Get the Highest Income in Property!

Good morning! Steve here!

So, where exactly can you get the highest income in property?

Giving regular Property Finance talks is the norm for me these days and I love educating the audience on all areas of Property Finance.

From time to time we focus on a particular area.

Last week I was in Glasgow and spoke about Serviced Accommodation (SA)

The SA market has grown significantly since Lockdown (remember that?!) and has become a real income generator for many.

It isn’t the same as the Furnished Holiday Let (FHL) market though which is another area that can generate very healthy returns. 

SA is another level and here’s why...

So what is SA?

Unlike a standard Buy To Let (BTL), SA is essentially a property let on a Short Term Let Basis. The property is let out to ‘guests’ rather than tenants. 

And unlike a FHL , SA's can be let out to both holiday makers and contractors looking for an alternative to a hotel. SA can be let out maybe for 1 Night, a Weekend or Long term short term lettings. 

You could use a 2 bed apartment as an SA or a large ex-hotel. It is considered more a Business Strategy than a Property Strategy.

Although the lenders in this space are more niche, they are flexible in their approach. 

FHL lenders tend to look at the low, medium and high seasons, use an average then work off a property being rented out for between 26–32 weeks a year. There might be a minimum income needed as well as a lender stress test to be met. 

The SA market takes a more commercial view, considering both historic income (if ex-guest house for example) or projection led income, where a lender looks at sites like booking.com to understand what a typical nightly rate might be. 

The big advantage to SA is the amount of income it can generate. Instead of looking at monthly rent, like a normal rental property or weekly rent, like a holiday let, it looks at a nightly rate and in some cases shared rooms too. This means your yield or annual income as a percentage of the property value goes through the roof. 

For the right property and circumstances, it is possible to get the property valued on a commercial basis, meaning a higher value and thus more money can be pulled out of the property to go and do it again! 

Lending rules differ from lender to lender but that’s our job, to match you up and organise the right funding. 

You don’t even have to purchase residential dwellings. Some of our clients have bought ex-hotels, some old court buildings, offices etc. used creative finance to reconfigure, then an SA mortgage to hold onto the property and let it out.

It’s a really exciting space right now and gives clients one of the few opportunities to produce an income that beats inflation. 

If you'd like more information on this subject, please reach out to our team here and we'll talk through what's possible.

Have a fantastic week!

Steve

Express Mortgages is a trade name of Express Mortgage Services Ltd. Express Mortgage Services Ltd is authorised and regulated by the Financial Conduct Authority. [Reg No: 474427] Company registered in England & Wales no. 05167662

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