Why Choose a Short-Term Rental Property Management Team?
Posted on 30th December 2021 at 14:40
We are living in a somewhat unprecedented period; the economy is reacting to the global pandemic as it unfolds in real-time, and it can be difficult to know a safe investment when you see one. With some economist data speculating on a 2022 recession (Gavekal), and some instead pointing towards economic growth (ONS), it’s clear there is much uncertainty. One thing is certain, however, and that is that the short-term accommodation market continues to see steady growth, despite the myriad setbacks presented by the global response to COVID-19. In this article, we will delve deeper into how people we work with are continuing to see a return on their investment, and how you can benefit in the same way.
Owning a secondary property can facilitate different opportunities to generate an income, the most common of which being to place the property on the rental market and secure a long-term tenancy agreement. There is however another option, one which reaps higher rewards for ultimately less work on your part – Serviced Accommodation. Let us first define it; ‘Serviced Accommodation’ is a fully furnished apartment, house, or single room within a house that is available for a short-term or long-term stay, providing the guests with an experience akin to a hotel
The stay duration is short (typically)
A higher nightly rate is charged (as opposed to a tenancy agreement)
The property is fully furnished and equipped with TV, Wi-Fi, kitchen utensils, etc.
Cleaning is provided, and services such as a concierge can be utilised, too
Unlike a hotel, however, guests will have the luxury of being the only people using the facilities and can therefore enjoy a much higher degree of privacy during their stay.
There are very few places where Serviced Accommodation would face difficulty, but given the diversity of guest types, there is hardly a shortage of viable locations. Most properties are likely to perform better if some consideration is given to certain geographical factors, however, and it is therefore worth considering operating nearby them where possible. These include, but are by no means limited to:
Areas of industry
Near to airport/train/bus station
New building development/construction
Stadium/sports venues/golf clubs
The centre of cities, towns, or villages
There are also some additional factors to consider if your second property is located within London – more information can be found here: 90-day rule
So, from a property owner’s perspective, why do it? Why take the ‘risk’ with serviced accommodation instead of going down the more ‘traditional’ route of the long-term rental market? Return on investment. Simply put, the profit margins are larger with Serviced Accommodation. Let’s elaborate:
Higher-income. By charging a nightly premium as a hotel would, you can generate a higher monthly/annual income on average. I will demonstrate this in further detail below**
Tax allowances are made for serviced accommodation, further saving your costs. More information can be found here: Furnished Holiday Let – Tax Guide
Less work. If you choose to let an agency manage the accommodation, the workload for you will be practically non-existent.
Far better maintained. Given that guest turnover is high, and the full property is cleaned between each stay, the property will be continuously maintained to a ‘hotel’ standard of cleanliness throughout the year.
Tenant profile. If managing the property by yourself, you can decide which bookings you do, or do not accept. This becomes easier still if you choose to let an agency manage the property; guests can be fully vetted through various channels before any booking is considered.
Market growth. Reputable forecasts predict year-on-year growth for the serviced accommodation industry – More, in-depth information & statistics can be found here – (https://katten.com/files/GSAIR%202020-21.pdf)
The exit strategy. If you decide to sell the property somewhere down the line, it is far easier to do so if there are no tenants to remove, not to mention the property will be in better condition than it would be had it been rented out full-time (given the continuous maintenance/cleaning). The property can be immediately put on the market.
Although the negatives are few, they do exist, and it must be noted that as with any investment, serviced accommodation can have its difficulties if not managed correctly. More information can be found here. Utilising a management agency such as Tempstay will alleviate these risks. More on that below.
As alluded to within the previous section, ‘renting’ your property under a serviced accommodation model can provide you with a considerably greater return than a long-term equivalent. This is shown clearly in the image above, whereby the monthly income can be increased upwards of 80%, depending on the size and location of the property. The above data has been extrapolated from the 2021 performance of Tempstay managed properties.
It is certainly worth mentioning the types of guests and how they would compare to an average long-term tenant. If you are unfortunate enough, long-term tenants can sometimes cause damage to the property which exceeds the value of their deposit. Some tenants are reluctant to pay the rent or maintain the property to a reasonable standard, and it is not unheard of to visit the property after a few months and see damp from a leak that they neglected to inform you of. When it comes to serviced accommodation, given the high turnover of guests, entire proerties are professionally cleaned after each stay. Additionally, guests are not shy about informing of any maintenance issues, such as leaks, meaning that they can be rectified swiftly, and property damage can be mitigated.
How can numbers such as these be achieved? You are presented with two options when itcomes to the ongoing management of your serviced accommodation property.
Option 1: Go at it alone
Keep 100% of the income
You will ideally advertise your property through a sales channel such as Airbnb
You will use the same channels to manage any bookings (answering queries, vetting guests, accepting/declining bookings, etc.)
You will need to arrange for the property to be cleaned at the end of each guest stay
Any property maintenance (plumbing, electrics, general upkeep, etc.) will need to be arranged by yourself
The property would also greatly benefit from secondary marketing, through social media for example. This is certainly worth considering to maximise booking potential.
All of this can be highly time-consuming, particularly if bookings are frequent or you are managing more than one property. The major upside to this route, of course, is that any revenue generated will be yours to keep. However, also consider that the operating costs associated will diminish any revenue gained and that unless you can dedicate the necessary time, your occupancy rate (percentage of nights occupied by a booking) will likely take a hit.
Option 2: Utilise an agency
The agency will take a fee/percentage of the revenue generated
The property will be marketed through various online channels, including social media
All guest queries, vetting, and bookings will be managed by dedicated, experienced people
Regular cleaning and property maintenance is taken care of and needs no involvement from you
The benefits of using an agency are clear to see. Granted, a small percentage of the revenue generated will go to them, but it could be confidently argued that the higher occupancy rate agencies can achieve would make up for this. This is not to mention the amount of time that it would save you by not having to manage the property day-to-day.
Here, I will use Tempstay as an example. How does Tempstay achieve all of this (and more) for the landlords that we work with? Click here to see ‘The Process’
Who are we and why trust what we say?
Tempstay is one of the largest serviced accommodation agencies in the Berkshire area and continues to expand rapidly. Tempstay has a wealth of experience on board and manages a large portfolio of properties, with a high satisfaction rate from the landlords with which we work.
If you are interested to know how you too can increase your monthly income, please don’t hesitate to leave your details below.
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