What are the pros and cons of investing in serviced apartments?

Discussion in 'Serviced Apartments' started by nmb, Feb 19, 2016.

  1. nmb

    nmb Well-Known Member

    I would be very interested to learn about the pros and cons of investing in serviced apartments. The research I have done indicates that serviced apartments are cheaper than hotels and therefore likely to attract the attention of corporate customers who have employees staying away on business on a regular basis. However, from what I read the standard of service can vary quite widely?

    Does anybody have any experience of investing in serviced apartments?
     
  2. Tracey Woods HMO

    Tracey Woods HMO Director of Landlord Smart Forum Partner

    I don't personally invest in SAs but I have many customers that do and follow a lot of SA groups on social media as it has been something I have considered. As with any strategy I would suggest that education must be the first step. Some people I know have jumped in and got badly burnt and then resorted to having to learn how to do it properly. I believe the biggest hurdle is to identify your area and you customer market. You then need to meet the needs of your customer, as we do in any business. Also make yours stand out from the crowd with little touches and things that not everyone does.....
    I believe the key is in the name of this property strategy 'Service'. Give second to none always!!
     
  3. totallyproperty

    totallyproperty Administrator Staff Member

    I actually stayed in a serviced apartment recently for the first time in Cambridge. Up until doing that, i probably didn't really 'get' the concept. But now I think they are great and can really see the USP for guests and the value! Your own apartment space rented per night. Similar to air b'n'b really when you think about it.
     
  4. Kane Nelson

    Kane Nelson New Member

    Regarding your comment on the variation of standards, I believe there are many different groups of operators that contribute towards this.

    Too many so-called property investors view this as just another property strategy which is where they fall short before even starting to let out their first property. Once people get their head around that this has nothing to do with property, other than it is a vehicle for people to stay in, and understand that it is a complex hospitality business model, only then will they start to see good results and produce excellent customer experiences for those that choose to stay with them.

    I operate in this arena and it has lots of moving parts that make it a difficult business in order to maintain first-class experiences.

    (moderated)
     
    Last edited by a moderator: Feb 23, 2018
  5. lookinginvest

    lookinginvest Member

    I presume the only downside is “giving away” some margin to those who are managing the property? On the upside, if the property is situated in a busy/affluent area then there may be the opportunity to charge premium rates for short-term stays?
     
  6. Longterminvestor

    Longterminvestor Active Member

    If you can get yourself “in” with large companies in the area who have significant numbers of visiting staff, you could seriously increase your occupancy rates. People will pay a little bit extra for a short-term property let especially if it has quality services with it.
     
  7. michael1978

    michael1978 Member

    I have lots of friends doing this and it's a growing trend, at least in Romania. Instead of monthly rent, you get much more as serviced apartment.
     
  8. diyhelp

    diyhelp Active Member

    Hi @michael1978

    I was just wondering what kind of occupancy rates your friends get on these serviced apartments. I you would guess that unless you have an apartment in an inner-city area it may be difficult to retain high occupancy going forward?
     
  9. From what I understand it is possible to increase short term rates to make up for the possible periods of vacancy?
     
  10. michael1978

    michael1978 Member

    Yes, that is true, it is an inner city appartment. It does depend on the area, occupancy and rates as well, that's why it is an investment, buying far from the city attractions is not really worth it. And being Europe occupancy depends on the weather. Spring to autumn is about 25 days per month and the rest of the year it is booked on weekends and Christmas/New Year.
     
  11. Jules1970

    Jules1970 New Member

    Actually this is something I was thinking to invest in but need to do more research. I have done most things in property so may look into it. Obviously has to be in the right place.
     
  12. diyhelp

    diyhelp Active Member

    Hi @Jules1970

    I think the key to this is location, location, location. Unless you have strong tenant flow it could prove to be a damp squib. Long term contracts with large companies might also be an interesting route to take - maybe even a retainer to guarantee a level of accommodation?
     
  13. Marinaki

    Marinaki New Member

    What exactly a serviced apartment is?
     
  14. michael1978

    michael1978 Member

    It is an appartment, could be your own that is fully furnished and that you lease for a short period of time, just like a hotel room. People prefer it because it is bigger and cheaper than a hotel. You advertise it on Airbnb, Booking...
     
  15. Marinaki

    Marinaki New Member

    Oh, right :)) I tried that but I didn't know that is called like this. I don't find it very smart in term of investing. Has many expenses and the incertitude that your home will still be standing the next day.
     
  16. michael1978

    michael1978 Member

    Haha, that's true and there is a risk as there is in any business, that's why you don't spend a lot on furnishing it. Yes, it has to be cute and clean but it should not be expensive furniture and only basic appliances also not expensive. And you can choose the people you rent to, you don't rent to a bunch of teenagers. :)
     
  17. diyhelp

    diyhelp Active Member

    In my mind the apartments are only stop overs - just somewhere to lay their weary heads :)

    Joking aside, bright and cheerful would be the name of the game for me. Dont go overboard on furnishings, fancy decor, etc.
     
  18. Jules1970

    Jules1970 New Member

    My reason is that I know a great location but waiting to see if certain plans are being built. Will fill you in when it gets there. Quite interesting. So we wait and see
     
  19. Jules1970

    Jules1970 New Member

    Agree. I stayed at a holiday inn recently, surprisingly though basic room clean, beds good quality mattress. Bathroom nicely done. Believe me I'm fussy. So can be done cost efficiencent and still look great :)
     
  20. realdeals

    realdeals Active Member

    As long as the property is clean and tidy, with all basic facilities, then you can charge a decent rate. Finding the balance between levels of occupancy and the best price is tricky - you may have to go through a period of trial and error.
     
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