Soundbite Episode – Don’t be a Dodo! Spotting trends helps capitalise on or defend against changes on the property horizon…so what’s trending now?

Don’t be a Dodo! Spotting trends helps capitalise on or defend against changes on the property horizon…so what’s trending now?

Are you a trend-spotter…what is catching your eye right now? Even if we do not seek to capitalise on emerging trends, we may need to defend against them just in case. Don’t be a Dodo and become extinct is the unsaid warning we can glean from looking out for trends in property investment. There are at least two emerging alternatives to BTL that are doing the rounds with many professional property people right now. They are serviced accommodation and property partnerships. One new and one apparently not-so new concept here, although the latter has re-emerged of late due to some environmental factors as you shall hear.

Resources mentioned

Serviced accommodation examples can be found in both booking.com and Airbnb

Today’s must do’s

Are you a trend-spotter…what is catching your eye right now? Even if we do not seek to capitalise on emerging trends, we may need to defend against them just in case; don’t be a Dodo and become extinct is the unsaid warning we can glean from looking out for trends in the property investment arena.

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Transcription of the show

Hello and welcome to another edition of The Property Voice Podcast, my name is Richard Brown and as always it is a pleasure to have you join me again on the show today.

We are still on our travels…back in Thailand now, having spent a few days in Bangkok earlier and now a bit of chill time on Phi Phi island before what could be quite a mad time in Phucket right at the end of the trip. In fact, I am recording this week’s show a lot earlier than usual just in case I have an experience akin to that in the Hangover movie that might prevent me from being able to speak or something like that. All being well that won’t happen though, so I expect to have another episode with again in a week’s time.

Right now though, I wanted to share a couple of property strategies that are trending right now, setting the context as to why that is the case as I do. Let’s get on with the discussion then straight away.

Property Chatter

OK, so as I was thinking about what I would share with you this week, a couple of property strategies are trending at the moment and so I thought I would share a little bit about these. There are at least two emerging alternatives to BTL that are doing the rounds with many of the professional property people right now. They are serviced accommodation and property partnerships. One new and one apparently not-so new concept there, although the latter has re-emerged of late due to some environmental factors as you shall hear.

Serviced accommodation

Starting with serviced accommodation then, so what is it?

• Short-term furnished room / property rental by the day / week / month
• Often comes with extra services such as cleaning & laundry but could extend to catering, transfers, excursions, etc.
• Not let on an AST as not BTL
• Class 1 business use for planning purposes
• Permissions required from insurers and lenders to operate this type of business
• Types of let: leisure: holiday and short-stay vacations, corporate: mid-term corporate lets, business: white collar & blue collar overnight accommodation, temporary accommodation: casual or short-term living say to get know a place, in-between properties / locations, etc.
• Business model: unit rental rates & occupancy levels dictate profitability, marketing and management are very different to BTL and whilst bear some resemblance to HMO has a much higher turnover rate

Here is an example

• 4-bed semi-detached property in Lancashire that I am currently working on
• Market value is c£180k
• Market rent as a single let is c£700 per month

This makes this a fairly uninspiring investment as a standard BTL, with a less than 5% gross yield but a slightly healthier ROI of just under 8% when using a mortgage.

However, contrast this with the potential returns if it is converted into serviced accommodation that can sleep up to 10 or even 12 people.

Assuming modest room rate of £99 per night, which compares favourably to the local hotels for a double or twin room, with only 40% occupancy this would gross over £1900 per month in rent. There are more costs involved in managing the property though, so the management charge is higher than you would expect to pay with a BTL or even an HMO.

However, even taking the higher costs into consideration, based on this level of booking activity, the gross yield jumps to just shy of 13% and the ROI a rather impressive 16%+. Add to this the prospect of increasing the occupancy rate and it gets even better. The expected rate of £179 and 50%+ occupancy does start to become quite attractive I have to say.

This is why serviced accommodation is being one of the most sought after new strategies at the moment! It can transform a fairly ordinary investment proposition into a rather inspiring one by adopting a different angle.

Property Partnerships

The second growth area that I wanted to talk a little about is one that has been around for a while, but is taking on even more prominence at the moment…property partnerships.

Partnering with others is not new and can come in several forms. Financial investment partnerships, joint ventures to combine skills & resources and outsourced management partnerships to utilise selected skillsets of other people are just some of the options available.

A partnership allows people to do more with less (or leverage) and to plug some of the gaps they may have in terms of one or more of the following capabilities:

• Finance & other capital assets – such as money to invest or even a property to utilise
• Skills, knowhow & systems – such as building trade knowledge, planning regulations, niche market awareness, short-term booking systems & management and so on
• Experience – just knowing the pitfalls and how to avoid or at least reduce them can be a great help
• Contacts – access to off-market opportunities, investor communities, an existing ‘power team’ of professionals and trades and such like
• Shared learning & accountability – often underrated but quite often undervalued as well; having someone to share the journey with can make it more interesting, fun and deepen the learning experience as well as giving the two heads being better than one approach to risk management Your browser does not support the audio element.