Following my Flipping Property series now we’re going to think about serviced accommodation and how to find deals for this strategy. At its core, serviced accommodation is not that far removed from buy to lets in that the actual raw product or type of property that we could use will be similar, (if not identical) to a buy to let.
The main big difference between the two is that serviced accommodation is let out on a short-term basis much like a holiday let (except that not every guest will stay in the property for holiday purposes), whereas a buy to let typically involves a 6 or 12 month Assured Shorthold Tenancy.
Then there are other significant differences. Finance, for example – if you are going to use finance for your serviced accommodation then this would not be the same type of finance as that which would be used for a buy to let. In fact, I have to stress that it is highly unadvisable to try and buy a property using a buy to let mortgage if your plan is to use the property as serviced accommodation. The bank would take a very dim view of this and may even demand their money back.
The same is true of insurance. With serviced accommodation, you need bespoke insurance for this type of property just in case anything was to go wrong.
Planning is also different with serviced accommodation. Whilst the property resembles a normal residential property because you do, in effect, have residential guests staying with you (albeit on a short-term basis), it’s more of a holiday let so under planning this type of property must not be used as a buy to let. It’s vital to make the right application to your local authority and to get the right type of planning in place.
Nevertheless, 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 would probably look pretty much the same. However, the way in which you could configure the property could be different. With serviced accommodation, you have the option of letting the property out as a single unit, (in other words, renting out the whole property) or, it could instead be let as individual rooms.
If you choose the latter, this would work rather like an HMO. In this case, you would then need to make sure that you follow all the usual HMO regulations. For example, there must be a specified and designated shared area, all individual rooms would need to have proper security in place, and you certainly need to comply with all the fire regs and other related rules.
If you’re considering this strategy, let’s think about where you might find your deals. Of course, a lot will depend on the route that you are going to take in terms of the configuration of the property, but overall, it’s likely that you’ll still find these types of deals through your local estate agents. You would proceed as discussed in my previous blog posts.
By the way, the fact that a serviced accommodation property is very similar to a buy to let does have a big plus. If you find that the strategy doesn’t work in your area, then you could turn the property into a buy to let instead. This gives you the opportunity to have a back-up plan in place should things not turn out the way you planned in the beginning. Admittedly, the figures might not be quite so great, but having a fall back is always a good thing.
Peter Jones B.Sc FRICS
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