Serviced apartments: How the US vacation rental investments work

Originally conceived as an alternative to city centre business hotels, serviced apartements has become increasingly ppopular within the leisure market. With over 60 per cent of the world’s supply located in the USA, we look Stateside to see how they work.

Tap into tourist demand

Any rental property location needs a steady stream of visitors, which is what makes the USA a reliable market for serviced apartment investors. Orlando in Florida, for example, had 68 million tourists in 2016.

The city houses eight of TripAdvisor’s top 15 of the world’s amusement parks, along with 189 golf courses and some of the best shopping the States have to offer. Right in the middle of ‘The Sunshine State’, Orlando’s climate and attractions make it an all year attraction for sun-worshippers and thrill-seekers from around the world.

The ideal rental property

Serviced apartments are in relatively short supply in Orlando, with most tourists being accommodated in expensive themed resort hotels or private rental villas. However, they are larger than the average US hotel room, making them particularly good value, especially if they’re close to the main attractions.

Private individuals are now able to buy individual 2 and 3-bedroom units in larger serviced apartment developments, with some of them being destination resorts in their own right. Attractions, such as waterparks, surf simulators, lazy rivers and luxury spas, all contribute to above average occupancy rates all year round, while features such as fully-equipped kitchens and extra sofa beds can turn an apartment into accommodation for up to six to eight people for the cost of a single room.

The investment opportunity

Fully managed by upmarket resort specialists, service apartments offer investors a share of the rental income. Following a well-established business model, it is divided thus: 51 per cent to the owner, 4 per cent to a maintenance sink fund to cover future refurbishment, repairs and replacements, and 45 per cent to the management company.

Depending on the apartment’s daily rate and occupancy levels, this can equate to a NET income of as high as 9.4 per cent.

Add to that the unlimited personal usage that the better developments offer, and investors can find themselves with a lucractive investment, which also doubled as a holiday home.

Next steps

Purchase and operating processes vary from country to country, so when considering any property investment, it always pays to speak first to someone who knows the place inside out.

James Harrington, Business Development Manager with Florida property specialists Emerging Property comments: “Orlando is the most popular destination in the world, with record visitor numbers for the last 7 years on the trot. For many it’s the trip of a lifetime and they’re prepared to spend a lot – but if anybody can offer them bigger, better accommodation in a resort that has all the facilities and attractions they’re after, they’ll snap it up.

“Serviced apartments within 10 minutes drive of Disney are getting rave reviews on the hotel review websites, even those developments which aren’t fully complete yet. Orlando really is an outstanding prospect for property investors who are after something a little bit different.”