3X Your Rental Income
Heard this before? I certainly have. My mate Mat Smith was the first I remember talking about serviced accommodation on regular rental properties.
The headline is:
3X Gross
2X Net
Here’s the idea:
If you want to turbo charge your rental income, and you’re happy to put some time and energy into it (and it’s the right property! (very important!)) … you could double your income (after taking into account the extra costs of running SA).
I said ‘2X Net’ … I suppose that’s cheating slightly. What I really mean is 2X the AST rental income. So that’s after paying for things like linen, cleaning, OTA fees, utilities etc … But before paying for all the usual AST expenses (mortgage, service charge etc etc). So the 2X is directly comparable with your AST gross rent.
The rule of thumb says you should make double that.
if you typically spend say … 80% of that income running the property … that leaves you with 20% as profit (before tax).
So if you do SA on the same unit, and run it properly, the rule of thumb says you’ll end up with 120% of your gross profit figure. That’s 6X the profit!
Not. Too. Shabby.
Now before you all go running off to do SA, remember you need the right property. And if it’s a leasehold flat, you need the right lease. Not to mention stellar photos, phenomenal responses, and a sliver tongue for guess comms.
For me this is all a bit too much, so I decided a little while ago to let someone else run my SA flats. Thank you Smart Apartments
There are at least 2 ways you can do this:
- Management – like a letting agent, an SA operator will run your SA for you and take a cut of the gross income, usually 15% – 20%. This is a form of partnership I suppose. At least because if you succeed, they succeed. You need a trusted relationship here. With someone good. Very good. This time of operator can be tricky to find. Not impossible. But tricky.
- Rent2Rent SA – a very fancy sounding name for a relatively simple concept. The operator rents the flat at a fixed rent (probably similar to the usual AST rent). For a fixed period (often a number of years, say 5). You’ll heard words like ‘guaranteed rent’ and ‘corporate let’ used a lot here. Avoid or ignore the buzz words. They’re not worth the price of the course they were spewed from. In a Rent 2 Rent scenario, they operator takes all the risk about whether the SA is succesful, they pay you the monthly rent, pay all the bills, and hope there’s a decent surplus to reward them for their hard work (N.B. There often is for the right well run property).
Neither way is foolproof, nor to be avoided. Both can work just fine. Just get the right person. I do mine management style with the excellent Smart Apartments (Neil and Chris).
So what’s the point of me telling you all this …
It’s yet another way to fast track your investing. To cheat the income or capital growth trade off.
If you want help right away making passive income, check out my mentoring programme, just £85 a month https://kingproperty.co.uk/sign-up-for-group-mentoring/
