Which Property Types Work Best For Serviced Accommodation
If you are thinking of investing in serviced accommodation then you have probably found yourself wondering exactly what kind of property you need to buy. The good news is that your research into your tenant profile and a good location will almost certainly make that decision on your behalf.
Rob: Hi, it's Rob from Property Investments UK. And in today's video, we're going to be looking at specifically what properties actually work for serviced accommodation and why.
We've looked at the locations that you should consider. Next up we're going to consider specifically what type of properties work.
So serviced accommodation is, we've spoken about the corporate let type tenant profile. So does that dictate, I guess, what kind of property is ultimately going to make sense?
Rob: The type of tenant, where it's gonna be but the type, the size. All that kind of stuff. So what is it that you guys actually look for?
Paul: I mean some fundamentals is we need some sort of concierge system.
Paul: So we'll do a meet and greet but we'll also, we'll either key hold ourselves or we'll need a key holder as well.
Paul: So that way you can access anything you need. Apartments generally. Because they're just cleaner, they're easier to do.
Paul: And you have got that service available. You know, if you've got a normal house, you've got no one to meet you there.
Rob: Yeah, that's right.
Paul: You know, et cetera. And they're easier to maintain as well.
Rob: I guess for apartments, you wouldn't get a house at this location.
Where we are now, it's city centre. So you're only gonna get apartments in that respect, for that particular location.
And so, apartments. Is there a certain size of apartment or number of bedrooms that you tend to focus on?
Paul: We will only focus on one or two bedrooms.
Paul: Studios are a no go, for us anyway. And three bedrooms are not - because then you're getting into a house in multiple occupancy, here again.
So one bedroom is great for the professional, for one professional or a couple.
Paul: You know, the, well a professional is on the contract, or in the apartment. Two bedrooms can facilitate a family. You know, with a child (and it's usually only one at this stage).
Paul: But where we're going. Three bedrooms - it's probably harder with the regulations as well. Because I know they're stricter with HMOs now and the numbers of people that you can have in there.
Paul: But it's getting a little bit cluttered then, you know. And I don't think - I can understand, if you've got a two bedroom apartment, you might get two separate professionals.
Paul: Instead of two hotel rooms, which again, is more cost efficient. But I think three, then it then becomes sort of shared. A combination, more than anything.
Rob: Yeah. And I think one person, a corporate tenant that's in there for six months and it's one individual, will probably feel like they're raffing around a little bit in a three bedroom apartment. One bedroom I think is fine. And it's more cost-effective for the company.
Paul: And for the person who's bought it through you but it's obviously gonna be more expensive.
Paul: And we want to be able to still say that, you know, we can give you this rental guarantee or this the new share you get.
Paul: You know because relative we'll charge more for two bedrooms. We'll charge more for three bed but no one's gonna book a three bed for one person.
Paul: So obviously they're gonna look for one bed or two bed first.
Rob: Yeah. Because it's that type of market. I mean, it's still an estimate at the end of the day because they're buying it based on yield or return.
Paul: Yeah. Absolutely.
Rob: They've got to get that kind of-
Paul: And I think historically, with apartments we've sold three beds generally, are always bought by residential buyers, I would have thought.
Rob: That does make sense. So there are some terraces, there are some semis that I think can work and do work for some maybe holiday let type areas.
But I think for the corporate letting model, it's that prime location isn't it? It's being in the right city. It's being in the right kind of spot within the city and that very often lends itself to the serviced accommodation model.
Paul: I'm thinking, with the short-term stays and the houses, it's hardly usually next door to a house the person who owns it, et cetera.
Paul: To make it easier. Because you do need someone close to it. The last thing you want is just to be left stranded alone in a house and you've got no contact with anybody else who'll come.
Rob: Yeah, yeah.
Paul: Yeah. It's just worked out, how it's transpired is this is what people want when they ask us, you know. They'll say, "Do you have a one-bed or two-bed apartment?" And that's it. So we've stuck to that model, there's no point in changing it.
Rob: And it makes sense for everybody involved in the chain. So it makes sense for the investor, the yields are very often kind of slightly higher, slightly better. Makes sense for you guys as a management.
Obviously, the structure is in place. You've got the ability to offer the concierge service. You know the locations.
Paul: And the retail aspect as well. The biggest market is still one and two bedrooms, you know. So when you look into a few exit strategies you've still got an apartment that is gonna be highly sellable.
Rob: Yeah. So if an investor or a homeowner is gonna buy that apartment, one or two bedrooms is gonna work best. Studio centre, you struggle a little bit. Maybe three beds, maybe struggle a little bit. So it's the right fit.
Paul: Studios, because of the clientele we're looking for, you know. They don't want to be sleeping in the same living area and the kitchen area.
Rob: That makes sense.
Rob: Yeah, perfect. So hopefully this gives you some ideas in terms of what property types are going to work for serviced accommodation.
Certainly, where we're focusing our strengths and growing our portfolios well in the future, it's gonna be focused on these prime locations.
And you've got to consider the end user in mind.
So that corporate tenant profile. They're gonna want a certain type of property and that's very often location, size and also the type of property and the service that goes with it.