Property Millionaire Secrets Part 2 - Serviced Apartments!
Build your portfolio quickly ...
POSTED BY JONATHAN VOWLES ON 20/03/2018 @ 8:00AM
Serviced apartments are a fairly specialised part of having a property portfolio. It works for property owners and for rent-to-renters. But it requires a different level of commitment ...
However many serviced apartments you have, you need to run them as a business!
copyright: scanrail / 123rf stock photo (licensee)
The point here is that serviced apartments are actually a business and need to be run in a business-like manner. Here are my 6 top tips to get you started:
Build your portfolio quickly
You can make a sustainable profit out of one apartment. But it is much easier to make a real profit if you have a portfolio of apartments. Your short-term goal should be to get to at least three properties.
This appears to be the tipping point, the point where profitability is sustainable. But this is just a rule of thumb, your individual circumstances will determine your tipping point.
Because of the margin between rental income and rental cost, serviced apartments work well with rent-to-rent properties.
Percentage occupation is your goal
Even if you own the property without a mortgage, you will have monthly costs to cover. The more your costs, the higher the percentage occupation needs to be to break-even and cover your costs ... and get into profit. Make sure you understand your break-even point.
Individual or corporate customers?
Some locations have a higher proportion of individual customers for serviced apartments, some for corporate customers. If you mainly deal with corporate customers, then you may be able to fill your gaps with individual customers.
Understanding if you have to charge VAT or not is critical to the success of your serviced apartment business. Make sure you have taken proper advice about this!
It is no good taking on the liability of a house or apartment if you can't sell it on. Make sure that you have a plan and, ideally, have a corporate customer lined up before you take on your first property. Look at various online channels for additional marketing routes.
Of course, there is a lot more to running serviced apartments than this brief article can tell you. If you haven't already, check out the other property articles I have written.
"Consider doing research or going on a course to find out more!"
If you have a query about the VAT issues of serviced apartments, want details of a course I recommend, or to find out more about property taxation then do call me on 01234 752 566 or click here to ping me an email and let's see how I can help you.
Until next time ...
If you're looking for a new accountant to help grow your business, do visit www.jvca.co.uk and discover how Jonathan Vowles Chartered Accountants can help you!
I've been an accountant in and for business since 1987 and have a wide experience of consultancy, audit, accounts, taxation and wealth planning work from individuals and small businesses to multinational corporations and charities.
My eclectic interests in growing and developing business span a number of areas … and can be summarised as strategic business advice and tax saving advice.
I have worked with the Chamber of Commerce to deliver courses for people about starting up in business and have lectured about tax for a major accountancy practice and for Milton Keynes College.
I relax by reading fiction and by getting away from the office in a campervan.