First Time Buying a Holiday Let? Keep These Things in Mind

Holiday lets, or holiday homes, are a wonderful idea for individuals looking to spread their property investments widely. When done right, holiday let investments offer high yields, but they’re subject to specialised legal obligations and mortgage requirements.

Table of Contents

If you think this is your calling, read this guide to grasp the benefits and drawbacks of buying a holiday let in the UK. You’ll also learn more about holiday let mortgages, estimated running costs, rules and regulations, and a few tips for owning a holiday let.

Key Takeaways

– Why Investors are Switching from Traditional Buy-to-let to Holiday Lets
– The Advantages of Holiday Lets
– Holiday Let Estimated Running Costs
– Regulations of Holiday Lets in the UK
– 5 No-Mistake Tips for Buying a Holiday Let

What Are Holiday Lets?

Holiday lets are properties let to other people for short-term stays in serviced accommodation that is not their main home. To qualify as a holiday stay, the duration should range from 1 to 31 days.

It’s important to accurately define a holiday let (or short-term let) for tax purposes, as a holiday let may be subject to business rates while you might be expecting local council tax.

Similarly, your holiday let goals may require you to get planning permission approval.

What Are the Advantages of Holiday Lets?

What makes holiday lets such an irresistible, potentially lucrative opportunity for some property investors is that:

– They’re a long-term solution for storing your capital.
– They come with a relatively lower risk than other investments.
– Peak holiday seasons (especially in scenic or natural locations) offer high yields. The income you may earn in a week could equal a month’s rent from a regular buy-to-let property!
– You can personally benefit from a holiday let or invite your family and friends over thanks to its flexible schedule.
– You participate in improving your local tourism industry.
– They offer tax benefits since they may be classified as a business.

What Are the Disadvantages of Holiday Lets?

Consider these drawbacks before buying a holiday let so you have the right expectations:

– Higher upfront purchase and set-up costs.
– More void periods in off-seasons, so it’s not a steady investment.
– More complex management demands.
– Higher maintenance costs due to more wear and tear than a typical buy-to-let property.
– More restrictive regulations than long-term rental.

Holiday Let Mortgages

After weighing the pros and cons, you need to think about what holiday mortgage schemes look like and how different they are from a typical buy-to-let. For starters, you can’t apply for a regular residential or standard buy-to-let mortgage, but a specialist holiday let mortgage.

What this entails is:

– Maximum Loan to Value (LTV) of around 75%
– Deposits of 25% or higher
– Higher interest rates

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Holiday Let Estimated Running Costs

Running costs will vary based on several factors, such as the property’s location, size and features, guest turnover rates, maintenance, management level, subscriptions, and insurance.

On average, you can expect to spend £7,000 to £12,000 a year on holiday let expenses, which include:

– Cleaning services
– Utilities
– Maintenance
– Insurance
– Hiring a holiday let management company (optional, but it takes much of the burden off your shoulders: bookings, pricing, marketing efforts, cleaning schedules, etc.)

Regulations of Holiday Lets in the UK

Rules and regulations regarding holiday lets can change from one location to another; although, in general, you don’t need a licence to rent one out in England.

– You’ll need a short-term let licence in Scotland for a holiday home.
– London dictates a 90-day short-term letting limit without planning permission.
– In Northern Ireland, your property will have to be approved by Tourism NI.
– Wales is currently working on a licensing and registration framework for visitor accommodation.

5 No-Mistake Tips for Buying a Holiday Let

If you think that investing in a holiday let is worth it, follow these tips to minimise the risks and make the most of your investment:

1. Start by deciding what type of holiday let you want to establish: Is it a city flat, coastal cottage, manor house, or holiday chalet?
2. Assess your financial details and factor in all the expenses, from upfront costs to management and housing expenses, to insurance.
3. Set up a watertight marketing and pricing strategy that generates desirable revenue.
4. Educate yourself on holiday let mortgage requirements, gather all the data and documents you might need, and get ready to present the projected rental income when meeting up with your lender.
5. Find the right lender that’ll support your holiday let buying dreams. Hire a market specialist or broker to help you out with this.

FAQs

Are holiday lets a good investment?

Holiday lets can be a good investment because they generate high yields in a short amount of time.

However, they have their risks, as they’re more hands-on than passive long-term rentals. Plus, holiday lets have higher upfront and maintenance costs, and they sit idle in the off-season.

What to consider when choosing a holiday let location?

A holiday home needs to be in a location that tourists will be interested in visiting, such as:

Natural or historical sites
Nearby major cities
Close to amenities, like restaurants, coffee shops, or markets
Near beaches, museums, walking or hiking spots, etc.

Final Words: Get Advice on Buying a Holiday Let With Assets for Life

Buying a holiday let can be one more rewarding investment added to your portfolio. For a higher success rate, sign up for top-rated property investment education by a UK leading business training company – Assets for Life.

From regular webinars to property investment events, bootcamps, and weekend summits, there’s no shortage of resources to offer you professional guidance.