An Introduction to Rent To Serviced Accommodation (R2SA)
Inﬁnite Growth, Inﬁnite Possibilities
An Introduction to
Rent To Serviced Accommodation
By Star Sterling Property Investments
Inflation is out of control, and people are running scared. But right now, there’s one thing we believe investors should avoid doing at all costs – and that’s doing nothing.
Rent to Serviced Accommodation is one of the various forms of property investing available to investors today. Before investing in Rent to Serviced Accommodation, you must understand what you are getting into and what to expect as a serviced accommodation business owner or hands-off investor. Below, you will find all the information you need to determine whether this property strategy is the right move for you.
Star Sterling specializes in providing secure, low investment, and high cash ﬂowing Rent To Serviced Accommodation (R2SA) investment opportunities to hands-off investors.
“One of the most popular methods to generate a high level of cash ﬂow / income from the property is through Rent to Serviced Accommodation”.
The 90-day regulation was designed to legalize shorthold lettings in London.
As you can see, there are many beneﬁts to investing in serviced apartments, and if you have a portfolio of them, it is super easy to generate a solid monthly income that can be reinvested.
About Star Sterling
Star Sterling specialises in providing secure, low investment, and high cash flowing Rent to Serviced Accommodation (R2SA) investment opportunities to hands-off investors. We provide fully managed end-to-end services that include sourcing a suitable property, staging the property to stand out, marketing it on more than 50 online platforms to attract guests, and providing 24×7 management.
We have sourced over 100 R2SA properties so far. Our fully-managed Rent to Serviced Accommodation deals start at £7,500 and generate over 100% return on investment within 36 months. We pride ourselves on conducting every deal with due diligence and providing detailed financial analysis to our investors with complete transparency. So, contact us now to kickstart your investment journey!
What Is a Serviced Apartment?
The terms ‘Serviced Accommodation,’ ‘Serviced Apartments,’ and ‘Managed Apartments’ refer to properties that are suitable for short-term rentals.
The term serviced apartment is an umbrella term that comprises a variety of properties meant to provide temporary housing or holiday lets for guests. What distinguishes a serviced apartment from other lodging alternatives on the market is that serviced apartments are furnished with the comforts and utilities that we often associate with our homes rather than hotels, for example fully functional and equipped kitchens with all utensils and access to a private lounge to name a few.
Serviced apartments are frequently chosen by those in search of a hotel-style lodging yet wanting access to homelike amenities. Serviced apartments provide the same amenities and services as a hotel, but with the additional room and convenience of an apartment. In this way, serviced apartments may give their visitors the best of both worlds.
Whether you are searching for a temporary place to stay while on vacation or housing for the duration of a business trip, a serviced apartment is an excellent accommodation alternative. But how attractive are they as an investment target? It’s easy to see the appeal of a serviced apartment as the demand is ever-growing and growing fast due to changing preferences of commuters, which implies that it’s possible to earn money from them. However, before committing to an investment in a serviced apartment, ensure you have a thorough understanding of the market.
What Is the Rent to Services Accommodation R2SA Business Model?
One of the most popular methods to generate a high level of cash flow/income from the property is through Rent to Serviced Accommodation (R2SA). Unlike other property investing strategies, under the R2SA business model, the property is rented out from a landlord with explicit permission to use as Serviced Accommodation. Since you do not need to purchase the property, the start-up costs are relatively lower too.
The property is rented out for short-term stays. This frequently involves utilizing internet platforms such as Airbnb and Booking.com
The structure is fairly straightforward – you rent a property from a landlord usually for 36 – 60 months for a fixed rent, then rent it out on booking websites such as Airbnb and Booking.com. The landlord in return receives a long-term rent guarantee from you and does not have to worry about the property’s internal repairs & maintenance and voids. You retain the difference between the rent payable to the landlord and the income generated by short-term rentals. It’s a win-win situation!
How Much Does It Cost to Invest in Rent to Serviced Accommodation?
The business model can be active or completely hands-off. The investment in the business is dependent on the model you choose. Active business involvement does cost less in the capital but requires a lot of time commitment. Serviced Accommodation is a 24×7 business. On the other hand, savvy investors choose to be passive whilst still earning a significant return from a Rent to Serviced Accommodation business.
Hands-off investors work with SA specialist companies to source a suitable property, stage the property to stand out, market to attract high-paying guests, and provide 24×7 management.
Average fully-managed turn-key investment range between £7,500 to £10,000
How Much Can You Expect to Earn?
A specialist Serviced Accommodation management company is critical for the success of the business. It is not as simple as finding a willing landlord to rent a property and stick up on online travel agents like Airbnb. It requires a lot of strategic thinking, positioning, promotions, and solid relationships with corporate and relocation agencies to make a business profitable.
Compared to bank deposits, the significant advantage of investing in a fully managed Rent to Serviced Accommodation is that it offers more than 100% return on investment within 36 months.
How to Find Property for Serviced Accommodation
Investors are looking for markets that can provide them with solid and stable returns at this point. Thankfully, investing is no longer limited to the traditional structure of buy-to-let. The serviced accommodation property investment strategy is new, popular, and profitable. Since an SA property is usually similar to any other rental property, you’re most likely to locate them in similar locations. Nevertheless, there are many factors to consider when investing in serviced accommodation. The more you take into account; the more profitable your investment will be.
Here’s A List of The Top 5 Ways to Find A R2SA Property:
- If you’re a passive investor, you can engage a reputable R2SA property sourcing company. Don’t forget to do your due diligence.
- Contact local estate agents. Identify a property through websites like Rightmove, Zoopla, and On the Market and call the agent to enquire if the landlord would be open to work.
- Contact landlords directly through websites such as OpenRent, Gumtree, and Facebook Marketplace.
- Networking – attend the property and non-property-related networking events such as BNI, 4Networking, PPN, and PIN to name a few.
- Join local Facebook groups and engage with local residents
Assuming that you’ve chosen the R2SA model, you must understand the factors you need to consider to select your target market and the demographics of the guests you are looking to attract. SA has been popular with business travelers and is commonly added to the ‘apartment’ type on hotel-type accommodation booking; nonetheless, serviced accommodation is far more than an apartment.
As with any investment, several factors must be carefully considered before committing to serviced accommodation. Here are some crucial elements to take into account when selecting the property for R2SA.
The finest locations for serviced apartments are typically close to important business areas, railway stations, or conference centers. Similar to hotels, regions closer to tourist attractions will generate more revenue. Therefore, you must carefully analyze the location when contemplating an investment in serviced apartments.
The type of guests you can attract will depend on the property you acquire. For example, if the property is a studio apartment, it will attract business travelers or tourists, and a 2-bedroom or 3-bedroom apartment will most likely attract families and long-term contractors.
When it comes to investing in property, transportation links are an important factor to take into consideration. R2SA properties that are surrounded by various transportation links (such as railway stations etc) tend to have a higher occupancy rate. Therefore, it is important to consider proximity to public transportation, a central location, and city center accessibility.
How complicated are the regulations governing SA properties in the area? Consider the numerous applicable taxes, laws, and regulations, e.g. “the 90-day rule.” It is the host’s responsibility to ensure that all legal requirements are met.
Local Authorities’ 90-Day Rule’ For Serviced Accommodation
What Is The 90-Day Rule?
The 90-day regulation was designed to legalise shorthold lettings in London. This is because formerly, the Greater London Council (General Powers) Act 1973 regulations prohibited anyone from operating any sort of short lettings (a single stay of less than 90 days) in Greater London.
Prior to the new law, you could not rent out your property for less than 90 days. Technically, if you owned your own property and rented it out for less than 90 days, you would have required planning permission from Greater London Council. They would then have carried out what is known as ‘A short’ or ‘Holiday Let’ for your home.
What Does The 90-Day Rule Mean for Landlords?
- Short-term rentals are banned in Greater London if they exceed 90 days in a calendar year.
- It doesn’t matter if you’re renting out a single room or the entire house, the rule applies to both.
- If a homeowner desires to prolong the rental period beyond 90 days, they must apply for a change of use to a short-term or vacation let.
- Anyone who violates this restriction may face enforcement procedures from their local council, which may range from a service notice to cease to a £20,000 fine.
Serviced accommodations are essential “home away from home.” Consequently, guests would expect a serviced accommodation to offer similar amenities to their home or any hotel. Therefore, it’s necessary to complete the process of inspecting and identifying any defects/faults or issues within the property before welcoming any guests.
From a broken boiler to a leaky tap, ensure that your maintenance team is all set to fix problems with minimal fuss.
How To Stage the Property?
This is the most important part when it comes to the R2SA investment strategy is the staging of the property. This process definitely requires some consideration and there are broadly 2 ways of doing it:
1. Source furniture packs from furniture companies
An easy way to have your property up and running in no time is to source your furniture from a furniture company. This is a pretty convenient method since they provide everything that you may require, do all the necessary installations and leave the property ready for you. However, sourcing furniture can be relatively expensive and your property may look like any other property available on Airbnb.
2. Buy individual items from different suppliers such as Amazon, IKEA, etc.
Another way to stage your property is by buying individual items from different suppliers such as Amazon, eBay, and IKEA. Since you’ll be purchasing more than 250 items, you’ll have to be highly organized while managing your deliveries and make sure you don’t miss out on anything.
Moreover, if you want to keep a low start-up cost or save your finances for setting up another unit, then you can also lease your furniture. The average monthly cost of leasing furniture is approximately 35£ – 50£ per 1000£ borrowed.
While staging your property, it’s important to make it stand out from the rest of the properties and be mindful of your interior choices. One way to outshine is to put effort into the aesthetics. When it comes to choosing a home interior, less is always more. Avoid items that can cause clutter, such as cables and books, and opt for a minimalist design instead. Incorporate design elements from the surrounding area to create a comfortable atmosphere.
How To Attract Guests for Serviced Apartments?
Scaling your Rent to Serviced Accommodation Business can be a challenging task. You may have successfully established several units, and are eager to amplify your success. What’s next? Continue reading to learn how you can find guests for your serviced apartment.
1. Online Travel Agents (OTAs)
You can advertise your rent to serviced accommodation on multiple OTAs for short-term guests on websites such as Airbnb and Booking.com. And the best part is that you ONLY get charged when you get a booking.
OTAs are becoming more and more common. In fact, travelers utilise online travel agencies fifty percent more than hotel websites to evaluate leisure travel alternatives nowadays. Consequently, OTAs may play a significant role in reaching a high-value target audience in a short time.
2. Corporate Relocation Agencies
Corporate Relocation programs give firms and individuals the necessary tools, resources, and services to facilitate a smooth relocation. They specialise in long-term bookings and corporate relocations which is exactly what you need to find guests for your serviced apartments!
Companies such as Silver Door, SITU & Serviced Apartments Network are the most trusted sources to find guests for your Rent to Serviced Accommodation (R2SA). These agencies are your perfect partner to have access to corporate clients who need temporary living space.
3. Local Contractors Working in The Area
Major infrastructure projects attract thousands of contractors in the city for the long term. Most of them stay at the hotel, however, they are your ideal guests.
4. Contact Local Employers
International and national employers usually have to travel to visit company headquarters, or attend regional training sessions; they could be long-term clients. There are many local employers in the area that want to enjoy the comforts of an apartment but don’t want to commit to a lengthy tenancy agreement. You can accommodate this need by providing a home away from home, without the commitment!
5. Visiting Local Construction Sites
Many contractors are looking for direct long-term bookings. They don’t want to go through the hassle of scanning accommodations of various OTAs. Find your value through the contractor customer base that has vast potential with long-term booking promises.
Websites like Constructionmap.info provide information about contractors working nearby.
Running an R2SA property is a 24/7 business, and you must ensure that your services are on point. The guests should be provided with all the amenities and feel comfortable during their stay. Make sure to provide clean beddings & towels, and there is no inconvenience for the guests.
Furthermore, the check-in/checkout process needs to be executed smoothly, so there is no delay or confusion. Automating this process can cut down costs, and the guests can check in/out themselves. On the other hand, opting for the traditional “meet & greet” option can be slightly costly since labor is involved. However, it’s easier to monitor the number of guests arriving and manage early check-in requests. To address early check-in, ensure the previous guest checkout is timely so the apartment can be thoroughly cleaned.
Insurance for Serviced Accommodations
You must ensure that you have the appropriate insurance coverage in place. If you encounter a fire hazard and do not have proper insurance coverage, you will have serious difficulty. Therefore, avoid cutting costs and ensure that you have the necessary procedures. There are two types of insurance:
Building Insurance: Buildings insurance covers the cost of repairing structural damage to your home. This is the landlord’s responsibility, so you don’t need to worry about it.
Content Insurance: Contents insurance is what you need as an R2SA investor. It helps pay to replace or repair your content if it is stolen or damaged by a covered peril, such as a fire. Therefore, if someone breaks into your home and steals your laptop, or if a fire destroys your clothing and furniture, you may find that contents insurance helps cover the loss.
Are Serviced Accommodations worth investing in?
As you can see, there are many benefits to investing in serviced apartments, and if you have a portfolio of them, it is super easy to generate a solid monthly income that can be reinvested.
They are a wonderful addition to any portfolio and can even be favorable for those seeking a larger rise in portfolio income. The improved rental yield, reduced risk of vacancy, and growing popularity with enterprises and ex-pats mean that a well-located and well-presented serviced apartment may provide lucrative returns.
There are countless perks of the serviced accommodation industry. Essentially, investors are renting out high-quality, centrally-located housing units. Therefore, investors are more confident in receiving stable income because their apartments will be occupied for longer. In addition, due to higher nightly rates, serviced apartments typically generate much higher returns.
Investing in serviced accommodations is unquestionably a wise decision. There is a reason why the industry is thriving, and the upward trend is likely to continue. Moreover, due to the changing needs of guests seeking a home and a workplace, a serviced apartment provides far superior amenities to a hotel. Therefore, serviced accommodation as a real estate investment strategy has the potential for high returns if all details are carefully considered.