Serviced apartment

[Partridge]

Me and my husband have no pensions. We are comfortable (dependent on dh income as a contractor which has been stable for 8 years but is obviously very subject to the economy - when contracts are up for renewal can be hairy). We have a small mortgage on our flat in the centre of Edinburgh.

Through our garden gate is a very very pretty and unique property that we would need to borrow everything to buy. We are both thinking longer term about elderly parents and how convenient it would be looking after them in this (2 beds 75 sq m).

We would have to get a buy to let mortgage with a ltv of around 70% (I think) and I was thinking that we could possibly do serviced short term lets. Has anyone done this? The scary thing is that we would need approx 80% occupancy to make us break even. This is very ambitious so realistically I am thinking that we would be running at a bit of a loss - making life distinctly less comfortable.

Is this crazy? Or is the long term benefit of having somewhere for elderly relatives/somewhere for adult children to visit with their families/ another asset eventually worth it?

I think we could make it really really special - the proximity would make it easy to manage and we would keep it indefinitely - so there would be capital appreciation. We have crunched the spreadsheets and listed the pros and cons ad infinitum and seem to be stuck and indecisive. Part of me just thinks - fuck it - you have to speculate to accumulate - and part of me is terrified. I'd love any words of wisdom - thanks.

Before you take this any further or outlay any money, I suggest you spend about £15 and get a copy of the lease from land registry. Most leases prohibit short term lets, and a lot of those which even allow long term standard ASTs require you to gain permission from the freeholder which can be an expensive process which you would need to be factored in.

Thanks but it's a freehold property so we would be buying the freehold.

It's not a loss if you are counting repayments as part of your calculations. That would be investing in your future for which ou'd have the asset of the property.

Property is not a very liquid asset so you won't be able to count on getting your money back from it quickly if you needed to.

I'm surprised that in the current property market you'd need to rent out 80% of the time on short term lets to cover costs are rents that low for short term by you?

In my very limited experience buy to let mortgages are more expensive than on the property you live in. Could you remortgage your flat to get the money for less? That would have repossession considerations etc but all food for thought.

How would it work with elderly relatives there, would you be in a position to get them to pay to cover costs?

Go for it. I'm sure you'd get over 80% occupancy in Edinburgh city centre easily. Is it in at offers over though? Friends getting constantly outbid at the moment - still going for lots over.

Sorry, I assumed it was a flat or apartment from the title - as long as you own the WHOLE freehold then it won't be an issue, ignore me!

We can't remortgage unfortunately - I am crap at the mortgage side of things I'm afraid but there is some reason why we can't. Because we don't have much capital to put down on it we would need 80% occupancy on a holiday letting basis to pay mortgage and I think that is interest only. In some ways it seems a little crazy, but we would be in it for the long term and would probably inherit some money during that time that would take a chunk off the mortgage. Thanks for advice so far.

How are you going to - practically - manage the short term serviced apartment? Are you prepared for the commitment? I don't think you can depend on capital appreciation, even in Edinburgh. I heard recently that Aberdeen (the oil capital of Europe apparently) has dropped 9% in the past year (house prices)

PS I'm not saying you shouldn't do it. It is scarey. I'd feel the same.

I think I can count on capital appreciation over 20+ years. It would be if there was a disaster and we had to sell that it would be scary but that shouldn't happen. Parents will sell and downsize to it in 15 - 20 years so we are projecting v long term.

It is a very unusual property and they are not making these kind of properties any more. Having said that it has been on for an offers over price since the end of June and only has 2 notes of interest. It is on for offers over 15k less than they bought it 4 years ago. It has a home report valuation of 30k over the offers over price. So hard to know where to pitch it.

My husband and I are pretty risk averse so it is quite scary. Regarding servicing it I am happy to do laundry/clean but may be radically underestimating the commitment. Would be interested to hear other's experiences.

It sounds like almost a one off opportunity for you to have something rather unique in a great location. Why do you want to have short term serviced accommodation? It does make more money, but it is more work. Could you let out longer term and cover expenses etc?

a market for the serviced let could be the Mon-Thurs commuters, who work in the city but vacate on a Friday morning. You could then let it out as a weekend city break apartment. The commuter let would be long term, so a guaranteed income, and the weekend holiday let as a bonus, paying higher 'holiday' rates.

Good idea. Longer term would work out at approx 6k loss a year

Short term would need high occupancy to cover costs...