If you are here reading this beginners guide to SA, you probably want to make more money from your property investment, right? Great! Investing is a wonderful way to make money with money, and Serviced Accommodation is a growing industry with high demand.
To help you along, this is what we will cover:
How do I boost my return in property?
This guide is all about answering this question. To sum up, you will only boost your returns if you make planned, conscious changes in your strategy. And these changes must include everything, from management to marketing.
However, before even starting to think about enhancing your skills, it is important to understand the reasons why you want to boost your return in property and what makes you consider that move. This is not an easy job at first – especially when doing it alone, which also makes it very time-demanding. So, have your goal very clear in your mind: “Why would I want to increase my portfolio?”.
The answers can be varied, such as possibilities of partnership with other investors, or you want to increase the portfolio for safety purposes or achieve a stable financial situation. Other reasons are market recognition and good market presence since there has been a high demand and interest in property investment in recent years.
How do I make money in property?
In general, every business owner needs to follow some basic steps before set up, and real estate is nothing different. Basically, the first step to making money in property is understanding your area: what the city/neighbourhood has to offer? What are the main attractions for guests? Attached to these questions, is market demand: what do guests look for in a property? Take as an example: a property in a tourist location. Obviously, it is likely to be much more lucrative as a holiday let than as a long-term rental property.
Understanding about competition, market situation and the value of your own property is also crucial. Every piece of information will have its role during the planning route, and understanding the industry will guarantee many options available for you to decide HOW, WHEN and WHERE your next move should take place.
Can I increase the return of my existing property portfolio?
Of course! Especially if you never hired a management company before, your existing property portfolio has the potential to become much more profitable with some adjustments.
First, check your current returns and understand the possible profits based on the competition. However, don’t limit yourself! Most property owners do not even know what they are doing and have not reached their fullest potential yet.
Also, you should think small before you think big. Changing the tiniest aspects such as decoration and marketing photography can impact hugely in your returns. The best way to know what you should change exactly is by contacting an expert, such as a SA management company.
Would I make more money as an SA?
SA properties can come in different sizes and demands. Still, they are usually more profitable because you will be offering space, privacy and amenities to the clients, and not only accommodation. Here are other reasons why SA is often a much more profitable option for you as an owner:
- SA is in increasing market demand: There is a higher interest from both parties (investors/ landlords and guests) as the industry faces growing popularity.
- Tax advantages: Since furnished SA properties can be legally treated as Furnished Holiday Lets (FHL) if they are let on a commercial basis for at least 210 days a year, they receive a number of tax advantages such as capital allowances, tax-friendly pension contributions, and reduced capital gains tax.
- People’s awareness: Currently, people are valuing privacy, comfort and space even more. However, they still prefer cheaper places than hotels. In either case, SA is the optimal choice, and guests started realising that they can get the same excellent value accommodation by paying less rather than in hotels. Besides, you are more likely to make more money with word of mouth “marketing” and recommendations from guests who like the place (which means more guests overall).
- Usually, a longer occupancy in SA rather than hotels: While hotels are costly and not a good choice for people looking to stay for longer than a week, SA are cost-effective in the long run. A guest can close a month-long contract for a slightly smaller price than your per night fee, and even pay the full per night fee – still, for them it will come out cheaper than the hotel stay (while for you, it will be very profitable)
- You can get money even if you are not around: Will you be out of the country for some time? That’s not a problem. Many companies are providing excellent SA management out there. They will make your business run smoothly even if you are not physically there. If you find one that you love, go for it – they’ll do the best work possible because your success is their success.
Would an SA work in my area?
Of course, as with any business, it will depend – but most of the times, yes. Although characterised as FHL, the SA business is not leisure and tourism-dependent. There are some things to consider apart from tourist attractions and attractive places around the area to understand if the property will work on your region:
- Transportation: are there any airports, train stations, motorways, or buses around? It is also essential to check if there is a good connection to London and other big cities.
- Workplaces: the guests can travel for work-related purposes, so check what type of companies the property is close to – services, warehouses, factories…
- Resources: Are there shopping centres nearby? Or even local shops? Families with children (if that is your audience) are more likely to be around parks and hospitals. Is the area cheap or expensive?
Why would someone not want to do an SA?
There are numerous reasons why anyone would be afraid to start an SA business. Fortunately, most of these reasons are backed up by myths and misinformation, which can be easily solved. If you enjoy the idea of owning an SA unit but are still afraid of some aspect of the industry, check if it’s not a myth first. We have some examples:
- The property will not be continuously damaged. If you think through, you’ll see why – families who stay long term often believe the house is theirs, so they get comfortable and are more likely to damage. During short term stays, the guests are conscious that the house if someone else’s. Also, if you have the right terms and conditions documents, they will know that there are consequences if there is any damaging.
- SA is not illegal. When you understand what you are doing and use the right contractual agreements, you will know that SA is not illegal. Serviced Accommodation isn’t subletting, and you will not break any laws.
- The market is not saturated. As we mentioned, SA is in high demand, especially some niches and areas that are still underserved. Many people believe in this myth because they lack the connections and don’t understand the market in general.
- Serviced Accommodation is largely unregulated. So, if you thought it would be a lot of compliance, don’t worry. In fact, you are currently able to let any typical property without almost any changes. Of course, there are some essentials, such as EICR and gas safety. Still, it is not legally required to provide guests with added security (although we recommend).
- Holiday lets are self-catering accommodations, and they will work anywhere. So, even on holidays, these lets will be on demand because many companies will prefer self-catering over hotel stays.
If you are still afraid of something we haven’t mentioned in this list, you can contact us or post your doubt in the comment box below, and we’ll be happy to answer.
HMO vs SA?
Both great property investment strategies, HMO and SA have some differences and some similarities (such as high liquidity). While HMOs or Houses of Multiple Occupation are properties where you rent several rooms to individuals for six or more months, Serviced Accommodation units are short let and usually smaller.
HMO has strict regulation and a set of rules, while SA is mostly unregulated, as we mentioned earlier. This means that HMO is a much harder business to start with, especially when compared do Serviced Accommodation, which doesn’t require a license to be operated.
Also, SA units have much less competition than HMO in most areas. Investors haven’t realised all the potential profits of a unit focused solely on short term stays. Even with the advent of Airbnb, SA is still an emerging market with plenty of opportunities.
If you worked managing properties for some time you probably have faced this situation: you need the apartment or the tenant is not paying the rent. Because of the contract, you are legally bound to keep them until the end of the contract. That’s normal, and that’s what happens with HMO. However, SA contracts are short term, which means that they also allow you to remove people immediately if they don’t pay.
In terms of flexibility and returns, SA is also a better option for active business owners. Since it is short term, you will probably receive at a per night basis, which will multiply if you know how to market the property. You can also hire a good management company to do the hard work. SA is in much higher demand than HMO, but it is risky if you are not informed. That’s why we recommend you to research a lot before creating the perfect SA strategy (or simply hire us).
The final difference is tax-related. If you own a holiday let or SA, you will have access to numerous tax benefits not available for HMO.
Any beginner should have quick access to a useful FAQ section, and that’s what we’ve prepared here.
How much of my time will it take to set up a SA business?
It depends. If you do it alone and start uninformed, it will surely take some time. If you are busy and have no time to spare, we have wonderful news! Hire us as your management company. We can do everything for you, from helping you find the right property to managing it completely.
Will I make less due to cleaning costs?
You shouldn’t worry about these costs, as they should always be included in the contract. Guests are responsible for cleaning costs, paying them as an additional charge.
What profits and level of occupancy should I expect?
It will depend on several elements: area, type of guests, amenities, etc. We can give you an estimate! Just send an email or give us a call.
Do I need any specialist insurance?
We recommend that you get a holiday let insurance and permitted use with building insurance.
Do I need a specialist mortgage?
Yes, you will require a holiday let mortgage.
How much do you charge for management?
We charge 15%, which is currently a very competitive price in the market. In the fees, we provide you access to channel manager costs, dynamic pricing and the option of utility bill management.
What is the difference between guaranteed rent and management only?
While our guaranteed rent services provide you with a fixed rent income from the property, our management services include handling of bills, letting, management, and maintenance.
Presence on the market?
Are you worried about the presence on the market? That’s not a problem!
Many beginners feel that they have a great property in the perfect area, besides understanding their property’s value. However, they are not sure how to reach the guests and position the business. Unlike long-term properties, where the owner acts as a landlord, SA is a business that requires constant management and marketing.
That’s why you should do what business owners do: delegate.
We can position your business in the perfect spot. We understand the market and the area. We know how to target potential customers/guests.
Hiring professionals to manage your property will save you time and costs, especially in the long term run. It provides you with enough time and room for growing other investments and businesses, as well as expanding your portfolio even further. Besides the numerous more opportunities for building your networks.
Among our services is marketing. We include advertising when you hire us, providing the SA unit with better market visibility and online presence. We can even redesign the apartment to match the guest profile, take pictures and spread the word.
Should I self manage?
Everyone starting in the business will ask this question, and this is a good one! Self-managing is apparently a way to “cut costs”, but it involves a lot of knowledge, and most of the times also experience.
To help you with that, we’ve prepared an article with the four questions you should ask before self-managing a Serviced Accommodation. Here is the summary:
Are your goals well set?
Set SMART goals before taking any action:
Do you know your clients?
To understand the client’s profile, ask four basic questions:
- Who are my customers?
- Where are my customers?
- How much are they willing to spend?
- What are their accommodation needs?
Do you understand compliance?
Compliance is key. Even though SA is not as regulated as other types of properties, it requires documents, and there are rules.
Have you checked all our tips?
We also have several tips for those starting and although optional, reading and implementing them is strictly recommended. It would help if you also studied with more information available out there.
- Implement a SA marketing strategy: find out the marketing message that is most appealing for your potential clients and apply it.
- Identify the type of accommodation you want: houses or apartments, studio units, 1 to 4-bedroom apartments, and more.
- Partner with a good property management company: you may be self-managing, but that doesn’t mean you shouldn’t look for guidance.
- Understand the business is worthy: when done correctly, it will be profitable and fulfilling.
How to maximise returns with an SA management company
Anyone can start an SA business. However, not everyone will succeed!
Investing in properties and SA requires not only having a suitable property and money to invest: it is also about networks, market knowledge, customer service skills, marketing, area knowledge and a lot more.
Sure, you can self-manage if that’s your choice, but don’t do it without understanding the risks. An SA management company is the perfect way to boost your investment even more than you could think of. And it’s an excellent solution for those thinking about long-term growth and stable, constant profits.
That’s why we do what we do. We provide you with top-notch management and stress-free experience. Even if you only need help with the setup, we will help. Even if you need the full-service (we can pay the bills!), we will help.
Either way, give us a call on 01234 924 429 or contact us through this page.