The term serviced accommodation, also referred to as ‘serviced apartments’ can be used to describe a number of properties designed to cater short-term and long-term accommodation to clients. It differs from other accommodation options in the sense that a serviced accommodation is provided with all the necessary utilities and amenities that are associated within a home in comparison to a hotel.
Serviced accommodation units are found to be preferable to travelers, specifically boasting popularity amongst the ‘digital nomad’ communities. These types of accommodations are perfectly equipped for those looking for a place to stay with the usual comforts a home offers yet, with the addition of hotel-styled amenities. Most serviced apartments come fully furnished and self-contained with the additional bonus of systematic servicing.
Why should I invest in serviced accommodation?
Although the market for serviced accommodation is on the rise, it is still a new and emerging sector, enabling potential investors to purchase them as a discounted rate to the market value as they are still being constructed.
Serviced accommodation offers a plethora of advantages to investors looking for optimal return rate opportunities. However, like any other investment opportunity it is critical to understand the key topics surrounding serviced accommodation such as why people use them, and why it is preferable as opposed to other accommodation forms. In addition to this, like any other investment opportunity it is crucial that the investor has done their research of the market and the type of property opportunities before investing.
Value for money
A key benefit offered with serviced accommodation is the amount of extra space, offering more value for your money. These types of accommodations on average offer around 30% more space than a regular hotel charging the same rates.
To further support this, Kate Hill (2020) states that “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 property owner, as you don’t have to go looking for new tenants too regularly.”
Shorter Void Periods
Many property owners face issues with lengthy void periods for their properties after a tenant has moved out. Changes in the economy and the market all pose threats to homeowners looking for long-term tenants to rent their property out to. A key benefit of serviced accommodation is that they appeal to both long-term and short-term clients, this helps to minimise void periods where the property is left without occupancy and is not producing any form of income.
High Yield ROI Rates
One of the most enticing benefits of investing in serviced accommodation is the prospect of yielding higher return rates for the property. On average, renting out a long-term residential property yields ROI’s of around 3-4%. In comparison, serviced accommodation units have the potential to double that, averaging to an impressive ROI of around 6.5-9%, demonstrating why serviced apartments are proving to be an emerging favourable opportunity amongst investors.
The Potential Downsides to Serviced Accommodations
As with all property investment opportunities, it is necessary to analyse the risks and potential downsides to investing. This is understood, but it is imperative to complete a thorough market research and analysis, not only of the area you are looking to purchase into, but also with the type of investment opportunity, so you can be prepared for every scenario. You should be prepared for the possibility for any property investment to not make a return, with some even losing money in the process.
Although serviced accommodation is an emerging market in the real estate sector, this does not rule out the possibility of void periods. They key to earning high ROI’s is to constantly be conducting your own research on the market and to know when a suitable time is to invest and when it is not. As with any other property, values can go up and down so you must be prepared for that. It is crucial to have a team of advisors to help support and counsel you on your journey, such expertise can be gained from our diverse team at Big Roar.
If you fail to research and end up investing in an area of poverty, it will have a detrimental effect on your investment. Not only will it yield lower return rates, but it also poses the chance for longer void periods due to being in an unattractive location. In addition to this, it is imperative that you look up the restrictions within the country and area that you plan on investing in. Certain restrictions may impose rules and regulations to help protect local hotels and accommodation services in that area. Therefore, it is necessary to check that your investment will not be affected by these mandates.
One last key thing to consider is the time it takes to manage a serviced apartment. These types of accommodations tend to be time-consuming due to the management and servicing required to benefit from high ROI’s. However, this can easily be rectified by having the property managed by an external organisation for a monthly fee. On the other hand, if you invest in one of our exclusive properties at Big Roar, we offer many investment opportunities fully managed and hassle-free.
Conclusively, serviced accommodations can boast a wide variety of advantages as opposed to many other rental investment opportunities in the market. Things like more value for your money and high yielding returns are particularly common amongst investors looking to double their investment. We have also covered some of the downsides towards investing in serviced accommodation, specifically cautioning the need to be educated in any opportunity before investing. Hopefully after reading this article, you will be more familiar with the concept of serviced apartments and will be more confident in potentially investing in one. For further information please contact us at 0116 232 5129 or reach out to us at: email@example.com to look at our exclusive range of luxury property investment opportunities, and to have further support from one of our highly experienced property investment consultants at Big Roar to help you fast track your investment journey today.
Big Roar is a boutique Property Investment company with a wealth of experience that offers high quality in demand investment opportunities in the UK and worldwide. The aim is to deliver unique property developments either through developer led investment or providing pre-launch or off-market access.
2021 has seen a period of great transformation and growth which has enabled our company to grow and diversify from the traditional property investment model allowing us to launch our Sub-Agent product – allowing individuals and companies to utilise our skills and experience to on sell our wide and diverse portfolio to their own networks and wider audiences.
Our focus is you. Each investment we launch is rigorously assessed by our in-house team of analysts’, and our Portfolio Management team monitor the progress of each project, updating both investors and the developers providing you with a truly hands-off investment experience.
Whether your requirements of new property or off-plan developments for resale of buy-to-let, or high yielding rental properties that will serve well in either the serviced accommodation, short-term or long-term let market, we have complete confidence and proven results to ensure you receive exceptional return on investment.