Serviced Apartment vs Single Let

What is a Serviced Apartment?

You may have heard a lot of hype lately about Serviced Apartments (SA), with the likes of Air B&B and Booking.com disrupting hotel accommodation space. SA is providing a viable alternative option for hotel guests, tenants and short term accommodation requirements.

So what is a ‘Serviced Apartment’? Well this is the umbrella term for a type of furnished apartment available for short-term or long-term stays which provides amenities, housekeeping and a range of services for guests and where most taxes and utilities are included within the rental price.

 

The positives of Serviced Accommodation (SA) to the users

According to the Association of Serviced Apartment Providers (ASAP), Serviced apartments offer facilities much like a traditional hotel but with added space, convenience and privacy like home, so you can enjoy living like a local when travelling. They have private cooking facilities, sometimes a kitchenette but mostly a full-size kitchen with dishwasher and washing machine, larger living/sleeping areas than most standard rooms, and can have access to gyms, restaurants, meeting space, concierges and other hotel-like services.

Imagine you wish to take a weekend break away with your family to a UK town or anywhere in the world, and your options are between booking 2 hotel rooms for 4 people or a SA that sleeps 4 to 6 people. You can see from the table below a likely comparable scenario.

Example of similar level accommodation with similar standards.

2 x hotel rooms (sleeping 4 pp) (3 star+)

- £150 per night for both rooms

- Hotel bedrooms and en suites only

- usually add breakfast at an additional cost

- Off road parking

- Eat out at additional cost

- Reputation of a good hotel company.

SA (sleeping 4 to 6 pp). (3 star+)

- £140 per night (however, with more people, this cost is shared further).

- Additional space with lounge and kitchen areas

- Can cook breakfast in the SA kitchen at minimal cost

- Off road parking

- Option to eat in at minimal cost or eat out

- Reputation of a good SA company.

As you can see from the above, there are many similarities to hotels and SA. But the differences naturally come with the number of guests and nights you stay for, where you can make savings per guest and by eating in. The cost of 1 hotel room may be cheaper than the SA however as soon as you hit 3 guests +, SA start to become a very viable option. This is just a quick guide to the positives of SA.

The benefits of SA to the BTL investor

So how does SA benefit the BTL investor? Well there are many benefits shown below as to why SA may be a better investment to a single let (like a flat).

1 bed flat (Single let)

- Rent per month

- For example £500 per month

- After costs £100 profit per month (on average)

- Difficulties with late payments and evictions due to tenants’ rights

- Only 1 tenant to deal with

- Good for capital appreciation

- Potential mortgage relief TAX issues

1 bed flat (SA)

- Rent per night or per week

- £500 per week

- After costs £500/£600 profit per month (on average)

- Guests pay in advance with no late payments or  eviction notices

- No tenants and management of guests can be outsourced to professionals with plenty of profit left over

- Good for capital appreciation and can change back to a single if need be.

- No mortgage relief TAX.

As you can see from the above, the best thing about SA is as an investment, you benefit from the capital growth and a monthly cash flow. Whereas with a single let, you mainly just benefit from the capital growth, as one boiler break could wipe out a year’s profit in a single let, assuming there is a standard 75% mortgage in place.

As previously mentioned this is just a brief overview of how SA could be a viable option as a property investment. For more information, please contact info@homerandpardy.co.uk. Or click here for a quick video.