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Serviced apartment lets versus traditional buy to let

by Nikki Dale -

When investing in a buy to let property, knowing the right rental option to choose could be very lucrative indeed.

I need to book a hotel in central Manchester!  We are a family of four and plan a long-weekend visit and Booking. Com, naturally, is my first point of call.  In the mix of hotel options, a green “apartment” tab on a listing catches my attention: a spacious, brand new two-bedroom apartment, with a fully fitted kitchen, lounge and dining area and perfectly located minutes from the city centre.  Its cheaper than the hotel option I liked, however equally as modern, kids get their own room (no sofa-bed or Z-bed), we have a lot more space and we can enjoy the independence of a kitchen.

Serviced accommodation or Serviced-apartment lets in UK cities and towns are becoming so popular with the staycation and short break leisure market that Knight Franks recent research pointed to a “rapid and potentially disruptive expansion” in the Serviced-apartment sector.

Not only is there a leisure market up-take to this convenient short-break accommodation, there is a huge corporate market, from a 2-night business trip to all-year-round Monday to Friday contracted lets.

So, let’s compare how this buy to let income-boosting rental model fares against normal tenancies (These are known as ASTs assured short hold tenancies) for investors and landlords.

Serviced apartment Let V’s Traditional AST Buy to Let

Comparison Between:   Serviced Apartment Rental model   Assured Shorthold Tenancy model
What is the Purchase Price?

£100k+

Purchase price is town and city dependent. Essentially the property price doesn’t differ between the rental models.

100k+

Purchase price is town and city dependent.  The price starts lower due to city-outskirt property prices, which does not normally yield as well for the serviced let model.

What are the typical annual yields? Net annual yield between 8% – 10% of purchase price (based on UK main city) Net annual yield between 3.5% – 5% of purchase price (based on UK main city)
What are the finance options? Up to 75% LTV Buy to Let mortgage up to 80% LTV
How key is location? Location is crucial to maximise your occupancy throughout the year.  Main UK towns & cities near the centre and/or business district yield the highest. Location is still very important, but it is not crucial to be near the centre or business district.  Main UK towns & city’s outskirts yield well on ASTs,
What is market demand? Huge demand from the short-stay leisure and corporate markets.  They complement each other: Monday – Thursday businesspeople and Friday – Sunday leisure stays Uni post-grads, commuters, singles, couples, young families – many people are choosing to rent instead of buying their own home – demand is very high across the UK
What are the likely void periods? Occupancy is worked like a hotel. Corporate let’s can be all year round with zero void and if not with a combination of leisure stays. Even running at the national hotel avg. of 70% would still net up to 8% p.a. ASTs are often taken on a six- or 12-month arrangement therefore no voids happen throughout the year.  Between a tenant leaving and another moving there may be a vacant month.
Do I need a management company? It’s definitely advisable as occupancy will be maximised with their Online Tour Agency affiliations ie: bookings,com, Corporate Lets. And incl. housekeeping, looking after your tenants and maintaining your property to a very high standard. Also, advisable esp. in the case of owning in a purpose-built block. Tenants are sourced on your behalf, agreements, payments of utilities, repairs, maintenance, complaints, are all dealt with and taken care of on your behalf.
Are there any tax benefits? Yes.  Serviced apartments can meet the criteria of a Furnished Holiday Let (FHL) which are generally more tax advantageous. A supported claim for Capital Allowance can have significant tax relief.  Its’s worth seeking independent tax advice to find out how this will benefit you personally. Recent years’ tax legislation changes have not been in favour of the landlord: with increased SDLT and the decline of mortgage tax relief. Depending on how you purchase your property e.g. personal or company and your own tax situation, it’s best to seek professional advice to find the most tax advantageous way for you to buy.
Are there any resale benefits?

 

Using the same channels as mentioned in the right-hand column, however, consider these two benefits. You will never pay a fortune to bring the property back up to a sellable condition.  Secondly, you will be able to show a period of accounts with a higher than market income for one, two, three or more years.

 

You have a wide range of options: investment brokerage, such as REW. Your typical High Street Estate Agent:  most will have affiliations to online property portals, such as rightmove.co.uk and Zoopla, plus other agency networks. If you have used a good management company your property should be ready-to-sell with no need of any major repairs.

 

So, what does a serviced apartment investment look like?

Location, uniqueness & style and maintained to a high standard makes one serviced apartment stand out from another – The Press in Manchester most certainly ticks all three boxes for tenants and investors alike.

Location

In the heart of Manchester’s NOMA regeneration area (which will provide 2.5 million square feet of new build and renovated office space) and with the city centre on its doorstep The Press has an idyllic location for short-stay leisure breaks and corporate lets.  Its neighbour is Co-Ops international headquarters and it convenient position make it: a two-minute walk to Victoria train station and only eight-minutes to the Etihad.

Uniqueness & Stylish

A beautifully preserved 18th-century Grade II-listed building, formerly the co-operative Printing Room, is currently being transformed into 66 New-York-Style apartments and townhouses and will be complete and ready for stays in early 2020.   Exposed red-brick ooze the NYC loft-style interior décor of these high-spec and spacious apartments, which now boast being part of one of the most storied buildings in Manchester.

Maintained to a high standard

It will not just be its location & its unique history that serviced apartment management specialist Residential Estates will promote, but its own experience in this sector and the high quality & efficient service and management it provides its tenants & the owners alike.  Residential Estates already operate the successful Halo House serviced apartments located very close to The Press.

This financial breakdown illustrates the net rental that is achievable at The Press – with three occupancy examples.

Email info@realestateworldwide.co.uk for more information on The Press | Prices from £213,000 | Only 20% deposit and the rest (80%) on completion | Fully mortgageable | Proven property developer with great track record


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