A serviced apartment is a private apartment of one or more floors (up to eight), which is regularly serviced by the property owner. The apartments are either fully furnished or partly furnished.
They are a luxury purchase in the private sector. The apartments are typically furnished by international hotel brands, that hire in the refurbished apartments, or by local manufacturers. Service charges are an additional monthly charge for all of the service costs.
What is a serviced apartment space?
Serviced apartments can be defined as apartments for lease which are furnished by the owners themselves. Often they are based in prime areas of the city, such as Monaco, Barcelona, Venice, Paris, New York City and Miami.
What is the market value of a serviced apartment space?
In 2014, the Italian Prime Minister, Matteo Renzi, commissioned a report that showed the prices of serviced apartments were around €200,000, or 5,735 euros per square meter.
What is the difference between serviced apartments and vacation rentals?
A serviced apartment space is a private residence, and is considered to be a luxury product. Therefore, a serviced apartment is always an option, whereas a vacation rental usually takes the form of a fully furnished residence.
A private residence is considered to be an asset by investors, because in the event of a sale, the potential gain will be dependent on the size and quality of the asset. Vacation rentals, although private, are usually of a lower standard, but some investors can make money by buying vacation properties and renting them out for short periods.
Is serviced apartment investing a long-term option?
Although it has many advantages, in the short-term, the short-term rewards of owning a private serviced apartment space may not be attractive to investors.
The typical investor owns and manages several private rental properties. The main difference between owning a private residential property and a serviced apartment is that serviced apartments are leased out, while private properties are always owned.
The expense of owning and managing a private rental property is expensive, and a person may find investing in serviced apartments is more financially sensible in the long-run.
A regular income allows the owner to invest the rest of their life savings in other areas, such as property. The owner may take a few short-term rental returns on the service charges, in order to cover the short-term costs.
For the owner, the ideal scenario is a continuous stream of high-quality tenants, that rent out their unit as a short-term holiday rental property. The owner can make the property their permanent residence in the long-run, by keeping the rent under control. In this case, the owner could build up a portfolio of luxury residential properties.
The owner can also have a diversified portfolio, that includes serviced apartments, vacation rentals, luxury properties and private rentals.
In the long-term, the investor will be able to increase their financial wealth by accumulating an ever-growing portfolio of private properties. The owner will be able to take out loans to increase their wealth, and eventually convert their properties into a business to provide more revenue, in order to cover the high cost of the initial investment.
With the introduction of artificial intelligence, machine learning and the internet of things, the ability of investors to take control of their investment assets is becoming more affordable, and easy.