This month I want to discuss the topic of serviced accommodation, a property strategy which has seen considerable growth over the last two or three years and one which, on the face of it, can really enhance the financial return for a property compared with an assured shorthold letting.
A strategy which also seems to ignore even the basics of due diligence!
As property investors it is key that those who occupy our properties are able to afford the rent and are likely to maintain the property in a satisfactory condition. Pursuant to that goal we expect letting agencies who act on our behalf to thoroughly vet prospective tenants, make checks on current employment status, obtain credit scores and an existing landlords reference. For added security it is customary to take a monetary deposit. Indeed if a letting agent failed to undertake these rudimentary checks they would most likely be accused of negligence and be subjected to criticism by their governing body and their Ombudsman.
This is the way it is done and the way it has been done for many years and it appears to work.
I have to question therefore why, for serviced accommodation, we seem to make no such checks and arguably the risk is greater in that serviced accommodation is also fully furnished. Accordingly there is a greater likelihood of damage and theft.
Now some of you may say that you meet each of your guests to ensure that the Mr and Mrs Jones, for whom you have received a booking, do not transpire to be six young lads on a stag weekend!
Whilst this would hardly tick the box of due diligence it is, I admit, some sort of safeguard. That said, at least one of the major booking sites for serviced accommodation has an automatic booking system whereby the booking can be confirmed without any reference to the property owner and this seems to me to have the potential for risk. By comparison I am sure you would be shocked if your letting agent were to propose a tenant for one of your vanilla residential properties that they had neither met nor referenced!
I do accept that the horror stories are the tiny minority of the circa 17m serviced accommodation guests.
There have been a handful of problem guests which have made the headlines over the last couple of years. One unfortunate landlord found his property in Sweden had been used as a pop up brothel and been raided by the police, another landlord had a guest refuse to leave for a period of 44 days, whilst many more landlords have had guests steal furniture and items and cause damage to the property. I have also heard stories of guests getting sets of keys cut and then returning to help themselves to items from the property at a later date. The clever ones will use the same booking portal to calculate the periods during which the property will be vacant.
Just last week a landlord I know had all the towels, kitchen utensils and the television stolen from his property and upon checking, the guests had booked using a false address and telephone number.
I know from experience that one of the booking platforms does not take a deposit from the tenants. Add to the equation the fact that you may have never met the guest or even have any verified contact details for them and you can see how someone suitably minded could really cause you a headache.
I believe that the booking platforms, encouraged by property folk such as ourselves, should undertake far stricter booking regulations. Verified ID details and perhaps credit card details in lieu of a deposit may be an appropriate starting point.
The current system can be manipulated far too easily. It seems wrong to me that you need to provide more comprehensive ID details to rent a car than you do to rent a property.
You may think that this represents an over-reaction if you have enjoyed great quality guests at your property over a long period of time however without any proper due diligence this is by luck rather than by design.
I would suggest you review the procedure for your guests bookings. Contact them on receipt of the booking to verify the telephone numbers provided and ask for proof of address from them prior to their arrival. Whilst you are reviewing this you could also look at the costs of running the property and how these could be minimised. Motion sensing for heating, air conditioning and lighting may significantly reduce your outgoings, whilst an earlier check out time may increase your chances of being ready for a same day turnover of guests.
Serviced accommodation can be a successful strategy and a way to meet a myriad of interesting people. Some basic checks at the outset could make the process safer, more professional and more lucrative which is to everyones benefit.Back