Serviced apartments are a great investment for anyone wishing to expand their property portfolio. It is the lucrative blend of low-risk and high reward. Let see what are the major differences between Rent to SA vs Buy to SA
If you play your cards right, you can start making money from them as soon as you open for business. But there are two ways you can run a service apartment business- Buy-To-SA or Rent-To-SA.
Rent to SA vs Buy to SA ( Lets see what’s different between them.)
The fundamental difference between the two of them is ownership of property.
If you invest in a property that is in the heart of a city with aims to turn it into a service accommodation, it is Buy-To-SA. Rent-To-SA is when you rent a property from a landlord to run a service apartment and use the cash flow from the business to pay rent to the landlord.
Funding for Rent to SA is simple. You rent the property and promise the landlord monthly rent.
Initially, you will have to pay some money to kickstart the business out of your own pocket but once the business is up and running, all the profits after paying for the services to run your SA is yours to keep.
However, you will still have to pay rent to the landlord if your SA is not performing well during the void period.
Whereas in Buy to SA , you might not have to pay rent, but if you have borrowed a B2L mortgage from a bank, then you may use the funds from your business to pay off that mortgage every month.
Additionally, if you have hired a property sourcing agent to take care of the business for you you will have to pay them for their services.
There is a wider variety of independence that comes with owning your own service accommodation that can’t be found in Rent To SA.
Any time there is an issue with property you will have to contact the landlord for redressal and wait for their response.
There are also a lot of restrictions when it comes to renting a property, some that are imposed by the landlord, and those are obstacles that you will have to work around to run business smoothly.
On the other hand, a lot of issues can be easily addressed when you own your property. However, the problem with this is that you will have to be prepared to put out fires at all hours of the day.
Renting can be higher depending on the location of the property. City centers usually have higher rent than the outskirts, but they also see reduced demand in tenancy.
Running a service apartment is difficult as every other business.
But if you know your strengths in your services and have had previous experience in the business, it should be smooth sailing.
However, if you are a first-time Serviced apartments investor, it is advisable to hire an experienced person to run the business with you so that you start making money quickly and learn the tricks of the trade while you are at your job.