Why Serviced Accommodation Is A Shrewd Investment Strategy
Serviced Accommodation (SA) has seen a rise in popularity over the years and is a particularly hot topic right now due to more and more people opting to holiday in the UK because of travel restrictions enforced by the Coronavirus pandemic. With more people looking to stay close to home for the foreseeable future, property commentators believe the market will only continue to grow.
Investing in property that can be rented out on a short-term or longer-term basis is an attractive investment strategy for a number of reasons:
1. SA offers a good yield - expect anything from between six and nine per cent, much higher than on a typical residential rental. Buy the property at a discounted price and yields will increase
2. There are more attractive tax breaks on serviced properties than say, on Buy-to-Let properties
3. It’s a relatively new strategy that can deliver excellent rental returns over a short period of time
4. There’s better value for guests staying in SA than in a hotel as prices tend to be cheaper - good news for property owners
5. There are potentially lower operating costs for the landlord. This combined with longer average guest stays means SA is a good investment
6. Online booking portals such as Airbnb and Booking.com mean property owners have access to hundreds of thousands of potential customers looking for somewhere to stay
Buying a property specifically to rent out as SA offers clever investors excellent opportunities for profit. If you buy a property to use specifically as SA, it’s classed as a commercial property. That means landlords pay a commercial tax, which is much less than you pay on other properties classed as residential, Buy-to-Let or HMOs.
There’s also no need to worry about the Section 24 law that means Buy-to-Let landlords can no longer claim mortgage interest as tax-deductible. If you’re a landlord that currently owns a Buy-to-Let or HMO it’s worth looking into whether you can convert it into SA. Always make sure you get advice from a trusted accountant or tax advisor.
Investing in SA also means you’re entitled to claim all the capital allowances on the property. So anything that needs repairing, replacing or needs significant investment can be claimed against the profits you make on renting out the property.
As with any property investment, there are pros and cons to this type of investment, so it’s always worth enlisting the help of a property expert to advise on the best way forward. Look at your investment properties with fresh eyes and you could well see your profits from property rise exponentially over the coming months and years.
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