They are used by families, professionals and those attending events in the area who don’t want a hotel but want a more luxurious touch. Think of Airbnb serviced apartments or self-catering apartments that have extra amenities like clean towels every week, and that’s what serviced apartments are.
But for those looking for real estate investment, what does a serviced apartment look like for ROI, and could it be the hidden secret of real estate investing?
The returns on investment of serviced apartments
Serviced apartments, unlike traditional rental properties, often offer a higher yield, with an average yield of 6.5% to 9% per serviced apartment. Although the cost of maintaining the property is often higher, the ability to include seasonal pricing, short stay and long stay pricing, variable pricing and more means the ability to generate revenue additional space is easier with a serviced apartment than with traditional rental properties.
As serviced apartments are closer to a luxury hotel than a long-term residential rental, pricing and business models should be more targeted there.
For example, the cost per night in a serviced apartment in London, for a one-bedroom apartment with weekly cleaning, could be over £150. Over a month, with 28 nights of occupancy, that’s £4,200. Once you factor in the cost of utility bills and housekeeping, the rental yield is likely even higher than if you had a residential tenancy.
Another great advantage of the serviced apartment is the reduced “dead time”. It simply means how long a property is left empty. With long-term residential rentals, the risk of having an empty property for months between tenants may be higher, while the likelihood of having an empty serviced apartment for a longer period is much less likely, both that you are sensitive to your location.
Find locations for serviced apartments
Serviced apartments are often best located near central business districts, train stations, or conference centers. Similarly for hotels, areas closer to tourist hotspots will receive greater revenue.
When considering investing in serviced apartments, you need to make sure you have thought about the location. Choosing an area like that near a festival site, for example, means you may have a boost in income once a year, but the rest of the year there will be little or no income. regular. However, an area near a popular conference center such as the NEC in Birmingham, or in central Manchester, near a port in Liverpool, etc., is likely to be used all year round by professionals or by visiting families.
The disadvantages of serviced apartments
While serviced apartments have many advantages, there are a few disadvantages. It is worth, as with any investment, to be aware that not all investments are profitable and you can lose money.
It’s also worth combing through your mortgage agreement, as there may be a clause preventing short-term rentals, in which case serviced apartments are not possible. You will need to confirm with your mortgage lender, if you have one, that short rentals of any duration are permitted.
There is also the increased workload. While on a long-term residential rental you can often outsource most of the work to a real estate agent, this is often not possible with serviced apartments. Instead, you’ll need a reservation system, cleaning and housekeeping service, a way for people to collect keys, and the list goes on. Serviced apartments are more of a full-time job than other types of rentals, and in the early stages it can be a more time-consuming investment.
Are serviced apartments worth it?
As you can see, serviced apartments offer many benefits, and once you have a portfolio of them, it’s quite easy to have a healthy monthly income that you can keep reinvesting.
They are a great asset to any portfolio and can even be beneficial for those who want a bigger boost in income from their existing portfolio. The increased rental yield, reduced risk of downtime and their growing popularity with corporate and ex-pats mean that a well-placed and presented serviced apartment can offer fruitful returns.
Written by Barney Packer – an OutReach executive at Mrs Digital