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Serviced-Accomodation investment


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Hi, 

I’m just starting out on property investment and I’m struggling to put money down for a deposit. I have seen an ad for buying a serviced-accommodation property for £15,000 In central London which would provide high renting yield BUT with a leasehold that ends in 5 years time. This opportunity seems to good to be true and I was wondering what could be the catch/trick? Have you already invested in serviced-accommodation? Any advice? 

Please find below some details: This specialised serviced accommodation offers high rental yield income with a projected £117,572 in net profit over over the full term and this leasehold purchase has 5 years remaining! Figures based on an estimated annual average occupancy of 85% pcm and annual projected average daily rate of £250.  
Projected rental income: £6,463

Projected management cost (12%): £776

Rent to landlord (the purchaser is responsible to pay rent on a monthly basis): £2,800

Projected bills: £928

Potential average net monthly income: £1,959

Potential average net income over 5 year term: £117,000

 

Many thanks for your help, 

Anne-Claire 

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  • 3 months later...

Hello Anne-Claire.

I am also currently exploring SA, with the current situation and lockdown, the SA business would have been impacted. Ofcourse dependting on the structure of the SA business you are setting up, you might have been eligible to some loans which can be used to pay the monthly rent to the landlord. It would mean you would be breaking even or at a big loss since the monthly rent is huge in London (£2,800) plus additional cost, advertising, management etc.

I think the SA business would pick up again but many people would be exiting it, especially those impacted heavily and who did not have a good structure around it, so it may be a good opportunity. Personally, I would look into setting up something outside London where the cost would be cheaper and a bit less return as a first project with 1 year break clause.

Which category of people would be renting this place? 85% occupancy is high to use in calculation . A daily rate of £250 is very high for London, even if sleeping 4! I don't see many contractors paying for this when next door or hotels are cheaper around or with a shorter commute. I may be mistaken.

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