Estate Agents (Part 10)
Over the last few months we’ve been thinking about where to find our property deals. We’ve covered buy to lets, flip properties and HMOs. As such, we’re now on to serviced accommodation.
At its very core essence, serviced accommodation is not dissimilar to buy to lets. The big difference is that with a buy to let, the property will usually be let out on a 6 or 12 month Assured Shorthold Tenancy whereas with serviced accommodation, the term is much shorter. Serviced accommodation is rather like a holiday let, although not every guest that you have in your property will be there for holiday purposes.
Now, just one thing which I want to clarify before we go any further is that serviced accommodation is NOT the same as a buy to let. The actual raw product itself (in other words, the type of property that we’re going to use) is going to be similar if not identical to a buy to let, but there are significant differences.
If you’re going to use finance for your serviced accommodation, then you won’t be using a normal buy to let mortgage and you will need bespoke insurance. Do not under any circumstances buy your property using a buy to let mortgage and then use it for serviced accommodation. If you do this, your mortgage lender is going to be very unimpressed and they may ask for all of their money back.
Similarly, you need to make sure that you have the right insurance in place because if anything did go wrong, then you need to know that you’re properly insured. Don’t ever try to pretend that you’re buying a buy to let when you’re actually buying a property for serviced accommodation.
It’s important to realise that serviced accommodation also has a different use class for planning purposes. Although it looks residential because you have residential guests staying in the property (albeit on a short-term basis), from a planning perspective it is essentially different. Serviced accommodation is more like a holiday let so again, under planning you cannot use this type of property as a buy to let. You need to get the right planning and you need to make the right application to your local planning authority.
Having said all this, to all intents and purposes if you were to look at a serviced accommodation unit and if you were to look at a buy to let unit then they’re probably going to look pretty much identical.
There could be one difference though, and that’s the way that you could configure the property. For example, if you have a house or a flat, you could let it as a single entity (i.e. one unit) or you could let it as individual rooms much like an HMO.
If you’re going to let it as rooms, then don’t forget that you need to make sure that there’s proper security in place, i.e. that you’ve got locks on the doors of the individual rooms, and that you comply with fire regulations, etc. Also remember that you need to make sure that there’s a specified and designated shared area – and that you comply with all other HMO rules.
The question now is how can you find serviced accommodation deals if you want to pursue this strategy? Well, much will depend upon which route you’re going to go down and whether you’re going to let the property as a whole or as individual rooms. In either case though, it’s likely that you will still end up going to your local estate agents. This is where most of the low hanging fruit is going to be and where you’re probably going to find most of your deals.
As a final thought, the fact that the property is going to be similar in many respects to a buy to let is actually a good thing because if you find, for example, that serviced accommodation was a great idea but it doesn’t quite work in your area, then this gives you the opportunity to turn the property into a buy to let instead. Whilst I’m not saying that this is the best thing to do, it can be a good Plan B. Of course, the figures might not be quite so good, but this can give you a bit of a backup should you ever need it.
Here’s to successful property investing.
Peter Jones B.Sc FRICS
Chartered Surveyor, author and property investor
By the way, I’ve rewritten and updated my best-selling e-book, The Successful Property Investor’s Strategy Workshop, which is an account of how I put together my multi-property portfolio, starting from scratch and with no money of my own, and how you can do the same. For more details please go to: www.ThePropertyTeacher.co.uk/the-successful-property-investors-strategy-workshop