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How to Avoid Financial Pitfalls Of Serviced Accommodation · The Property Unleashed Podcast

• 0:00
  Speaker 1: Costly mistakes to avoid when doing serviced accommodation.
• 0:03
  Speaker 1: Hello, my name's Mark Fitzgerald.
• 0:15
  Speaker 1: It's great to have you joining me here today.
• 0:17
  Speaker 1: So what are some of the costly mistakes that we see people doing time and time again when setting up and looking at building a serviced accommodation business?
• 0:27
  Speaker 1: Now, firstly, you do want to set yourself up as a business.
• 0:30
  Speaker 1: If you're doing short-term rental, serviced accommodation, airbnb, holiday, lets all of those great names but some of the fundamentals that you need to make sure that you have in place or that you are aware of are critical to your success.
• 0:45
  Speaker 1: You see, you can lose money doing serviced accommodation or any other property strategy for that matter as quickly as you can make money if you do not know what you're doing.
• 0:54
  Speaker 1: So in this episode here, I'm going to help you with that right now.
• 0:58
  Speaker 1: So, firstly, depending on whether you own the properties, maybe you have some buy-to-lets and you're converting them into serviced accommodation units, or you're looking at doing rent-to-rent, which is where you take on control of somebody else's property.
• 1:13
  Speaker 1: You give them a guaranteed rent, you take the property over as if it's your own, okay and then you let it out on a short-term rental basis.
• 1:22
  Speaker 1: It's really, really powerful.
• 1:24
  Speaker 1: It can work very, very well right here, right now as well, with the way that the market is.
• 1:32
  Speaker 1: You know, the market is very stagnant at the moment, so serviced accommodation can be a great thing to do, but also on that, you've got to watch out for mortgage restrictions when it comes to doing your deals.
• 1:43
  Speaker 1: What do I mean by that?
• 1:44
  Speaker 1: Well, let's say that the property does have a mortgage on it.
• 1:47
  Speaker 1: If the property doesn't and isn't a leasehold property with any restrictions in that, you're laughing, but majority of the time, it's going to have a mortgage on it.
• 1:57
  Speaker 1: Most investors have mortgages on their properties, so mortgage restrictions can be something that you've got to be aware of.
• 2:04
  Speaker 1: So if a landlord or yourself take it as you will buys a property, they normally get a buy-to-let mortgage.
• 2:13
  Speaker 1: Now, we're not talking about HMOs, where it's let out by each and every room.
• 2:17
  Speaker 1: We're talking about your standalone properties that you rent out to a couple of family individuals, but basically people stay in there for over 12 months.
• 2:25
  Speaker 1: That is called a buy-to-let mortgage.
• 2:27
  Speaker 1: That is what you will have on you, okay?
• 2:31
  Speaker 1: So you need to be mindful of the fact that if the landlord has a buy-to-let mortgage on their property, you could, by running it as a short-term rental or serviced accommodation, accommodation break or breach their mortgage terms.
• 2:47
  Speaker 1: Now what does that mean?
• 2:48
  Speaker 1: Well, if it actually gets found out in the mortgage company, then turn around to the homeowner and say you've breached your mortgage terms.
• 2:56
  Speaker 1: They can call the mortgage ie.
• 2:58
  Speaker 1: They can say that you're not going to have this loan anymore.
• 3:00
  Speaker 1: We're not lending you the money.
• 3:02
  Speaker 1: We want you to pay us back our money now because they've lent the landlord or the home not lending you the money.
• 3:05
  Speaker 1: We want you to pay us back our money now because they've lent the landlord or the homeowner money for the property.
• 3:09
  Speaker 1: So this can put you out of business as quickly as you get into business if you're not careful.
• 3:15
  Speaker 1: So how do we go about this?
• 3:16
  Speaker 1: Well, mortgage restrictions or mortgage terms just need to be talked about at the very beginning.
• 3:22
  Speaker 1: So if you're looking at doing a rent-to-rent deal, you've got to make sure that the landlords are aware of what you're doing with their property.
• 3:31
  Speaker 1: Now a lot of people say to me well, if the landlord knows what I'm doing, why don't they just go and do it for themselves?
• 3:36
  Speaker 1: And hey, maybe they will, but a lot of the time they don't want the hassle.
• 3:42
  Speaker 1: If you're offering a guaranteed rent, you just need to make sure that you propose everything in the right manner.
• 3:52
  Speaker 1: So what do I mean by that?
• 3:53
  Speaker 1: Well, for me, rather than saying I'm going to take your lovely property, I'm going to make it into a serviced accommodation, I'm going to earn X amount of money so I can pay you this guaranteed rent, happy days I would be more inclined just to say that we are looking for properties like yours in this area.
• 4:08
  Speaker 1: This property suits the criteria of our clients, ie our short-term rental clients.
• 4:14
  Speaker 1: So it's going to be a great property because we're going to manage it.
• 4:17
  Speaker 1: We're going to treat the property as if it's our own, we'll maintain it to the highest standard and we can put our clients into your property.
• 4:24
  Speaker 1: Are you okay with that?
• 4:26
  Speaker 1: Or do you think there's any mortgage restrictions that you might have on that?
• 4:29
  Speaker 1: Why?
• 4:30
  Speaker 1: Because we will be using licensed agreements rather than ASTs.
• 4:35
  Speaker 1: Now there is a way to get around asking the landlord outright if they think their mortgage will allow them Some landlords.
• 4:43
  Speaker 1: That will scare them.
• 4:44
  Speaker 1: It will put them off doing the deal with you and you might lose the deal.
• 4:47
  Speaker 1: So here's a top tip what I would recommend that you do is find out, if you can, who their mortgage is with Now.
• 4:55
  Speaker 1: It's an easy way of doing this and it's quite simply to say to them have you got a mortgage on this or do you own it outright?
• 5:01
  Speaker 1: And they will normally say, oh, no, no, it's mortgaged.
• 5:04
  Speaker 1: All right, cool, cool, cool.
• 5:05
  Speaker 1: Is that?
• 5:06
  Speaker 1: Is that right with Halifax or Santander or HSBC?
• 5:09
  Speaker 1: And then just go quiet because chances are they'll just say, no, I think it's with Kent Reliance or something like that.
• 5:16
  Speaker 1: Oh, brilliant stuff.
• 5:17
  Speaker 1: Ok, no worries.
• 5:18
  Speaker 1: And you can always say you know great, are they good?
• 5:21
  Speaker 1: Are they bad?
• 5:21
  Speaker 1: Have you have you had much joy with them?
• 5:23
  Speaker 1: Did they give you good rates?
• 5:24
  Speaker 1: You can get into a conversation about that if you want to, but once you know that, you then want to make sure you're connected to an independent mortgage broker OK, somebody who has the lay of the land of all of them.
• 5:36
  Speaker 1: So don't go to your high street banks.
• 5:37
  Speaker 1: Go to independent mortgage brokers.
• 5:39
  Speaker 1: If you need, or likely to refer you to a few, and I don't just say one.
• 5:43
  Speaker 1: There's a couple that I'm very, very close to and that I work with with my own projects and everything, so I can recommend those.
• 5:50
  Speaker 1: Just reach out to me.
• 5:50
  Speaker 1: More than happy to do so.
• 5:52
  Speaker 1: Ask in the comments descriptions, reach out to me on social media, dm me who is it and I'll let you know and you can go and speak to them.
• 6:01
  Speaker 1: So have an independent mortgage broker.
• 6:02
  Speaker 1: You can go to them and you can say this landlord's got a property in this area.
• 6:06
  Speaker 1: They've got their mortgage with Kent Reliance.
• 6:09
  Speaker 1: Do you know, on a buy to let mortgage, if Kent Reliance would allow short term rentals?
• 6:14
  Speaker 1: Ok, chances are they can ask or find out, or they might even know.
• 6:19
  Speaker 1: Ok, it's a really good way to get around the back door, so to speak, without actually scaring people off, because if they do say no, kent Reliance, no chance whatsoever.
• 6:29
  Speaker 1: That is when you would have to dig deeper and go back to the landlord and say I need you to ask your mortgage company if you're allowed to do this type of deal on the property.
• 6:39
  Speaker 1: If they can give you permission, ok, and sometimes they will give you permission, other times they won't.
• 6:50
  Speaker 1: But it's very, very important not to force a deal that's never going to be a deal.
• 6:51
  Speaker 1: You don't want to then get this deal thinking I'm not going to tell him, I'm just going to go ahead and do my own thing.
• 6:54
  Speaker 1: You spend X amount of thousands in there because it's serviced accommodation and you want to make it look really, really nice and then a month later you're told that you can't do it.
• 7:03
  Speaker 1: You've got to take all the furniture out, take that money that you're not going to get back.
• 7:08
  Speaker 1: It's a bad investment.
• 7:10
  Speaker 1: Okay, so very, very important, you check mortgage restrictions on any properties that you're doing.
• 7:14
  Speaker 1: Okay, this is something I help people with, I help my clients with.
• 7:17
  Speaker 1: We make sure, as I always like to say and if you've ever watched my videos or listened to the podcast before, ever watched my videos or listened to the podcast before, you'll have heard me say set yourself up for success, because that's what it's all about.
• 7:27
  Speaker 1: We've got to be the property professional of our area.
• 7:29
  Speaker 1: That brings me on to leasehold restrictions.
• 7:32
  Speaker 1: So some people will be saying I'm going to go for apartments, one bed, two bed flats.
• 7:37
  Speaker 1: I always find two beds is probably the best, because normally with a two bed property you can sleep about six people on there.
• 7:44
  Speaker 1: It gives you plenty of scope.
• 7:45
  Speaker 1: One bed maybe you get four, but six is normally a sweet spot for us in our business.
• 7:50
  Speaker 1: The other thing to that is mortgage or sorry, not mortgage leasehold restrictions.
• 7:55
  Speaker 1: So if it's a leasehold property if it is an apartment and some houses are as well but if it has a leasehold on it, you need to see the terms of the lease.
• 8:03
  Speaker 1: More and more leasehold properties now, apartments that are being built, apartments, flats, depending on where you are in the world.
• 8:10
  Speaker 1: Apartments is American, isn't it really?
• 8:12
  Speaker 1: But apartments, flats, whatever it is, you've got to make sure that the leasehold isn't actually stopping you from doing so.
• 8:19
  Speaker 1: So you need to be able to check the lease on it and see if there's any restrictions to that.
• 8:24
  Speaker 1: Now, if you're doing a deal with an agent or a landlord, ask to see the lease.
• 8:28
  Speaker 1: Can I see the terms of the lease please, so I know what I can and can't do in this property.
• 8:32
  Speaker 1: Okay, don't be afraid to ask these things.
• 8:34
  Speaker 1: These are fundamentals as a business owner and you shouldn't be scared.
• 8:37
  Speaker 1: And if nobody will show you the lease, maybe it's not a deal that you want to waste your money on there.
• 8:41
  Speaker 1: Plenty more deals out there to be done, but you need to check any leasehold restrictions on the property to make sure that you're not going to get caught out Again.
• 8:50
  Speaker 1: I have seen people do deals, put money into deals only for then the actual freeholder who owns the property or the leaseholders come out and say you're not allowed to do that.
• 9:01
  Speaker 1: You need to cease doing that straight away.
• 9:03
  Speaker 1: And it doesn't matter even if the landlord's doing it now.
• 9:07
  Speaker 1: They still need to check because chances are they haven't checked and don't just go off of what they say Nah, I think it will be all right.
• 9:13
  Speaker 1: I would like to see that document, please.
• 9:15
  Speaker 1: And if you cannot get hold of it, just ask the company to send it out to them a duplicate copy.
• 9:19
  Speaker 1: They will be able to get hold of it.
• 9:21
  Speaker 1: Ok, they should be able to get hold of it, because it's very, very important to say that we abide by the lease restrictions on this property, if it has any, ok.
• 9:30
  Speaker 1: The next thing is people get the properties, so they've got the mortgage terms sorted out, there's no leasehold on this property, we haven't got to worry about that.
• 9:38
  Speaker 1: And then they say I'm going to put this fantastic serviced accommodation unit together Brilliant stuff.
• 9:44
  Speaker 1: That's what we want.
• 9:45
  Speaker 1: But they then start marketing it out.
• 9:53
  Speaker 1: Now, marketing branding, getting yourself out there, having a professional website, having a good looking Facebook and social presence, instagram and all of those things is very, very important.
• 10:01
  Speaker 1: And if you're not marketing 24-7, very, very important.
• 10:05
  Speaker 1: And if you're not marketing 24-7, ie all the time your accommodation, then you are leaving money on the table.
• 10:14
  Speaker 1: Okay, you need to be marketing like a ninja.
• 10:15
  Speaker 1: Okay, because another thing that I see is people are not attracting enough guests.
• 10:18
  Speaker 1: Why?
• 10:19
  Speaker 1: Because they're not putting themselves out there on enough of the platforms your bookingcoms, your Airbnbs, your social medias, your own website, promoting yourself.
• 10:28
  Speaker 1: That's what you want to be doing constantly, constantly, okay, so don't set it up as just well, we're going to run a bit of this, we're going to run a bit of that.
• 10:35
  Speaker 1: Have campaigns, set up campaigns to certainly get yourself booked up.
• 10:40
  Speaker 1: Once you get booked up to a certain level, maybe you ease back on your marketing and stuff because you're full, in which case, then, if you're full, you need more properties, don't you?
• 10:47
  Speaker 1: And I would say also, if you've got five or less properties in a certain area, look to work with other people.
• 10:55
  Speaker 1: Look to work with other service accommodation companies, potentially even management companies that are out there, because chances are, at some point you will run out of properties, you might get overbooked, and you want to be able to support that by maybe just giving a book into somebody else who you know is good, that can look after it for you, but you need to make sure you're attracting enough people to your properties or you're going to be losing money.
• 11:17
  Speaker 1: The other thing on that is not attracting the right type of guests.
• 11:22
  Speaker 1: Now, some of that can come down to your area If you've got the wrong area.
• 11:30
  Speaker 1: You're trying to have holiday makers in an area that just isn't holiday makers.
• 11:32
  Speaker 1: Why?
• 11:32
  Speaker 1: Because you found this deal, you just managed to negotiate this deal, but it's in completely the wrong place.
• 11:35
  Speaker 1: Make sure you know your guest type.
• 11:38
  Speaker 1: Is it going to be contractors?
• 11:39
  Speaker 1: Is it going to be holiday makers?
• 11:41
  Speaker 1: Is it going to be partiers?
• 11:42
  Speaker 1: Is it going to be people visiting the attractions and things like that?
• 11:46
  Speaker 1: What have you got in your area?
• 11:48
  Speaker 1: Who are you trying to attract to?
• 11:49
  Speaker 1: And then make sure that your marketing and your branding speaks to that type of guest.
• 11:55
  Speaker 1: You get that right.
• 11:56
  Speaker 1: You will get more bookings than the other people who are just splatter gunning.
• 12:01
  Speaker 1: The whole network, the whole sort of environment, the whole area just hoping that somebody books their property.
• 12:12
  Speaker 1: Make sure you speak to your guests in their language and you will attract more guests as well.
• 12:15
  Speaker 1: And, of course, in SA, it's all about attracting the right people.
• 12:17
  Speaker 1: So make sure that you've got your mortgage in the right place, you've got any leasehold restrictions covered.
• 12:23
  Speaker 1: You're getting out there with your marketing, ok, you're pushing everything all the time, you're attracting the right people to your properties and you're not trying to do everything yourself.
• 12:33
  Speaker 1: I spoke to somebody the other day lovely, lovely person and they were doing everything.
• 12:40
  Speaker 1: They were doing all the bookings, they were doing all the linen changes, the cleaning.
• 12:44
  Speaker 1: They were doing the cleaning.
• 12:46
  Speaker 1: Okay, there's certain things that you should be doing and you will do for a long time in service accommodation.
• 12:53
  Speaker 1: There's certain things that realistically, even from the start, you shouldn't be doing.
• 12:56
  Speaker 1: One of them is you should not be cleaning your own properties.
• 12:59
  Speaker 1: Now, there's nothing wrong with cleaning, okay, hoovering, changing bedding and all of that sort of thing but it's just not the best use of your time.
• 13:07
  Speaker 1: Okay, if you think to yourself well, I can save 20, 30 quid on cleaning if I do it myself.
• 13:12
  Speaker 1: That's what you rate yourself at.
• 13:15
  Speaker 1: That's the time you know, that's the hourly wage sorry that you give yourself.
• 13:19
  Speaker 1: Don't give yourself such a low hourly wage, because you should be out there trying to find more deals, okay, attracting guests, not in there in the weeds, as they say, trying to do everything yourself.
• 13:30
  Speaker 1: So you need to start building systems in, you need to start systemizing things as much as possible.
• 13:34
  Speaker 1: This is again something that we work very closely with our mentees, our students, making sure that they're not trying to do everything themselves, making sure that they're building a systemized business for the future.
• 13:46
  Speaker 1: They're not just trying to piece everything together from you know bits of knowledge and then struggling their way through, because that's where you start to lose money.
• 13:54
  Speaker 1: Ok, so make sure that very early on, you know good systems.
• 13:58
  Speaker 1: Why?
• 13:59
  Speaker 1: Because they're proven, because other people with successful service accommodation businesses are using those.
• 14:04
  Speaker 1: And, of course, you can then just say what should I use for this?
• 14:07
  Speaker 1: What should I use for this?
• 14:08
  Speaker 1: How do I attract this?
• 14:09
  Speaker 1: Who do I go here?
• 14:10
  Speaker 1: Whole power teams there, ticket in the box.
• 14:13
  Speaker 1: We're out there.
• 14:14
  Speaker 1: We're just looking for deals.
• 14:15
  Speaker 1: We're going to grow this business and try and make as much money as we can, whilst doing an excellent job for A the people that we're working with.
• 14:23
  Speaker 1: And the last thing that I will say that you have to make sure that you get right is your service.
• 14:29
  Speaker 1: Ok, it's called serviced accommodation.
• 14:30
  Speaker 1: Ok, it's called serviced accommodation.
• 14:33
  Speaker 1: It means that we want to be delivering a VIP service to each and every client that stays in our property.
• 14:41
  Speaker 1: Ok, you've heard the old saying the customer's always right.
• 14:44
  Speaker 1: Well, we know for a fact that they're not, but there are ways that we can do things to make it feel and think that they are right.
• 14:56
  Speaker 1: But of course, if something goes wrong, you have to be proactive on it.
• 14:57
  Speaker 1: Ok, if somebody is there, and maybe the last night, for whatever reason, the boiler, maybe the pressures just dropped, but the boiler stops working, so there's no hot water, maybe there's no central heating, for that evening you cannot get anybody out there.
• 15:10
  Speaker 1: Ok, refund them.
• 15:12
  Speaker 1: Just give them a refund.
• 15:13
  Speaker 1: Just say I'm ever so sorry this has happened.
• 15:15
  Speaker 1: We've never had it before.
• 15:16
  Speaker 1: We couldn't get whatever.
• 15:18
  Speaker 1: It was fixed in time for you.
• 15:20
  Speaker 1: Give them their money back.
• 15:21
  Speaker 1: Why?
• 15:21
  Speaker 1: Because I'd rather have somebody give me like a four or five star review to say do you know what?
• 15:26
  Speaker 1: It all went wrong, but they couldn't have been nicer to us and they gave us a free night or they gave us a voucher.
• 15:31
  Speaker 1: You know, don't be tight when it comes to your service element.
• 15:34
  Speaker 1: Remember, it is all about service and we have to have the best service five-star service, vip service.
• 15:40
  Speaker 1: So look at your different contingencies.
• 15:43
  Speaker 1: If something is likely to go wrong, something is likely to happen.
• 15:46
  Speaker 1: How can you solve that or how can you have damage limitations if something like that happens?
• 15:53
  Speaker 1: Okay, so let me know in the comments or descriptions or on social media or just reach out to me if any of those elements have really helped you and you've thought to yourself.
• 16:04
  Speaker 1: Do you know what?
• 16:04
  Speaker 1: I've never really thought about that, but I'm glad that I've watched this or listened to this and I think that's really, really going to help me moving forward.
• 16:11
  Speaker 1: And, of course, do check out thepropertyunleashedcom.
• 16:14
  Speaker 1: We have service accommodation, e-books and guides, as well as free training.
• 16:19
  Speaker 1: We have rent-to-rent guides.
• 16:21
  Speaker 1: We have HMO deal sourcing guides as well to help you get out there and do the best property investment that you can.
• 16:27
  Speaker 1: We obviously have paid training and products.
• 16:30
  Speaker 1: If you want to come in there, follow a simple roadmap which is so detailed and with such great support that it's unbelievable.
• 16:36
  Speaker 1: Blow your mind at the end of the day, with coaching sessions and everything to make sure that you only do the best deals.
• 16:42
  Speaker 1: Then you'll find them all there.
• 16:44
  Speaker 1: And hey, if you take on one nugget from this episode and you can leave a five-star review, then please do.
• 16:51
  Speaker 1: I would really, really appreciate it.
• 16:54
  Speaker 1: Thank you for joining me here and I look forward to you joining me in the next episode.
• 16:58
  Speaker 1: Hey, let's do it now.
• 17:00
  Speaker 1: Come and join me now.