‘Flex Lease’ Comes to the UK : Higher returns, lower risks for BTL Investors

The UK is seeing a new emerging approach to renting, which should see buy-to-let investors rewarded with high premiums and lower risks.

‘Flex-lease’ started in the US and works by seeing 10-20% of a residential building allocated to short-term rentals and the remaining 80-90% to long-term rentals

Under this idea, developer Sonder has opened blocks in central London, including on Great Peter Street in Westminster, but also in Glasgow and Edinburgh.

And it’s becoming a growing phenomenon among investors.

The new hybrid approach allows a residential building to capitalise on peak pricing periods in a way that long-term residential rentals can’t, according to Matthew Pohlman, a partner at Goodwin’s Real Estate Industry Group. 

A key factor influencing this increased investor interest in short-term rentals is the ability to drive stronger, more robust margins relative to units leased on a long-term basis. Covid has accelerated a trend where guests are looking for more ‘in-room’ amenities – like kitchenettes and workspaces – to support longer stays in the destinations they are travelling to.

Short-term rental operator Viagem over in the US is taking the approach a step further by joining up with real estate investment companies which can then manage a percentage of units in their property portfolios.

The owner and the operator then share the revenue generated. 

What do flex apartments offer?

The flex apartments offer self-check-in, fast wi-fi and useful workspaces, all in prime urban locations. As the way we work has changed, these are sought-after benefits for people taking the ‘digital nomad’ approach to work.

As an example, Viagem manages 40 units of a 230-unit block in Myrtle Beach in South Carolina. It then uses its own platforms to advertise the properties and takes care of the day-to-day operations. In the first six months, the company recorded a 98% premium above regular rents, despite the seasonal nature of the destination. 

Many people use short-term stays after relocating, or use it as a stepping stone before committing to longer term stays according to the company. 
With the increase in remote working, experts expect to see greater confluence between the two types of living accommodation. Book a call with our mortgage advisors to see if this could be the next step for your landlord portfolio.

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