Marc Willton didn’t hold back during his first foray into the London serviced accommodation market. He advertised the property online before he’d even signed the contract, using the estate agent’s photos. He laughs: ‘I’d never do that again.’
If you’re interested in serviced accommodation, then why not check out our free SA resources including a deal analyser, styling guide and essential shopping list?
Thankfully, a combination of hard graft, his 28 years of project management experience and a spattering of good fortune allowed him to sign the contract on 21st December 2016 and have the first guests stay three days later on Christmas Eve.
Acquiring the property as a joint venture
Mark’s background is in project management, having been in property and construction since the age of 16. He’s now 44. He has been involved in serviced accommodation since 2015, but the three bedroom, centrally located Westminster apartment was his first step into the London market.
He found the apartment through a local agent and set it up as a joint venture with two others on a rent to rent basis, paying £740 per week, ‘One person found the deal, one person set up the deal and one person managed the day to day running of it,’ Marc explains. He was responsible for the latter. The trio set up a limited company for the property, each with a third share, in order to split the profits.
Setting up the apartment: a race against the clock
Having only 3 days to prepare the apartment for its first guests, the initial 72 hours were challenging to say the least. ‘It was just a mad panic,’ admits Marc. ‘Luckily, the property was already furnished which took some pressure off. We needed a couple of extra sofa beds in the living room.’ He adds: ‘The rest of it was cosmetic generally, making it look prettier.’
They bought most of the furnishings online, but many items were lost or delayed in the chaos of the Christmas post. At a loss for solutions, Marc’s partners resorted to taking a taxi to John Lewis and buying tonnes of last minute items. ‘It was a mixture of online and buying stuff and getting in the taxi with a load of bags,’ Marc adds. ‘It was a bit of mayhem to be honest.’
Finding guests
Marc placed adverts for the property on three major OTAS: Booking.com, Airbnb and HomeAway. ‘It was really interesting,’ he says. ‘Since I’ve done more and taken on more I hardly get any booking on HomeAway, but that property [the Westminster apartment] for some reason was getting lots of bookings from HomeAway. More than I have for all my other ones put together.’
‘I think what it was that we got a lot of Americans and I think it’s quite big in America. What had happened at the time was that the pound had really dropped against the dollar and we were getting a lot of people coming from the states throughout the summer and the year.’
However, with SA properties he has managed since he says the trends have reversed. Booking.com brings in around 75% of his guests, with almost all the rest coming from Airbnb.
Despite the apartment having been located opposite the Home Office, Marc says that the vast majority of guests were tourists. ‘Mainly families or groups of families, because actually it can take ten people that apartment,’ he says. ‘Sometimes you’ve got two families there, sometimes you’ve got grandparents, parents and kids.’
He says that occupancy rates were generally above 80% on average. In July 2017, they had one day with noone in the property. Marc attributes these enviable occupancy rates to the size of the apartment. ‘I find that the bigger the property, the more interest people have in it and the more financially beneficial it is.’
Weed smoking students and a reluctant goodbye
Marc describes the Westminster apartment as ‘a brilliant property, making good money.’ Why then in April of this year did he leave the SA project for good? It’s a meandering story which begins with some of the guests complaining about the nextdoor neighbours. ‘The neighbours were actually students and they tended to have parties every bank holiday in particular,’ says Marc. ‘They smoked a lot of weed too, so you got the smell of weed going through the air conditioning and into the apartment.’
Marc and his partners raised their concerns with the concierge, but no steps were ever taken to resolve the problem as far as Marc is aware. Then just before Christmas 2017, a letter went out to all residents of the block setting out what was and wasn’t allowed. ‘There was one paragraph in the middle of it that said: we do not let Airbnb-type, short-let properties. We don’t allow it,’ says Marc.
‘It was quite strange because we’d seen the head lease and it didn’t have anything in it. We’d also seen the contract from one of the largest estate agents. They actually have a serviced accommodation contract, which is the first I’ve ever had from any agent.
‘They knew what we were doing.’
Marc and his partners decided to leave it a few months and see what happened. In the meantime, they became aware of other serviced accommodation operators in different blocks of the tower. Unlike Marc and his team who employed someone to check in the guests, these operators were being lax on security.‘They weren’t checking the guests, making sure they weren’t having parties,’ says Marc.
‘There was a couple of parties that happened that upset other residents which had a knock-on effect.’
A few months after the initial letter, their landlord received his own formal letter. It contained, ‘a few scary legal this thats and the other,’ says Marc. ‘Threats.’ The landlord pulled the plug on the apartment shortly after and they were forced to leave. The dope smoking, party students stayed.
Managing through packages
Despite the unlucky circumstances surrounding the Westminster apartment, Marc hasn’t been put off SA and he is still growing his serviced accommodation business, with properties in both London and York.
He juggles his property business around his day job, having trialed stopping for 9 months, but finding it didn’t quite bring in sufficient money. In order to save precious time, he splits the business into different parts, that he names packages. ‘I see the cleaning and linen as a package. I see the meet and greet as one package. And the maintenance is another package,’ he says.
‘Within those people, the maintenance guy was just one guy, the meet and greet was just one guy, but the cleaning firm was a multitude. I only deal with one person there.
‘You manage it by just managing one person that’s in a business of multiple people. If you put it into packages it makes it easier because you haven’t got as many people to deal with.’
Costs
Deposit: £0
Set-up and furniture: £5,000 (expenses increased because of lost deliveries)
Deep clean: £200
Miscellaneous: £250
Monthly rent: £3,250
Monthly cleaning & linen: £550
Monthly bills: £400
Best month: July 2018 (£12000 revenue on outgoings of £4200).
£34,500 dividends for the 15 months the property was active (final accounts complete and all costs, corporation tax and director loans paid back).
£2,300 net profit per month.
Further information
sojournshortstays.com – Marc manages properties with his business partner Paula Tomlin-Kent in London and York.
If you’re interested in serviced accommodation, then why not check out our free SA resources including a deal analyser, styling guide and essential shopping list?