Serviced Apartment Let vs Traditional AST Buy-to-Let
Serviced apartment lets or Serviced accommodation in UK cities and towns are gaining increasing popularity with the staycation and short break leisure market.
Therefore, let us compare this income-generating rental model for investors and landlords to standard tenancies (also known as ASTs assured shorthold tenancies).
WHAT IS THE PURCHASE PRICE?
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Serviced Apartment Rental Model
£100k+
The purchase price varies by town and city. In essence, the rental models do not differ in property price.
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Assured Shorthold Tenancy model
£100k+
The purchase price varies by town and city. The price begins cheaper due to the reduced value of a city-outskirt property, which typically does not yield well for the serviced let model. STs (assured short-hold tenancies) are a popular option for investors and landlords.
WHAT ARE THE TYPICAL
ANNUAL YIELDS?
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Serviced Apartment Rental Model
An annual net return of between 8% and 10% of purchasing price (based on UK central city)
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Assured Shorthold Tenancy model
An annual net return of between 3.5% and 5% of purchasing price (based on UK central city)
WHAT ARE THE FINANCE OPTIONS?
- Serviced Apartment Rental model
LTV of up to 75%
- Assured Shorthold Tenancy model
MORTGAGES FOR BUY-TO-LET PROPERTIES UP TO 80% LTV
How Important is the Location for property let?
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Serviced Apartment Rental model
Location is critical for year-round occupancy. The highest yields are found in major UK towns and cities around the centre and business district.
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Assured Shorthold Tenancy model
While the location is still critical, proximity to the city centre or business sector is not required. The UK’s main towns and city’s outskirts perform well on ASTs.
What is Market Demand of Serviced Apartment Let & Assured Shorthold Tenancy Let?
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Serviced Apartment Rental model
Demand from the short-stay leisure and corporate markets is exceptionally high. They are mutually beneficial: Monday–Thursday for business travellers and Friday–Sunday for leisure travellers.
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Assured Shorthold Tenancy model
Post-graduates, commuters, singles, couples, and young families — many people opt to rent rather than own a property. As a result, demand is extremely high throughout the United Kingdom.
What are the Likely Void Periods?
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Serviced Apartment Rental model
Occupancy is handled similarly to a hotel. Corporate rentals can be year-round with no vacancy and, if not, can be supplemented with leisure stays. Even functioning at the national hotel avg. of 70% would still earn up to 8% p.a.
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Assured Shorthold Tenancy model
ASTs are sometimes taken on a six- or 12-month basis to ensure that no vacancies occur throughout the year. A vacant month may occur between a tenant’s departure and another’s relocation.
Do I Need a Management Company?
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Serviced Apartment Rental model
It is highly recommended, as occupancy will be maximized through their affiliations with online agencies. This includes housekeeping, tenant care, and property maintenance to a very high quality.
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Assured Shorthold Tenancy model
It is advisable, particularly if you own a purpose-built block. Leases, utility payments, repairs, maintenance, and complaints are all handled and resolved on your behalf.
Are There Any Tax Benefits?
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Serviced Apartment Rental model
Serviced apartments may qualify as a Furnished Holiday Let (FHL), often more tax-efficient. An adequately documented application for Capital Allowance can result in significant tax savings. It’s worthwhile to obtain independent tax advice to determine how this will benefit you individually.
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Assured Shorthold Tenancy model
Recent tax policy changes have been detrimental to landlords, including rising SDLT and eliminating mortgage tax credit. Depending on how you purchase your property, whether personally or through a corporation, and your special tax status, it’s advisable to obtain professional assistance to determine the most tax-efficient acquisition method.
TRANSFORM YOUR BUY-TO-LET PROPERTY
INTO A SERVICED APARTMENT
If you own a home in a convenient, accessible area that will appeal to short-stay guests, it’s worth considering converting it to a serviced apartment.
If your house is currently fully furnished, you’re already halfway to making it acceptable for guests; however, the property must be configured similarly to a hotel. Landlords will be responsible for installing a quality television, bedding, and towels, thoroughly equipping the kitchen with pots, pans, dishes, and silverware, and, in most circumstances, providing tea, coffee, and milk, precisely like guests would in a hotel.
Consider the following:
- Who will be in charge of bookings?
- How will guests gain access to the property?
- Who is going to do the laundry?
- Who will be responsible for cleaning?
- Will there be someone on hand to greet and assist guests?
Some companies will manage your property as serviced accommodation; they will handle guest bookings and changeovers, allowing guests into the house, and cleaning the property at the transformation and regularly for longer-staying guests.
