Rent To Rent & Serviced Accommodation

James Nicholson

Rent To Rent & Serviced Accommodation – How It Works

I am often asked about the Rent To Rent and Serviced Accommodation business. In this blog, we deep dive into both those strategies and look at how you can use them.

Serviced Accommodation has gained huge popularity due to the ability to generate significant cash flow. With Buy To Let getting harder with constant changes by the Government, people have been moving to this strategy.

Before we dive into that, let’s look at a brief overview of Rent To Rent.

What Is Rent To Rent?

Rent To Rent is when you take property from an existing landlord, then rent that property out on a short-term basis for a higher nightly price.

Maybe the landlord is tired or looking to retire, and they no longer wish to deal with the hassle of renting the property.

Thats where you step in with an offer of guaranteed rent

Think about this: Would you be interested if you were a landlord and someone promised you guaranteed rent every month

Of course, you would. Thousands of landlords want the hassle taken away from them.

It’s very attractive to a landlord if they are fed up and no longer want to be involved with the property. Imagine you find a landlord who owns a 2-bedroom flat. You previously let it on a single-let basis but needed help to make money or had difficult tenants.

During periods when the property was empty, they were losing money. Thats where you come in, offering a guaranteed rent. This gives the property owner complete peace of mind.

It’s easy to find these types of properties; there are thousands of tired landlords all over the UK. Your goal is to rent their property short-term; doing that will generate more income than you pay the landlord each month.

The profit is the difference between the rent you pay and the money you make renting it out. You could turn it into an (HMO) House Of Multiple Occupancy if it’s a larger property. However, there are many smaller properties on the market than larger ones.

These smaller properties, particularly those in prime locations, can be used for Serviced Accommodation.

What Is Serviced Accommodation?

Serviced Accommodation is when you rent out a property for a short-term stay. It’s similar to a hotel; people want a home away from home.

It caters to a wide range of people, tourists, people on business trips, and those who prefer not to stay in hotels for extended periods.

These individuals (Guests) would rather have an apartment where they get much more space than in a standard hotel. Having a kitchen equipped with a washing machine and a living room to relax is highly desirable.

It’s much more appealing than just staying in a hotel room. Sometimes your guests could be couples of friends on a city break, visiting family or friends, or maybe attending a wedding.

In a typical Serviced Accommodation, there is a bed in the bedroom and an additional sofa bed to accommodate other people. Booking a one-bedroom apartment and sharing it between two couples for a few nights is much more affordable than two hotel rooms.

The facilities provided give extra space and create a more homely environment. This is why Serviced Accommodation is highly popular among tenants seeking short-term stays.

Why Does R2SA Benefit Landlords?

Being a landlord can be pretty stressful. A typical landlord has their properties on an assured short-hold tenancy (AST) lasting six months to 2 years. There is a risk of experiencing voids with no tenants and zero income. These empty periods can result in landlords losing income and profitability.

However, Rent To Serviced Accommodation (R2SA) offers a viable solution. With R2SA, landlords enter into a management agreement (if there is an existing mortgage) or a lease (if the property was purchased outright) with a contract duration of 3,4 or 5 years. This is instead of a standard Assured Short-hold Tenancy.

This arrangement ensures the landlords avoid any income loss during the void periods. More importantly for them, they enjoy consistent and dependable cash flow.

Another advantage to landlords who agree to an R2SA scheme is the exceptional care taken of their properties. A standard buy to let get wear and tear, which the landlord has to fix. However, with Serviced Accommodation, these issues will be promptly addressed and repaired at no cost to the landlord.

The appearance and condition of the property will significantly impact the success of the tenant’s business. This means they will do regular maintenance and take much more care of the property. This reduces long-term maintenance costs and preserves the properties’ fresh and well-maintained appearance.

Rent To Serviced Accommodation is gaining momentum and is becoming more popular among landlords. The lure of guaranteed rent for multiple years is very attractive to landlords.

How Do You Find Tenants For Serviced Accommodation?

To attract short-term tenants for your Serviced Accommodation using advertising platforms like AirBnB and Booking.com is crucial. It’s essential to keep in mind that your rooms may only be partially occupied at some times.

However, due to the short-term nature of the rentals, the rent you can charge is significantly higher.

You want to aim for 70% occupancy, and if you can hit that number, it’s very realistic to make between £500 and £1000 profit per unit per month.

These figures are after all costs; you will need to deduct bills for which you will be responsible.

Serviced Accommodation is all about customer service; it’s important you consider that when setting up your property. Guests expect clean bedding and towel changes, along with a really clean property.

You need to arrange for a cleaner to ensure the property remains in top condition. Please dont try and handle these tasks yourself. Building a team is vital to being successful in running this type of property business.

Hiring part-time staff to handle these tasks, such as changing sheets and cleaning, is highly recommended.

Getting a virtual assistant to manage the admin side will also help you streamline the business. Treating this venture as a business from day one will ensure this business is thriving.

Lots of investors need to avoid running the property themselves. By not having systems and processes in place, you will quickly become tired of running this business.

Avoid this approach at all costs; you dont have to do everything yourself.

When executed properly, the combination of Rent to Rent and Serviced Accommodation can yield a substantial cash flow. By following the right steps, you can quickly establish and operate your venture.

Other Considerations With Serviced Accommodation

There are a few important considerations to keep in mind regarding Serviced Accommodation.

Firstly if the property is situated in an apartment block, it is likely a Leasehold property. It’s crucial you review the lease agreement. Ensure it permits Short Term Lets for Serviced Accommodation.

Many new build properties have restrictions on this, so it’s essential to adhere to the rules.

ALWAYS thoroughly check the lease agreement before proceeding.

Another vital aspect is having the correct insurance coverage in case of accidents or incidents. It is necessary to insure the property and its contents against damage. You also need professional indemnity and public liability insurance. This ensures you are adequately protected in the event someone sustains an injury while on the property.

Make sure to inform the insurance company about the specific usage of the property to ensure correct coverage.

You could have a slight challenge with Serviced Accommodation regarding mortgage arrangements. Most mortgages are not designed for properties to be used in this manner. It’s essential you confirm with the lender they are comfortable with the property being used for short-term lets.

There are lenders who offer specialised products for Serviced Accommodation; it’s crucial to ensure compliance when renting someone else’s property for Rent To Rent purposes.

Transparency and good communication with the landlord are key for Rent To Rent to work well. The Landlords must fully understand the arrangement and be aware of what they are doing.

You must not deceive or mislead them just to get the deal. Being honest and upfront will save you lots of hassle down the line.

The goal is to provide the landlord a guaranteed rent while generating a profit yourself renting out the property appropriately.

Sometimes when people hear about Rent To Rent, they worry about having to pay a “guaranteed rent” every month.

However, is this any different from you owning the property and paying a mortgage?

With a mortgage, you must pay a monthly payment or risk repossession. Therefore it’s not fundamentally different.

The advantage of Rent To Rent is that you don’t need to obtain a mortgage and put in a 25% deposit.