Five Reasons Investors Choose Serviced Apartments
The structure and business model of serviced apartments mean investors can experience a range of benefits unique to this style of property investment. Here are the top five benefits investors enjoy from investing in a serviced apartment.
When you purchase a serviced apartment, you can select from a range of properties that have already undergone significant due diligence. Each property will have been vetted by the serviced apartment property company to ensure its location and style of accommodation suits the serviced apartment market, which is largely aimed at business and corporate travellers. Due diligence includes assessing the area to evaluate local economic conditions, business opportunities and infrastructure development, to provide investors with the confidence the property they are buying will be part of a sustainable and successful business model.
Serviced apartments are an investment most choose to keep for the long term. Serviced apartments are leased not to individuals, but to a third party company who then lets the apartments to guests, just like a hotel. The relationship between the investor and third party company is established through a long-term lease, usually for 25 years, made up of 5 year lease options. This provides both parties with confidence: the investor knows they have a high quality tenant for the long term, and the third party company can rely on using the apartment for short stays.
Undoubtedly, one of the most popular benefits of serviced apartments is the cashflow they deliver to investors. The third party company is your tenant, and each month will pay the agreed rental rate for your property. This means a reliable, steady source of income for investors. Cashflow is a significant element of many investment portfolios, and the fact serviced apartment rental is to a company rather than an individual provides additional security and peace of mind to investors relying on this cashflow income. Plus, incremental rental increases are scheduled in, allowing investors to budget and plan for their lifestyle accordingly.
4. No loss through vacancy
What’s more, the rent is paid directly into your account each month, regardless of whether the apartment is occupied or not. As the lease is between the investor and the serviced apartment company, not the actual guest, you are still paid your monthly rent, even when the apartment is vacant. This means loss of income due to vacancy is simply not an issue.
5. No management fees
Serviced apartments occupy around 25% of Australia’s market share in accommodation, demonstrating a strong position that assured the ongoing viability of serviced apartments as a property investment option.