Whenever an investor mentions a desire to invest in a serviced apartment, the first thing that most people think about is the traditional one or two-bedroom terrace building.
Many people don’t realize that there’s a big difference between these two types of properties.
In the case of serviced apartments, investors ought to compare the investment benefits and weigh them against the risk of investing in this type of property.
Why Invest in Serviced Apartments?
London is a leading destination for business and leisure travelers. Therefore, it makes business sense to want to invest in serviced accommodation such as the tower bridge apartments.
An investment in this sector will enable you to enjoy benefits such as:
1. They Offer a Good Rental Income
The agreement signed between the owners and the operators ensures that the operator takes on all the risks.
What happens is that they get to lease an individual apartment from the current owner for a fixed weekly or monthly price and then lease it out to travelers in need of a place to stay.
The model is perfect as the owner gets to receive a fixed-rate at the agreed-upon time, regardless of whether the flat is occupied or not.
In the long run, it eliminates the risks associated with long vacancy periods, which are common with other investment properties.
2. Good Returns
Considering that the agreement states that the owner will receive a fixed rate, the returns can be higher than those of other similar properties.
Additionally, the owners don’t have to worry about the void period, as the management gets to lease it to both long-term and short-term clients.
Regardless of how you look at it, it’s easier to find people looking to lease a serviced apartment compared to other types of properties.
3. You Never Have to Worry About Undertaking Repairs or Maintenance
The operator gets to handle all ongoing repair and maintenance works. As the owner, you won’t have to worry about having to handle client complaints.
The operator will deal with all the maintenance requests put in by the property manager. Depending on how the agreement is structured, the tenant in this agreement is the operator.
He/she will be responsible for handling all repairs.
Are there Risks to Investing in a Serviced Apartment?
While the serviced flats can act as a good source of reliable income, the flats have some drawbacks. They include:
1. Difficult Resale Market
It may be difficult for you to find a buyer willing to buy a serviced apartment. The properties are designed to attract a particular type of investor.
Such an investor will have a varied risk appetite and investment strategy.
2. Banks Can Be Hesitant to Offer Financing
Lenders are hesitant to offer financing to investors looking to buy serviced apartments.
Financiers may require you to place a bigger deposit as a way of mitigating the risk factors associated with this sector.
Others may also place a strict criterion on how the apartments should be used.
Conclusion
The question of whether or not to invest in a serviced apartment is one that only you, the investor, can make.
Before making any decision, take time to research all the available investment options, their possible returns, and the risk factors associated with the investment.
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