few things to consider when working out if an investment is viable:

·         Allow at least 10% of the property’s value for ongoing costs like tax

·         For buy-to-lets, assume no more than 70% occupancy

·         Will the property’s income outgrow inflation?

Doing all of the above give you an accurate idea of the property’s real worth.

If the seller is asking too much and will not lower their price, move on and follow up a few months later.

Having made the decision to invest, another massive mistake is to mortgage all your properties through the same lender.

This can tie up your money and prevent you from selling, or buying your next property.

In addition to ensuring mortgages are suitable for your strategy, buying rate and portfolio, keep mortgages as separate as possible.

Debt repayment is another that can trip up new investors.

Certain debts can have benefits for investors such as being tax-deductible or boosting credit rating and can actually be used to help build a portfolio. Tempting though it is, don’t clear off all your debts immediately.

Consult a financial expert to build an advantageous debt repayment plan.

Another big mistake is not getting a depreciation schedule. This might set you back a few hundred pounds, but it will save you much more.

A depreciation schedule outlines how your assets will lose value over time and maximises your claims for those assets.

Remember to get the property surveyed again after renovations and refurbishments!

Major Projects

Now that the groundwork is done, let’s talk about making some improvements to maximise your returns.

A new kitchen can greatly improve the likelihood of a sale. The kitchen is one of the most important rooms in the property for many buyers, and is usually the first room a new owner will look to refurbish.

Save them the hassle and provide a modern, attractive kitchen they can start using straight away. The prospect of having to handle a major renovation themselves can put off even the keenest buyer!

 The average kitchen costs around £8,000, and adds 6% in value to the property.

If you can do it without eating into living space too much, creating a new bedroom can add significant value.

A loft conversion could cost between £20,000 and £40,000 depending on the scale, and can add as much as 10% to the value of the property.

Make sure your insurer knows about the changes!

Adding a bathroom can be a great way to improve the value of a property, especially en suite bathrooms.

A new bathroom could cost between £3,000 and £6,000, and will increase the value of your property by up to 6%.

As a general rule, try to maintain a ratio of at least one bathroom for every three bedrooms.

Extensions can also be a worthy investment; just make sure they add a decent amount of space, and don’t clash with the original construction.

Conservatories are a fairly common extension which can add up to 5% to the value of the property, as long as you don’t take up too much garden space building it.

Expect to pay between £4,000 and £10,000 depending on the design. For smaller conservatories you may not need planning permission, which can reduce costs.

Almost two thirds of garages in UK homes do not contain a car, so converting wasted garage space into living area can be a very cost effective way to add value to a property. You might not need planning permission for this, but you will still need to comply with building regulations.

Though garage space does not appeal to the majority of buyers, parking space does.

If the property allows, the cost of turning an unused front garden into a parking space large enough for two cars is around £10,000, and in areas where parking space is at a premium could return double that investment.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

Some of the most expensive mistakes are made during the renovation and refurbishment phase.

Do not underestimate costs here, particularly as a new investor.

If you already have a few investments under your belt you will have a better picture of likely costs, but you should also know it is always best to plan costs with a wide margin.

Never forget to check building regulations!

Depending on the work, compliance issues can be expensive to fix.

If you find yourself in that situation, get your information from as high an official as possible before paying for the fix, as it is possible to get conflicting guidelines.

When it comes to getting the work done, hiring unlicensed contractors is always a bad idea.

Always work with licensed and insured contractors, and the contract for any major work should be checked over and confirmed by an attorney.

Don’t expose yourself to the risks of poor craftsmanship, reliability and insurance issues just to pinch a few pennies; you will pay more in the long run!

I will be sharing with you the methods I use for finding reliable tradespeople in an upcoming article, watch this space!

You can’t always blame it on the builders though! In many cases, the cause of a mistake is lack of proper oversight at the property. Be there on-site to advise your builders and check their work, or hire a manager to do it for you.

One last point - unfortunately, some contractors will simply quote whatever they think you will pay. Always get multiple quotes, and an independent assessment is ideal.

A loft conversion could cost between £20,000 and £40,000 depending on the scale, and can add as much as 10% to the value of the property.

Make sure your insurer knows about the changes!

Adding a bathroom can be a great way to improve the value of a property, especially en suite bathrooms.

A new bathroom could cost between £3,000 and £6,000, and will increase the value of your property by up to 6%.

As a general rule, try to maintain a ratio of at least one bathroom for every three bedrooms.

Extensions can also be a worthy investment; just make sure they add a decent amount of space, and don’t clash with the original construction.

Conservatories are a fairly common extension which can add up to 5% to the value of the property, as long as you don’t take up too much garden space building it.

Expect to pay between £4,000 and £10,000 depending on the design. For smaller conservatories you may not need planning permission, which can reduce costs.

Almost two thirds of garages in UK homes do not contain a car, so converting wasted garage space into living area can be a very cost effective way to add value to a property. You might not need planning permission for this, but you will still need to comply with building regulations.

Though garage space does not appeal to the majority of buyers, parking space does.

If the property allows, the cost of turning an unused front garden into a parking space large enough for two cars is around £10,000, and in areas where parking space is at a premium could return double that investment.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1^st. You NEED to be prepared for these!

Dos and Don’ts

Finally, here are a few quick tips that don’t quite fit into the above categories, but are worth knowing:

Do:

·         Keep original and interesting features. Memorable quirks like wooden beams, vaulted ceiling and frameless conservatories give the property character and make it stick in the minds of potential buyers.

·         Update the property with modern heating and double-glazing – just don’t get rid of those period windows!

·         Remove ugly or outdated features such as textured wallpaper and ceilings.

·         Get planning permission. It reassures potential buyers and costs around £300.

Don’t:

·         Convert the basement. It doesn’t appeal to a lot of buyers, costs upwards of £300 per square foot, and will require the organisation of multiple specialists.

·         Spend too much decorating and refurbishing bedrooms. While the number and size are important, a well-decorated bedroom is not likely to greatly raise the price or improve chances of a sale.

·         Spend too much on furniture in general. As long as furniture is in good condition and suits the property, that time and money is better spent elsewhere.

·         Outgrow your area. By pricing out most of the people looking in your area, you risk having a vacant property on your hands, or making a loss on the deal. Stay within the means of your target market.

In many cases, you will pay a steep price upfront, which is in fact being used to subsidise that fantastic-sounding guaranteed income. Once the guaranteed income period ends, many investors find the profits dry up and all that is left is the sinking realisation they have been getting paid with their own money!

Student pods are also exposed to a high degree of development and management risk, so do your research on everybody involved in the deal, and make sure they know what they are doing and have the track record to prove it!

Student pods can be unpopular with money lenders, who also have concerns with the re-sale and long-term tenancy prospects with this type of property, as they don’t have a great deal of appeal outside of the student property market.

Investing in clusters of apartments, particularly those within halls of residence, offers more realistic and reliable returns, but they can be hard to get your hands on as they are usually owned by university institutions. If you spot an opportunity to acquire a property like this, don’t delay!

HMOs

A House in Multiple Occupancy (HMO) means each bedroom in the property is let individually to tenants, giving you much higher rental yield than a comparable to-let property.

You need a license to make your property an HMO. In some areas councils are trying to cut back on the number of HMO licenses they give out, so it pays to look into this before making an investment!

There are retail funds available for this type of student accommodation; however these can involve a little risk as these funds are often based offshore and unregulated, with high charges and poor liquidity sometimes making it difficult to get your money out when you want to.

Thoroughly research the companies involved and make sure you fully understand what you are getting into, get someone to help you with this if you need to!

If you want to get started investing in HMOs, or you already are, don’t miss the Premier Property Club event covering the major legislation changes coming October 1^st. You NEED to be prepared for these!

Choosing a student property

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

Assessing demand for student property could not be easier, simply investigate the number of students attending college or university there and the number of properties available for students to let.

The government currently invests the most funding into accommodation for universities focused on science, technology, mathematics and engineering, as well as universities accepting large numbers of overseas students, so you can save time by focusing on these areas first.

It is worth noting that any property in London will require a significantly higher initial investment than other properties, although high demand means it can be worth the extra cost.

As most students do not own a car, arguably the most important factor when choosing a student property is its location. Students will pay a lot more in rent for accommodation within 20 minutes’ walk of the university.

Many students are living away from home for the first time, so the safety of an area is also usually very important to them. When looking at a location, ask yourself:

Would I want my kids living here?

 If the answer is no, you will probably have a tough time getting tenants.

Students need a fast and reliable internet connection and will often ask about this. Offering a good subsidised or inclusive internet package is a major bonus that will make you stand out. Try to avoid locations where internet is poor, a quick Google search for speed and reliability should tell you all you need to know.

When it comes to the property itself, try to focus the search on properties with large kitchen and lounge areas as these appeal the most to students.

As a general rule, students don’t care about gardens - so don’t invest in one. They can be costly to maintain and won’t add much value.

The basics of managing a student property are the same as any other property, but there are a few extra things to think about here.

Make sure the property is clean, well-maintained and has robust furniture and fittings, as students are capable of inflicting significant wear and tear on a property. You will probably be re-decorating on a pretty regular basis so keep it simple and don’t splash out.

On that note, ensure the landlord’s insurance has good cover for damages. Although the parents or guardians of students usually make reliable guarantors, make sure the insurance also covers lost rent.

Time-saving kitchen appliances such as a microwave and dishwasher add a lot of appeal to a student property.

Renting through a lettings agent rather than privately is generally a good idea as you will have the assurance of knowing your tenants have been referenced and credit checked, as well as reducing the amount of hands-on time you have to spend finding new tenants each year.

Students are usually pressured by their universities to find the next year’s accommodation before Christmas, but many savvy students know to avoid the higher prices of the ‘Christmas rush,’ so advertise your property throughout the year.

Outside the Property Market

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.

Although some improvement will be seen on the interest rates of savings accounts, there will not most probably be any major increases, as banks tend to utilise such rate rises to widen their interest margins and profits, and are usually slow to reflect base rate increases in the interest rates of their savings accounts.

The price of the Pound dropped sharply after the hike announcement, however this can be expected to bounce back to its pre-hike position as the anticipated change will have been priced in and accounted for by traders.

Finally, it is important to remember that outside of the property market in London, the base rate increase can be expected to be of minor impact, for a number of reasons. Firstly, the rate increase has been anticipated for some time and the affected markets have largely already taken it into account in advance. Secondly, although this hike is a nearly unprecedented fifty percent rise, 0.25% is a relatively small increase considering the length of the freeze on rate increases and the 6% base rate that was in place before the financial crisis, and the banking sector has been keen to iterate that the increase represents a reflection of the UK’s improving economy rather than an alteration to it. Thirdly, with so much dependent of the still uncertain EU trade deal, many markets, the property market included, are likely to reserve major changes for once a definitive deal has been announced, or at least the lack of a deal has been definitively announced.