The key difference to long-term rentals, serviced accommodation offers guests short term stays rather than them being a tenant. Properties can be rented out on a nightly basis or for brief periods of time.

Unlike standard buy to let property which you rent for 6 month to 1 year, serviced accommodation can be rented for one night, a weekend or even long term.

Its not uncommon to get longer term contracts with contractors who want longer term accommodation without the commitment of a rental.

This gives both parties flexibility and that is the key advantage, it does not require the typical 6 months assured short-hold tenancy (AST).

The type of property will be similar to a buy to let, however when used as SA it will generate much higher returns. Daily fees are significantly higher than those charged for long term 6-12 month tenancies.

What Is A Serviced Apartment?

A serviced apartment refers to a fully furnished rental unit that includes all the home comforts, housekeeping and additional services included in the rental price.

These apartments offer hotel like conveniences, such as laundry, cleaning and sometimes access to gyms and fitness centres included in the price all within a self catering environment.

Standard services your guest expect include, fully equipped kitchen, separate bedrooms, bathroom and good internet.

What Does Serviced Accommodation Mean?

Serviced accommodation is a short term rental property where the landlord offers extra services to guests, these range from housekeeping to more luxurious amenities.

Some serviced apartment complexes feature on-site gyms, restaurants, stories and round the clock concierge services.

Serviced accommodation is not only limited to flats, it can provided in any residential property rented out with added services to improve the short term stay. You can provide this service from as little as one night to many months.

What Are The Benefits To Landlords Of Serviced Accommodation?

In recent years more landlords have dipped their toe into the world of short term lets. This has helped them achieve much higher returns on their rental properties.

A standard buy to let property, the landlords leases their flat or house on a 6 month assured short-hold tenancy (AST). In this type of agreement they will collect rent due weekly or monthly.

While this gives the landlord a guarantee of a fixed income for 6 months, serviced accommodation offers advantages such as the flexibility for short term or long term rentals. A short term rental give the landlord potential for much higher rental income each month. This helps give the investor a much higher rental yield on their property.

Here is an example to clarify this, a property that generates £500 on an AST could potentially be rented out for £80 a night on Airbnb. Thats £560 every week running as a short term let. Obviously you can have voids and other costs, but its pretty easy for the monthly income to surpass as AST. This will be down to the marketing you do for the property and obviously its location.

Its also easier to get a guest than it is a long term tenant, its not uncommon to receive a same day booking.

What Are The Cons To Investors Of Serviced Accommodation?

Obviously with any property investing strategies there are some downsides, so lets look at the cons of running a short term let.

You will need to cover the cost of essential services these include, housekeeping, Wifi, Utility bills, Council Tax. All costs are covered by you the landlord.
It will cost more to market the property as you need guests more frequently than on a long term rental.
Income will fluctuate due to voids and time of year.
Its important to furnish the property to a high standard.
If you manage the property yourself, that will involve dealing with guest issues. If you outsource the management (Which I suggest) you need to factor in their costs.
Ensuring a smooth checkin for your guests, nobody wants to wait around to get into the property. Coded security boxes will make this easier.

What Do You Need To Include In Your Property?

The idea of serviced accommodation is to offer a home away from home, it needs to be better than what they can get at a hotel. All they need to have a comfortable stay is included excluding food. Here is a list of things you should provide.

A fully equipped kitchen with appliances and utensils so they can cook their own food. Ideally this would include a dishwasher and washing machine.
A clean bathroom with soap and towels.
A furnished living room.
Wi fi and a TV
A separate bedroom, although it can work as a studio apartment.
All utilities such as water, gas and electric.
Housekeeping on a weekly basis or upon checkout.

Do You Need To Furnish Your Serviced Accommodation?

Yes 100%, its one of the key things your guest is looking someone they can walk into a sleep.

What Type Of Guests Stay In Serviced Accommodation?

You will surprised at the diverse range of clientele your short term rental will receive. The obvious is tourists, but you will also get bookings from business professionals and individuals seeking temporary housing during moves or renovations.

Its common for companies to block book serviced apartments for their employees working remotely for extended periods of time or training programmes. This will save them a lot of money compared to putting staff in hotels.

Serviced accommodation gives great flexibility as it allows people to book just one night or several months at the drop of a hat.

Landlords can offer variable pricing structures dependant on how long the guest intends to stay. Its a great idea to offer discounts to people who plan to stay for longer periods of time.

Why Are Serviced Apartments Becoming More Popular With Guests?

Short term lets also offer huge advantages to their guests including.

Much bigger living space compared to a hotel room.
Better value for money, rooms are much cheaper to comparable hotel room.
More privacy as you get the whole property to yourself.

What Is The Difference Between A Serviced And A Non-Serviced Apartment?

Serviced accommodation requires an extra level of service for the guest, for example housekeeping.

In contrast, a non serviced apartment might be exactly the same property but it does not include these additional services. It will likely be rented out on a longer term contract.

People staying in a non serviced apartment will handle everything themselves, the furnishing, cleaning etc etc.

The landlord of a non-serviced apartment will still be responsible for any maintenance issues.

Is Serviced Accommodation Different To A Holiday Rental?

There are some distinct differences between serviced accommodation and holiday lets.

While both are short term rentals serviced accommodation caters to a much bigger market. For example you might get a business person or someone looking to stay while their house is being worked on.

Holiday Lets are more likely to be found with an agency and you would stay at least one week. They would not give you the option to just stay for one nighty.

A Holiday Let is also more likely to be used by the owner at certain times of the year with their family and friends.

Are Serviced Apartments A Good Investment?

Serviced Accommodation is one of the fastest growing property investing strategies in the UK.

As with any rental property, buy to let, holiday let or serviced accommodation the location plays a massive role in maximising your income.

All property investments have an element of risk, so its essential to fmailiarise yourself with the area you are investing, gauge local demand online on sites like Airbnb. Also research the property before you buy or rent any property.

Is Serviced Accommodation Profitable?

YES

However location is a key factor to your success in serviced accommodation. By picking an attractive area and pricing your property fairly, securing guests can be straightforward.

If you pick the wrong area it may leave with you extended void periods.

You must ensure the expected rental income will not only surpass your monthly mortgage payments but also give you a decent profit.

Short term lets tend to generate much higher returns compared to your standard buy to let property.

Is Planning Permission Required For Serviced Accommodation?

In certain situations yes, but most do not require planning permission. You might need planning permission to convert a residential buy to let into serviced accommodation.

This hinges on whether the local authority deems a material change in use has occurred. Taking a residential property (C3) and turning it into something akin to a hotel or guest house (C1).

Currently, there is no specific planning designation for serviced accommodation which are between a buy to let and hotel. However it is crucial you consult with your local authority before purchasing or converting a property.

Some councils are stricter than others in regards to serviced apartments. Having ever changing guests can be disruptive to neighbours, particularly in shared communal areas like hallways. They also impact the availability or long-term rentals in an area.

Some local councils impost restrictions on the number of days per year that property can be offered on a short term rental. This limits the potential income to make the business viable.

Michael Gove has proposed that in the future SA units might need planning permission. Watch my Youtube video on that here.

What Is The 90-Day Rule?

In Greater London, landlords can only offer short term rentals for a maximum of 90 days per year.

This was implemented to safeguard the availability and affordability of long term rental properties in London.

A shortage on long term rental stock can push up house prices and monthly rents which the council wanted to curb.

To be able to rent property in London for more than 90 days in a calendar year, landlords must apply for planning permission. However getting planning permission for a short term let in London is very rare.

Since 2017 AirBNB have automatically removed London Property listings once they reach the 90 day limit.

What Type Of Mortgage Do I Need For Serviced Accommodation?

If you want to rent your property as serviced accommodation as a short term rental, you will need to switch to a commercial mortgage.

Buy to let mortgages are intended for properties rented out for extended periods without voids. The lender on a buy to let mortgage is looking for your property being rented out at least 6 months on an AST.

A mortgage for serviced accommodation could include limitations on the maximum duration your property can be leased to the same guest. Its crucial you consider these types of restrictions when advertising your property.

A good mortgage broker can get this all sorted for you.

Can Leasehold Studios Become Serviced Accommodation?

Leasehold properties can be used for Serviced Accommodation but only if the lease permits this.

While most leasehold properties are allowed rentals on an AST basis, its essential to review the lease to see if short term lets are allowed.

How To Set Up Serviced Accommodation

Make sure you follow these steps when getting your property ready to rent.

Make sure you have the right type of mortgage, if not you could be in breach of your mortgage.
Rental permission, check your lease allows you to do short term rentals.
Suitable insurance, Obtain specialist insurance that offers the correct coverage for serviced accommodation. (We discuss this below)
Planning permission, its unlikely you will need it but check with your local council so you are covered. Breaking local council rules can result in huge fines.

You will also need to furnish the property, set up all the utilities (Including fast Wi fi). Then you need to organise someone to manage the cleaning and laundry. If you live locally you can start out managing this stuff yourself but you must be available at a moments notice.

Alternatively hire a professional company to manage all the guests and services for you. Take into account this will cost you more.

What Type Of Property Is Perfect For Serviced Accommodation Use?

One and two bedroom apartments in city and town centres a perfect for those looking to start a serviced accommodation business.

These types of property are similar to manage and more cost effective to maintain than houses. They also attract guests easier, as most rentals will be to single people or couples.

They will attract business clients as well as leisure travellers looking for a city break or vacation. They also perform better during the off-peak season. City breaks are still popular during the winter, while less people go to coastal areas during those times.

Can Limited Companies Own Serviced Accommodation?

Limited companies can own serviced accommodation, here are the pros and cons you should consider.

Running any property through a Ltd company is more tax efficient.
Financial benefits when managing multiple properties in one Ltd company.
Inheritance tax planning.

There are costs of managing a property through a limited company. Additionally lenders may charge higher rates for lending to a limited company compared to a private individual. The application process for a mortgage is a bit more complex, but a good broker should help with that.

Can You Do Rent To Rent With Serviced Accommodation?

Rent to rent is a strategy where you agree to rent a property from an existing landlord for a specific period of time. You then sublet (With permission) the property on Airbnb etc making a profit.

In the context of serviced accommodation, this approach could enable you to generate a substantial profit on a property you don’t even own.

If you pay the property owner £500 a month for rent. Then you lease the property to guests for £80 a night you could earn £560 a week.

Obviously the risk is that you might not rent the property for enough days to cover your rent.

What Insurance Do I Need For A Serviced Apartment?

Its very important you have the correct type of insurance in place, as some coverage is very unique to this kind of property strategy.

If you get an incorrect policy, such as a normal buy to let policy you might not be insured at all.

For instance, if you end up with a policy not designed for a serviced accommodation business you could face.

Insufficient employers liability insurance, you need this if you employ anyone to work at the property for example a cleaner.
Limited or no loss of income cover.
Absence of theft by guest coverage, a standard policy they would demand proof of forcible entry or exit.

If you only rent out your primary residence for a few weeks a year as an airbnb. Some insurers maybe offer short stay extensions to your existing policy. However if you rent out the property all year you will need a tailored serviced accommodation policy.

What Is Covered Under A Serviced Accommodation Insurance Policy?

Serviced accommodation insurance is very similar to holiday let insurance. But its specifically designed to cover individual apartments, houses and more unique short term rentals such as converted shepherds huts.

As well as covering the buildings contents and property owners liability. The correct insurance will cover the following.

Employers liability.
Optional add on for pet damage.
Business interruption, which includes loss of rent from confirmed bookings and your anticipated income based on booking history and seasonal fluctuations;
Rent-to-rent contracts;
Theft and malicious damage by guest coverage;
Unoccupied periods, ranging from 30 to 45 days at a time on multiple occasions throughout the year.

How To Find Serviced Accommodation Property

Similarities can be found between serviced accommodation and buy to let properties. They are often located in similar areas and even in the same building. However when looking for a property its not advisable to approach the estate agent saying you are looking for serviced accommodation.

I would recommend you stating you are looking for high quality buy to let properties. New builds are often the best for this type of strategy so view that type of property.

You need to have a clear understanding of who your target market is and what their needs are. For example if you are buying / renting property in a city centre, you may also be competing with cheap budget hotels so check the area.

Different guests have different needs, so make sure you take the into account before getting any property.

Its easy to find out most things about an area just by asking a local Estate Agent. I suggest you pick a property that would also work as a buy to let. Then in the unlikely occasion this does not work out for you then you can rent it as a standard buy to let. This gives you a backup plan and ensures your investment is safer.

Do Direct To Landlord Deals

One of the best ways to get Serviced Accommodation properties is doing deals directly with other landlords or investors.

This could involved purchasing their properties at a good price if they are selling due to Section 24. Section 24 is a government rule that makes owning buy to let in your personal name less tax efficient.

Some landlords are unable or unwilling to move their properties into a company and are selling their portfolios at steep discounts.

If you acquire these properties they can easily be modified and are well suited to serviced accommodation.

Another option for obtaining serviced accommodation properties is by renting them from other landlord. You then sublet (With permission) their property and run it as a short term let.

Check out our property courses and training here.

James Nicholson

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The Ultimate Guide To Serviced Accommodation

What is Serviced Accommodation?