The Property Unleashed Podcast

The Complete Guide to Short-Term Rental Success

• Mark Fitzgerald • Episode 336

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Mark Fitzgerald shares essential knowledge for building a successful serviced accommodation business, covering everything from legal considerations to marketing strategies and property selection criteria. 

• Serviced accommodation uses licensed agreements not ASTs, with new agreements needed every 28 days for stays over a month
• Understanding your target market (contractors, tourists, families, government workers) is crucial for success
• Short-term lets command significantly higher margins than traditional buy-to-lets
• Tax efficiencies exist when each property is treated as its own business
• Check for mortgage restrictions and leasehold conditions before starting
• Focus on creating a VIP experience with unexpected touches to generate word-of-mouth marketing
• Systemize your business from the beginning to avoid creating another job for yourself
• Consider competition and hotels as positive indicators of market demand
• Research growth potential in areas with upcoming developments or new businesses
• Prime locations with minimal refurbishment needs make ideal serviced accommodation properties
• Networking with other providers can help with overflow bookings and industry knowledge

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Speaker 1:

Let's go through the fundamentals of serviced accommodation. Hello, my name's Mark Fitzgerald. It's great to have you joining us here today. So right now, in this session, I'm going to go through some of the fundamentals about serviced accommodation, to give you some tips, some advice and help make sure that you're building a successful serviced accommodation business as well.

Speaker 1:

So serviced accommodation goes by many names. It can be called Airbnb, short-term lets, furnished holiday lets, short-term rentals, but one thing they all have in common is they are not your permanent residents. So when we say that, that means that you will not be using ASTs. You will have people here on a licensed agreement, which means that they can stay on a licensed agreement for one night, for a few weeks. But what I would say is you do not want to have anybody staying in your serviced accommodation on one licensed agreement for more than 30 days. What we do is every 28 days, because sometimes we have contractors that are staying. We make sure that we issue them a new agreement every 28 days. Why is that, mark? Well, because if you let somebody stay in your property for over 30 days, whether or not they're on a licensed agreement or not, by rights, by the law at the moment. Unfortunately, they can actually then call themselves a tenant. So you have to be very, very careful with that. I see a lot of people in serviced accommodation not getting these agreements and licensed agreements in place and not renewing them. So they get a six week or a three month booking and they're not doing new agreements throughout that booking. So you want to be saying to whoever's staying there you can stay for three months, but we have to do a new agreement every 28 days and we send that to them and if they do not sign it, they have to leave. So we make sure that that's set up for us. I have my virtual assistants doing that, but we make sure we always have new agreements. So it's something that I wanted to cover off here, because not everybody knows this and I have seen people getting caught out by this as well.

Speaker 1:

Now, one of the things I will say about serviced accommodation and when you're looking at setting up and running it, is to start looking at the areas. It's all very well finding a property, but if you don't know the area and you don't know the type of people that are going to be wanting to stay in that property, it can make running a serviced accommodation property very, very tricky. So a trick that I was always told was look at your markets out there, because some areas will be like niche markets for your clientele. So I live in South Yorkshire. Now nobody's coming to South Yorkshire on holiday bless it, bless its little cotton socks but it's not happening. So we target and we focus on contractors up here and we do very, very well with contractors as well. Now some people do stay for a week or so and go for walks and things because we've got the peak district nearest and stuff. But most of the time it's contractors, it's people that are coming here working in the area.

Speaker 1:

Of course, depending on the property, you can set it up for large groups. A couple of years ago we rented a property that had eight bedrooms so we had Lisa's my wife's brothers 40th birthday there, which was great. So just because you have a large property, you think, oh, people are going to party and trash it and things. Not if you set it up right, not if you set it up in the right manner. Of course, if you're in an area with a lot of tourist trade or you've got potentially stadiums and things by you, then that's a great market and, of course, the family market is a good one as well. People do like to travel around. If they've got young kids and things and you're near theme parks or any sort of resorts, then that can work well for you. But don't discount as well government workers, so the NHS, the police, the armed forces and things. They can all be great markets for you to be tapping into, depending what is in your area.

Speaker 1:

So what's in it for us? Well, cash flow. Serviced accommodation whether you own the properties, whether you're going to do it as a rent to rent, whether you're going to manage the properties is great for cash flow when set up and managed correctly. And of course, most of us here are looking for cashflow. So it is a good alternative to HMOs. Short-term lets command a significant higher margin than your buy-to-lets. So a buy-to-let property for people that don't know is where you just get one property. You put a family in it. You have them on an AST at the moment for 12 months. Serviced accommodation we have it a lot shorter terms one night, two nights, three nights a week or so so we can demand higher rents for it. So that's how you can make a lot more money. And, of course, you have guests, not tenants. When it comes to these, a well-managed serviced accommodation protects investors from the rise of interest rates and the cost of difficult tenants, because you do not have to actually take anybody to court to get them out of your property, as long as you've got your agreements and you've set it up in the right manner from the word go.

Speaker 1:

Tax efficiencies as well. There's lots of great different tax efficiencies that you can get into as well. So, if the deals are structured correctly, serviced accommodation does not and is not subject to the normal property taxes, so you can go for business rates on a property. You can also look at each individual property as its own business and HMRC will look at that as well. So you will be paying your taxes, but it can be very different to your normal landlord taxes that you pay when you've got a mortgage or a buy-to-let property. So the challenges that you'll need to look at overcoming because I always like to go through things the things that we have to look at.

Speaker 1:

So, if you're looking at new deals, whether you're buying properties or whether, again, you're getting creative with it, there are some underlining things that we need to make sure of. One of those, of course, is mortgage restrictions If you take a property on that isn't yours, because if it is yours you should know what your mortgage allows you to do and what it doesn't allow you to do. But right here, right now, there's a lot of mortgage providers that have a specific package now for serviced accommodation. A lot of people are out there doing this with landlords' properties who only have buy-to-let mortgages. Now you can do it on a buy-to-let mortgage if it doesn't say you're not allowed to do short-term rentals, or you can actually get the mortgage company's consent to let it as a short-term rental as well. If you're not 100% sure, then it's worth talking to our mortgage broker in ETA here and seeing if anybody has had to change their mortgage from a buy-to-let to a service accommodation or has been given consent. If they have, what were the companies that do that? That's what I tend to do before anything like that, so I just find out who the mortgage broker is or the mortgage company is that the landlord's using. Of course, there could be leasehold restrictions as well. If it's a flat or it's a leasehold property, you need to check the terms and conditions on that as well. A lot of flats now have written into their lease agreements that you're not allowed to do. Service accommodation, short-term rentals will probably be what it's called, or it could be called holiday lets, but if there's no restrictions in that, then again you're laughing. But these are things that you just need to be mindful of.

Speaker 1:

Another thing is not attracting enough guests. When it comes to letting properties, fundamentally, we put our properties on a platform. It could be a spare room. If it's HMOs, it could be open rent, it could be right moving Zupra and things. It could be on the market and stuff. But if, when it comes to SA, we are going to be marketing 24-7, pretty much, we are always going to have something on. So you're always going to be on those platforms and you really want to make sure that you've got a bit of a business. Make a business out of this. So have your social media platforms with your business page up there, always be advertising, always be promoting it. Why? Because some of the best opportunities and the best profits will be with direct bookings rather than going through the platforms, not attracting the right type of guests as well. And this is where I said at the beginning it's good to have a niche market. So, if you understand who you're trying to talk to as a customer because mark my words these people are your customers. If you understand who you're trying to talk to and look at them as a customer, then you want to be speaking their languages.

Speaker 1:

So what are the fears and worries that potentially people are going to have when staying in your property? Now, when I go anywhere, if we take the dog, we're looking for a property that allows us to take dogs. Yes, we can pay a bit extra for that, but equally to that, my wife's normally looking for something quirky as well, so it might have a dog stand or something like that, where it goes and helps itself to some food and things like that. Quirky little things or a little kennel or a little area for it outside and things. It's stuff like that that we might overlook, but, like somebody in your desired market might look at that and say I need to book that. That's brilliant. I really love the look of that and also remember it's all about the Instagram lifestyle. So people want to be able to stay somewhere that's potentially got that wow factor, where they can take a nice selfie in front of a feature wall and it looks like they're really living their lives. So you really want to make sure that your service accommodation units stand out, but they speak to the market that you're trying to attract.

Speaker 1:

A lot of people when getting started will try and do things themselves. The one thing I've always done with my service accommodation is I've outsourced the management, and I did that very, very quickly. Now some people want to do the management themselves because they want to learn the ropes and things, and that is absolutely fine. There is no right and no wrong answer to this. But the way I thought about it was, if I'm renting or letting, should I say, these properties on Airbnb and bookingcom and things I'm starting from scratch, whereas if I get a management company that has already started, that has already built up, that has already got people that are their customers I'm already starting with like a super host. I'm already up there with the status because I'm piggybacking off of somebody else. So don't try and do everything yourself. Don't try and clean all the properties yourself. Make sure you get decent cleaners in it that specialize in short-term rentals, that potentially can provide the lending and everything as well, and make sure that, if you are using the online portals, that you have yourself a channel manager and you just keep an eye on it all.

Speaker 1:

Okay, not setting up the right systems at the beginning to scale this up? So when I say that, what I say is, if you are going to do this yourself, then start making notes and start filming yourself. And when I say filming yourself, use something, a system called like Loom, where you can actually record what you're doing on your computer and you can talk about it at the same time, because there'll be little jobs and stuff that you'll do with your channel managers, with your bookings and things that at some point you'll grow this business and it might become too much for you. You want to be able to hand those systems, hand those little trainings, as I say, because you've recorded yourself doing things. You've got training videos to a virtual assistant who can then help you and, of course, can take away the little things that you shouldn't be doing, because, fundamentally, you want to be a property investor, you want to be out there finding more deals, growing your business to the size that you want. Then you want to systemize it so that, of course, you can give your time freedom. Otherwise you'll just end up building yourself another job.

Speaker 1:

And of course, remember it is all about the service element. When I say service element, it's about the VIP treatment. People, when they stay at your properties, want to have a VIP experience. They want to have something special. So don't advertise and tell them everything that you're going to do, but go above and beyond. Leave them a bottle of something nice, maybe some cakes, maybe some fresh bread in the morning, just something that makes people think you know what of something nice. Maybe some cakes, maybe some fresh bread in the morning, just something that makes people think you know what. That was really really nice. And if somebody has a bad experience, don't be afraid as long as it's within certain realms, don't be afraid to give them a refund or anything like that, because it's better to do that sort of thing than start getting bad reviews.

Speaker 1:

But make sure you get your service element right and really take a bit of time to sit down and think about what could I do, what could I add to this? That would absolutely blow away the people that are staying here because they're not expecting it and make them want to talk about my property. So if anybody else that they know is going to stay in that area, you are first and foremost on their mind. They're going to say you every time why? Because I tell you what they did. They brought out these cakes and they had this thing and I wasn't expecting all that and it actually blew my mind. And if you stay there you'll get the same treatment. People will then want to go there and it's free advertising for you. So let's just cover a few other things now. A few little more topics. What makes a great deal? Well, location with great demand. So prime tourist locations and, of course, business areas as well. We're very much a business area, but if you are a prime tourist area, then you really do want to be making sure that you've got that outstanding service and you are a cut above the rest.

Speaker 1:

Property types Basically, most properties are suitable for serviced accommodation as long as A the mortgage allows it, if it has a mortgage on the property. If it doesn't have a mortgage, you've got no problems. Or if there's any leasehold restrictions. But depending on your market, obviously, if you've got a getaway for couples and you've got a five bed property, you're going to struggle. Likewise, if you're trying to look for parties and things and you've got a one bed flat, again you're going to struggle. So you've got to make sure that whatever properties you're taking on are suitable, and this is the reason I've actually wanted to do this today, which is help everybody, but also to help Rupesh as well, because he's basically come across a deal now that he's determined to make into a serviced accommodation, and I think that's great and I'm really looking forward to diving into that in a bit with him. But we need to make sure that he's got these elements in place because otherwise he's going to take on a headache and you can lose money with serviced accommodation as quickly as you can make money. So you've got to be on the ball with it.

Speaker 1:

My friend Condition we want to take on properties with minimal refurbishments. We want them at good standards. We might have to put the furniture in there, we might need to give them a lick of paint and things, but we shouldn't have to be putting in lots of money unless you're buying it. Of course, if you're buying a property, you really want to be looking for something that you can add value to anyway. But if we're getting creative and we're doing rent to rent deals and things, don't be putting lots of money into somebody else's property. That's just bad business. Financials below market value. Add value. Know what your desired ROI is when you're looking at your deals and things.

Speaker 1:

I mean, one of the tricks I always love is, if I'm looking at buying a property, I will walk around the block and I will look at everybody else's property and I get some funny looks sometimes, because some people don't have any curtains or anything, do they? So they can see you looking straight at their property. They probably think I'm casing the joint. Well, I'm not. What I'm actually looking for is what have they done in these properties? This property is on the same street. It looks similar to the one that I'm looking at buying. What have they done to it? They've added something to it. Have they gone up into the loft? Is there dorm rooms up in the loft? Can you go down to the cellar? Can I see around the back? Has anybody added extensions and things? Because if the property I'm looking at hasn't got this all of a sudden, I know there's value that I can start adding to these properties. So if I can get it at a certain price all of a sudden, then it seems like a good deal to me.

Speaker 1:

And, of course, competition assess the local market for saturation. Now, the one thing I will say when it comes to service accommodation is more is better. So if you've got quite a few people doing service accommodation in your area, that's not a bad sign. Likewise, I like to look and see how many hotels are in the area as well, because big companies spend a lot of money we're talking hundreds of thousands on finding out whether or not to build hotels in the area before they go and spend millions of pounds building hotels and things. So if they think there's a market there and they're building hotels in the area, then chances are it's a really good place to be doing serviced accommodation as well.

Speaker 1:

And, of course, you can use the hotels to help yourself find some business as well, because if you are looking like we do for contractors, we go around the hotels. Well, I used to go around the hotels. I used to take pictures of all the work bands and then I used to get my VA once a month to ring all the companies up and see if anybody needed accommodation, and we've got some good leads by doing that as well and we've made a bit of fun out of it as well. So there's a lot out there that you can do. There's a lot out there that could be market saturation, but trust me, if you've got five serviced accommodations or less and you're doing it yourself, chances are at some point you're going to get double booked or you're going to need to be able to put somebody else into another property I know we have.

Speaker 1:

So it's good to start reaching out to other companies, get to know them, tell them oh, if I get overbooked or anything and I pass that lead on to you, can I take a little percentage? You do it and I'll do the same for you if you ever get stuck, look to work with people and, of course, make sure and see if there's anything that's desirable around the area, any attractions that can attract guests and things. Make sure that is all over your marketing, because the growth potential for any areas is great. So what you can do there is if you Google your local planning portals for your area. So just go into Google and that and see what planning has gone through, what's coming to the area that you might not know about over the next 12, 13, maybe 18 months, maybe 24 months, because the other thing is if you know for a fact I mean we knew in one of the areas where I'm near, called Birdwell, that they were building factories and they were going to be putting out about a thousand jobs.

Speaker 1:

So what did I do? I started to build a bit of a rent to rent portfolio of HMOs up there. Now they won't do them particularly brilliantly, but I tell you what they are now After. Hmos up there Now they won't do them particularly brilliantly, but I tell you what they are now After the first 12 months and everything they've done really well. And the other thing that we did is we got two serviced accommodations there as well, which were just single lets at the time and they worked really well with all of the builders that were working there and the site managers.

Speaker 1:

So look for growth potential areas and if you can see new things, new buildings, new businesses coming into the area again, it's a great opportunity for us. And this is what I say to everybody. It's all about being the property professional. It's all about having your finger on the pulse in the areas that you're operating in, because once you start to get the foundations of everything that's happening in your area, it's a lot easier to just stay on top of those legislations that are coming in. It's a lot easier to just stay on top of those legislations that are coming in. It's a lot easier to stay on top of what's happening in your area with maybe local licensing and all sorts of funny stuff that councils like to bring in.

Speaker 1:

But when we're starting at it from scratch and mark my words, you don't need to know everything from scratch, but when we're starting at the very, very beginning and getting going, we need to just make sure that a little bit, little bit, step by step, we can actually start to understand what's happening in our areas, and a lot of that can be just networking with people as well. So where are all the good deals? Well, to buy, they're all over the market. At the end of the day, you need to know the type of property that you're looking for. Rent to SA are easy to find if you know, again, your market and, of course, remember what we're looking for as well. So how do you take what's on the market and know if it's a good deal? Well, you need to be able to run your numbers. So there's deal analyzers that are in all of the trainings so you can use the deal analyzers you can actually post into the community.

Speaker 1:

I've just had a look at a deal analyzer. I've worked out a deal here. Could you check my numbers? Post it in the community. I'll have a look at your numbers and so will other people, and we're pointing the right direction. Better to practice before you actually need it.

Speaker 1:

The best deals that we will get will be from helping people with, as we always say, a property problem. I've never done a deal with anybody that didn't have a problem that I could solve, and, of course, you need to identify the most motivated sellers out there to get the best price. If you really want to get your price that is, numbers, that is absolute no-brainer to you then it really will probably be somebody who's quite motivated to do so. Now, as we always say, we don't take advantage of anybody on that. They still have to be good for them, but we need to be able to make sure that we're negotiating win-win opportunities and win-win deals and, of course, you need to make sure that you follow up with everybody as you're going along.

Speaker 1:

Now, one of the things that I'd like to talk about just quickly here is, of course, this Wednesday, we have our first deal clinic. So I've got Rhett from Property Filter coming on with his gadget and tool of Property Filter. Now, whether you use Property Filter or not, it doesn't matter. Rhett will still help you on that call. I'll be there as well to find deals. So we will be looking at certain areas. We can have a look at certain deals. We can stack deals for you. So, realistically, we are here to help you every step of the way, which is what we always say. We'll help you find the deals, we'll help you assess the deals and we'll support you as you build and grow your property portfolio, so there really is nothing stopping you.

Speaker 1:

So I hope you've enjoyed us going through those tips.

Speaker 1:

You can obviously see the video version of this, where I share slides and everything on my YouTube channel, which is Mark Fitzgerald, property investor, so do check that out. Equally, if you are interested in our community that we have now Property Education to Action, where we help teach you all of the skills and everything that you actually need to be successful in property. We also give you the knowledge and the expertise from my power team that are in the community and, of course, we have a community of like-minded individuals all helping to push each other to success. Then do check out education2actioncom, where you can find out more about how you can come and join us. Try it out for yourself and you will not be disappointed. We have a vault that is absolutely fully loaded with thousands and thousands of pounds worth of training for a very modest budget, so anybody can get started. So I hope you've enjoyed this episode. I always enjoy bringing these episodes to you and I look forward to you joining me in the next episode very soon. Take care and bye for now you.