Serviced accommodation
Over recent years the government has made traditional “buy to let” investments more challenging. They have:
-banned compulsory tenant fees;
-introduced tax reforms that eat into profit;
-proposed a ban on non-fault, Section 21 evictions; and
-increased stamp duty on all BTL purchases.
The result is that investors, especially those buying with a mortgage, have found it difficult to make a profit. Many are leaving the market.
We have seen a significant increase in enquiries from new and existing clients about serviced accommodation. These are short term lets of a few days to a few weeks. They are commonly marketed through Air BnB and similar websites. They offer increased average daily rents without the same obligations that normal buy to let landlord has. There is more day to day management and bookings, cleaning, repairing and maintaining the properties are required more regularly.
Before entering the market, clients should consider:
Time: do you have the time to devote to the project or do you have the staff to do so?
Lease or Purchase: many of our clients are taking longer leases of multiple flats on commercial terms and then sub-letting as serviced accommodation. There is less risk than when buying, but also less reward. However, such a lease arrangement is likely to avoid stamp duty.
Business Rates or Council Tax: especially when multiple properties are being let, it may be beneficial to apply for a change of use. If your business owns only one property with a low rateable value it could be that you qualify for small business rates relief. It is important to take specialist legal and financial advice before completing any such transaction as the deal could be structured in a way that saves thousands. A useful guide on the issue is found here https://www.thesapodcast.com/03-planning-use-class/
Restrictive covenants: many properties have restrictions on how they can be used. It is essential that these are investigated properly before being bound to proceed.
There is much more to know and discuss and this article is intended as an introduction to the issues rather than advice upon them.
For specialist legal advice on the serviced accommodation sector, call us today on 01253 858231 to arrange your free 30 minute consultation or e-mail michael.vincent@mjvlaw.co.uk