Clash Of The (property) Titans: Serviced Accommodation Vs. Buy-to-let

With the rental market continuing to grow across the UK, there has never been a better time to invest in property. However, there’s a lot of information out there about the best strategy, and it can be difficult to decide how to get your foot in the door without it getting jammed.

During our recent webinar, we heard from two experts about their property investment journeys. Ahmed Khan and Abi Oniru shared their insights, advice, and the strategies they would use if they were starting from ground zero again.

Let’s take a look at what they had to say about two of the most buzz-worthy strategies around, serviced accommodation and buy-to-let.

What Is Serviced Accommodation?

To understand serviced accommodation, you first need to understand the rent-to-rent model. This strategy involves an investor like yourself renting a multi-room property, and then subletting the rooms to make a profit.

For example, if you rent a four-bedroom house for £850 and then list each bedroom for £500, you can bring in significant revenue.

Serviced accommodation takes this model and brings in short-term clients. Using platforms like Airbin or Verbo you can charge more with a nightly rate. Rather than operating as a landlord yourself, you are creating a kind of hotel.

This strategy can be great because it can boost your ROI even higher, but it also requires significantly more oversight. With new people coming through, you need to ensure there’s a constant stream of guests, and that the space is clean and functional for each.

With any strategy, there will be pros, such as a low upfront cost and high ROI, but there will also be cons. Any rent-to-rent property will require more time and effort, especially if it’s used as a serviced accommodation.

There’s also quite a bit more risk involved because even if you can not find tenants or guests, you are still required to pay the full rent. This can become an issue when dealing with an Airbnb or similar property, as the month-to-month rentals are not guaranteed.

If you’re starting your property investment journey and don’t have a lot of capital, you can use rent-to-rent or serviced accommodation to create that capital and grow it over time. On the other hand, there is some incentive to use this strategy if you have money to work with because the ROI can be so high.

What Is Buy-to-let?

Buy-to-let is a more traditional way to enter the property investment field. It can be scaled up by upgrading the properties you buy, refinancing them for a profit, and using that profit to invest in another property. You can also work with external investors to get the capital for this system.

Much like serviced accommodation, this system has its pros and cons. You can rely on investors to bring in money you may not have, work with brokers to finance and refinance, and you own the property outright. However, this strategy takes time and expertise and can be significantly more expensive up-front.

With a single property, you can make upgrades, add value, and use that success as a case study going forward. Once you can prove your abilities, the door is open for investors to help you purchase more properties.

Challenges to Starting With Property Investment

Khan and Oniru shared some of the biggest challenges they faced when building their property empires. When you are aware of these hold-ups beforehand, you can plan to overcome them.

Information Overload

The more information you consume, the more confusing the process can appear. For example, if you first start with a rent-to-rent model it is conceptually straightforward. You rent a space and list it on a platform like Airbnb. It seems more confusing once you deep-dive into all the work that goes into that kind of operation.

The easiest way to overcome this hurdle is by taking action. You can’t know everything that goes into a process until you start it. It’s important to do your research, but getting bogged down with information rather than starting the work leads to more issues in the long run. Sometimes you need to start and learn along the way.

Repairs and Maintenance

Whether you’re doing rent-to-rent or purchasing a property yourself, there will always be maintenance that needs to be done. When you’re creating a budget for your property, you need to consider the cost of utilities and bills, as well as the cost of maintenance.

This safety margin may vary, but a good rule of thumb is to put aside roughly £300 a month to cover anything from plumbing issues to a tenant breaking a lock. It’s tempting to get excited about the money you make from property investment, but if you don’t consistently keep this safety net you may be strapped with a surprisingly large bill.

Best Practices For Property Investment

Let’s break down the biggest tips and tricks for beginners in the property space.

Get Specific

Simply saying “I’m going to invest in property” is too broad and will lead to mistakes. Start by creating a one-page business plan that answers questions like

• What area will you buy property in?
• How much will the property cost?
• How much can you make from the property?
• How much will you refinance for?
• What is your plan for paying back investors?

With this information and financial forecasting, you can move from imagining a career in property investment to taking real steps toward it. If you’re starting with a rent-to-rent or serviced accommodation model, these questions will differ, but having a distinct, condensed plan will still be key.

Understand Your Area

Because of certain laws, regulations, or the culture of a location, you will have an easier time with different property strategies.

For example, if you live with many tourists you will have no problem setting up a lucrative serviced accommodation business.  Areas with students looking for shared accommodations lend themselves to a more traditional rent-to-rent structure or a buy-to-rent plan.

Take time to understand your area and customize your strategy to what works best, or be willing to invest in properties outside of your immediate vicinity.

Document Your Journey

As you go through the process of upgrading a space, managing a serviced accommodation property, or building up your investment portfolio, it’s important to keep track of everything you do. The more of your journey you can share, the more trust you will build up with potential investors.

This could mean anything from keeping a detailed portfolio to creating videos or social media posts about the process. When you can show people exactly how you can grow their money over time, they will get excited about investing with you.

Bring in the Experts

No matter what strategy you use to break into property investing, there is a lot of work to do, and a lot of information to keep track of. The last thing you want is to reach the end of a successful year and find out you made a mistake with your bookkeeping.

If your mind is busy dealing with taxes, deadlines, and more, you won’t have the bandwidth to create the perfect space for your listings. That’s why working with a dedicated professional bookkeeper is vital.

Conclusion

Whether you buy-to-let or rent-to-rent, property investment can be as fulfilling as it is lucrative. The key is to have a clear strategy, understand the process you’re starting, and have the right tools and knowledge on your side.