Too good to be true, you are thinking, 10% Return on Investment, in this market? And this whole rent guarantee shenanigans must be a scam!
So… what is the deal?
The fact is that short leases on serviced accommodations make greater returns than long leases… but there is always a sting in the tail, isn’t there? There must be hidden charges, costs and penalties. Really – what’s the catch?
We have chatted about this amongst ourselves and have come up with the great earth shattering realisation that anyone could do this. (It’s just bloody hard work). So, here is everything you need to know to do it yourself.
Please! Have a go! Be our guest! (See what I did there?)
How to buy to let ....Well we have been sorting out the logic problem that is short term serviced accommodation over the past couple of years and are very happy to tell you just exactly how to do it…
(are you sitting comfortably?)
First, buy your perfect property…
If you'e looking for property invest advice, this seems a good place to start! Now – one bed or two? Or just a studio to start? What’s going to get you the greatest return. In general the fewer the beds the greater the income (or yield). But, the capital growth will vary locally. Typically we would buy two bedroom properties.
Property investment in the UK gives you lots of areas to choose from. You could invest in Manchester property, Liverpool, Leeds... Or how about a London property investment? Each area has very different potential returns and risks. And it's a very personal choice depending on what you want to get out of it. Do you want income (yield) or capital growth (how much the property will go up in value). The government puts out loads of great data you can use to help you make this decision.
As we are teaching you our secret recipe. We focus on commuter towns where prices haven't gone up too much. We are looking for areas that have lots of different guests. Corporate guests that need a place to stay a few months, families renovating their home, schools, holiday seasons.... This gives us the ability to get a great rate all year round. While we wouldn't say there is right and wrong (it's very personal) investing in property in london will return far lower yield. This is because prices have gone up so much. Our personal view is that Liverpool property investments, and indeed many other northern areas, carry more risk with Covid-19 & unemployment. So we focus on what we think are lower risk areas & get better returns through Flexible Rentals.
There are so many things you need to look out for on the purchase. Does it have parking? Did the lease say you could make this a serviced apartment? You'll need to understand how much competition there is, how many other properties are there in this particular short and midterm market? What are the average rates, average occupancy and consider seasonality? Near good schools, fast trains, good shops, nice parks etc also matters. Ideally pick something ready with no work. Avoid gardens.... I did warn you, many things!
Now, how are you going to finance it? (sensible to set up a limited company, don’t you think? Just plop a tiny down payment and borrow as much as you can to take advantage of the favourable mortgage rates?). Well actually it does depend on your needs. It's best to take expert advice here, but in simple terms. Buying in your name can be less tax efficient. But it is cheaper to finance. Buying in a company name can be more tax efficient but will cost more to finance. The reality is there is more to it & it's very dependant on you, so let's leave this to the experts when you are ready.
Phew – now we’ve done all that, just set up the utilities; decorate and furnish it. We would strongly suggest you find a great company that furnishes properties. While John Lewis & Ikea are great, after seventeen trips to the property and missing items, delays..... You will quickly realise that you need to make it more efficient. Check out our friends at Loft they are awesome! Oh, while we are on this subject, this is going to be someones home for weeks or months. So don't skimp on quality! And make it homely (pictures & soft furnishings go a long way).
Ensure that the linens are clean, there’s a corkscrew and the glasses are unbroken (in fact make. a list of every item you need, and have spares); find a local housekeeper who is trustworthy and understands the remit, can buy your loo roll and change a lightbulb; (You should also find a gardener and a handyman whilst you’re at it, as they will soon become your bestest friends);
Take fabulous pictures of your staged home-from-home; then get out your creative hat and (peeking out from under the brim) write the most evocative descriptions in order to set up a winning entry on all the various platforms…. (Oh. The various platforms – there are over 7,000, did you know?).
a people person (they will be dealing with your punters and your housekeepers and staff – they need to be responsive, helpful and endlessly cheerfully available – they need to deal with diaries and broken appliances and missing Deliveroo orders and the fact that there are spiders – you know – IN THE BEDROOM!)
a money person (they will be advising you: purchasing your property for the best possible price in the best possible location; finding your mortgage broker; dealing with the legalities of a purchase; figuring out how to make your accommodation appeal to the best market and setting up the pricing algorithms to ensure the returns)
and a technical person (they will be handling all the whizzy parts – this is so far beyond my pay grade, I am just going to leave you to imagine this bit: Like me. Imagining it is all I am able to do. Think: fairies! Wands! Singing dolphins! Magic…).
Now which of your friends can you rope in.....
You need to be on it administratively and be able to coordinate your pricings and bookings from various platforms, instantly… Ideally you need a channel manager. A dynamic pricing tool (using predictive analytics and machine learning) wouldn't go a miss either. ? You need to know all about this strange but vital realm of the interweb so you can maximise revenue and occupancy whilst guarding against that soon-to-be bane of your existence the devilish double bookings…
The universal booking platforms are all terribly complicated – I’m not kidding. Our person who manages the websites has spent months figuring out the mystical dark arts of how to change a listing on the various platforms – and they are all different! Some are set up specifically for short term serviced apartments (Airbnb, are your ears burning?) and some are set up for high-end hoteliers (Expedia and Booking.com are two of the most corporate) and then some of them need you to supply them with ridiculous proofs (Open Rent, we love you and we hate you in equal measure!), so grab hold of your GSC, EPC, ASTA, ETC – will you accept LHA?
All you have to do now is set up your automated messaging with welcome packs, directions, top tips for the local area, parking instructions, check-in times, codes for the bin areas and recycling days, WiFi codes. Alert the cleaners with dates and number of guests so they know how many beds to make up. And the more you pay attention to the little details the better the experience. Are they bringing kids, because the cots and highchairs should be unfurled in readiness… do they need an early check in because you know – nap time! So arrange the cleaner to get in and out again before junior needs to hit the sack.
You need to be available day and night (because people don’t lock themselves out or find out the flat upstairs is leaking during business hours).
You need to understand the markets (for real estate, for the rental appetite and how to reach the actual market so you can advise your guests where to go to buy a pint of milk).
Now – you’ve got a tenant who’s interested – you need to vet them. The deposit will depend on what type of contract & which platform the booking came through. Where do you keep their money? (hint: segregated account) Get references!
(Phew - Did I mention? It’s bloody hard work…..)
We are a property investment firm. Our publications do not offer property investment advice and nothing in them should be construed as investment advice. The information contained in our publications is not, and should not be read as, an offer or recommendation to buy or sell or a solicitation of an offer or recommendation to buy or sell.
See How We Can Help
If you'd like to learn more, check us out on the interweb by clicking the button belowLearn More