Investing in property has long been a popular route for budding investors to take and there are now more options than ever before for those that have the cash to burn. Of course, if things were as simple as buying a property and receiving a guaranteed income, then everyone would be doing it. In reality, investing in real estate is only the beginning. Once you have purchased an investment property, you are still responsible for maintaining it and ensuring that it remains in good shape.
Serviced apartments are one of the many types of property for investors today to consider. Before you put down any money and commit to an investment in serviced apartments, you need to know exactly what you are getting into and what you can expect as a serviced apartment owner. Below is everything you need to know to decide whether an investment in a serviced apartment is the right move for you.
Table of Contents
What Is A Serviced Apartment?
The term serviced apartment is an umbrella term that encompasses a number of different properties designed to provide short-term or long-term accommodation to renters. What makes a serviced apartment different from the other accommodation options on the market is that serviced apartments are equipped with all the amenities and utilities that we usually associate with home rather than hotels.
Serviced apartments are often used by travellers who are looking for a hotel-style accommodation but want access to all the usual creature comforts of home. Serviced apartments provide the same features and utilities as a high-end hotel but with the extra space and convenience that comes with staying in an apartment. In this way, serviced apartments are able to offer the best of all worlds to their guests.
Whether you are looking for somewhere to stay temporarily while on holiday or you need accommodation for the duration of a business trip, a serviced apartment is a fantastic accommodation option. But what are they like as a potential investment target? It’s easy to see the attraction of a serviced apartment and they will always be in demand, but that doesn’t necessarily mean that it’s easy to make money from them. Before you commit to an investment in a serviced apartment, make sure you understand the landscape.
Why Furnished Apartments For Rent Are Popular
When compared to other accommodation options, serviced apartments come with a number of advantages over the alternatives. if you want to get serious about potentially investing in a serviced apartment yourself, then you need to know the product and how to sell it. This requires an understanding of why people use serviced apartments to begin with.
Serviced apartments are used by travellers of all kinds, whether they are looking for temporary accommodation during their business trip or somewhere to stay while they are on holiday. Regardless of the underlying reasons, the benefits of a serviced apartment are the same for everyone.
First and foremost, the primary benefit of a serviced apartment is the amount of space that you get for the money that you pay. In these terms, serviced apartments are able to offer exceptional value when compared to the alternatives. On average, a serviced apartment provides 30% more space than a hotel room costing the same price.
Serviced apartments offer better value and more space than a hotel, but the longer your stay is, the better the value they offer. After 28 nights in a serviced apartment, the rate of VAT that guests need to pay will drop to just 4%. Because of this, there are always plenty of people looking to book serviced apartments for longer stays. The longer the stays of your guests, the easier things are for you as a landlord, as you don’t have to go looking for new tenants too regularly.
Why Buy Serviced Apartments In London?
London is one of the most popular tourist destinations in the world, so it makes perfect sense to invest in a serviced apartment here. While the Covid-19 pandemic might have seriously depressed the tourism sector for the foreseeable future, there is little doubt that the travel and tourism sectors will ultimately rebound. As such, there might be some unique opportunities for investors to take advantage of the current situation and acquire an investment property at a lower rate than usual.
One of the biggest worries for any landlord is void periods. These are the stretches of time during which a landlord doesn’t have any tenants lined up for their property, and the place is sitting empty, not producing any kind of income. Serviced apartments appeal to both short- and long-term renters, meaning that it is generally easier to find a tenant for a serviced apartment when compared to other types of investment property.
However, this is dependent upon your serviced apartments being located in the right part of town. A serviced apartment located in a city centre where there is a constant stream of potential tenants is going to be much easier to fill than a serviced apartment located in the middle of nowhere.
Another important benefit of serviced apartments is that they tend to yield higher rates. For most types of property, a long-term residential tenancy can be expected to produce a yield of 3-4% on investment. By contrast, serviced apartments average a much more impressive 6.5-9% yield.
What Are The Drawbacks To Investing In Serviced Apartments In Central London?
As with any investment option, investing in a serviced apartment comes with risks as well as rewards. Before you commit yourself to owning a serviced apartment, you need to know exactly what is in store for you. For example, while the potential returns on a serviced apartment are greater than they are for most other investment properties, there is also a lot of work required for you, the landlord, when managing a serviced apartment.
You should also be aware that there are some mortgage and lease restrictions that might apply to serviced apartments. Many investors envisage themselves buying a serviced apartment and then using Airbnb. However, before you start renting your serviced apartments out on any basis, you need to check the terms of your mortgage, if you have one. Many mortgages come with restrictions that prohibit short-term lets. Falling afoul of these stipulations could have serious ramifications for you, including the withdrawal of your mortgage.
How To Find Cheap Serviced Apartments In London
Like any dynamic modern city, London is home to areas of affluence and areas of poverty. Much of the city sits somewhere between these two extremes, and the areas that are considered trendy are constantly changing with time. If you are planning on investing in a serviced apartment in London, then you need to choose the area that you invest in carefully. As with any other property purchase, choosing an unsuitable location can mean that you end up paying far more than you need to.
However, if you take the time to identify the right location and the right estate agent, you can minimise the amount that you need to spend while also maximising your eventual profits. The less money you have to spend on the initial property purchase, the more of the rent profits you will be able to keep.
When you begin your search for serviced apartments, it is best to begin with an estate agent like Greater London Properties, which has experience in finding these kinds of properties for investors. In order to properly assess the value of a property as a serviced apartment, you need a reasonable amount of local knowledge. Estate agents like GLP have a good understanding of the local property market and will be able to provide this for you.
Should You Invest In Managed Apartments In London?
As with any potential investment, the only person that can decide whether an investment in serviced apartments is justified or not is you. Before you make your final decision, you should research all of your potential investment options and make sure that an investment in a serviced apartment is the right option for you.
For example, while a serviced apartment in the right location will have no trouble attracting tenants, a serviced apartment in a less desirable part of town might have to contend with some significant void periods. One of the benefits of investing in property in London is that it is one of the most in-demand cities in the world, meaning that you can be reasonably confident in your ability to find tenants when you need them.
Investing in property can be an excellent means of securing your financial future and property investments have long been popular amongst those who are trying to improve their financial security. If you can find the right serviced apartment building to invest in, then the potential returns are enormous. Overall, serviced apartments are a great investment opportunity but, like any investment, they are not without their risks. Make sure that you have a good understanding of the local area that you will be investing in, as well as the property itself before you pull the trigger.