"Show me the money"
The simple answer is money. And I will explain…
One of the biggest revelations in the last 10 years or so is the ease in which you can market your products or services to a large number of people, relatively cheaply. Thank you internet!
We can now get the word out to almost half the planet’s population, at any time of day, that you have a property available to let. All they have to do is jump on Airbnb or Booking.com, find your listing and click.
You don’t even have to speak to anyone anymore (if you want). You can book an apartment, check-in on your own and leave without even meeting the host. It’s become so simple.
It’s because of this simplicity that the demand for short-term stays has exploded. Guests are now seeing the value in alternatives to traditional accommodation such as hotels, hostels, B&Bs and guest houses.
The UK has seen some of the biggest growth in Serviced Accommodation and despite huge swathes of landlords changing from Assured Short-hold Tenancies (ASTs) to short-term lets, demand continues to exceed supply.
There may be no greater example of this than in Edinburgh. You can find out what makes this city such a hotbed for Serviced Accommodation by checking out our Serviced Accommodation Prospectus.
Occupancy rates in the UK are averaging at 80%. This means on average during one calendar month, 24 out of 30 nights are fully booked. If we were to assume that the nightly rate for a 1 bed property in Edinburgh is priced at £100 per night, (which is certainly not unreasonable) then the monthly income of that property would be £2,400.
What do you suppose the monthly rental income from a single bed flat in the Leith or Southside area would rent for? £600pcm? If your lucky.
Now, I know that you know “turnover is vanity, profit is sanity and cash is king”. So I won’t insult your intelligence by hyping these big numbers, when really, all you want to know is “what’s my bottom line?”.
To give you an idea, we must first take a look at the big expenditures that are present in short-term lets but are not present in contemporary long-term lets:
- Cleaning Fees
- OTA Commission (Booking.com, Airbnb etc.)
- Gas & Electricity
- Council Tax/Business Rates
- Restocking (toilet roll, condiments etc.)
It should come as no surprise that traditional long-term lets have lower running costs compared to Serviced Accommodation units. However, Landlords can still expect to see an increase in their bottom line of 200%, 300%, even 400% for two main reasons. Much Higher revenue coupled with tax benefits that are not eligible to buy-to-rent investors.
You can see a full cash-flow case study comparing a normal BTL in Edinburgh with a Serviced Accommodation Unit in our post titled Serviced Accommodation vs Buy-To-Let
If you would like to know more about the tax benefits available to short-term let owners, then you can visit our post titled SA Tax Benefits – Introduction.
If you’re relying on property to provide yourself with a major stream of passive income, then short-term lets may well help you to achieve your goal a hell of a lot faster than traditional means. Check out our post on compounding to find out just what we mean.
There is no doubt that setting up a short-term let can be time consuming and complicated, but that’s why we exist. We aim to make the process simple. From concept to a fully functioning SA unit that delivers high yield and passive income.
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