Have you ever thought about buying a holiday home to let out as a business? If you have, we explore the various topics which highlight the opportunities, key considerations and steps required to make the most out of your holiday let investment.
It’s important to make the right decisions from the start to get the most of your investment and to enjoy the benefits of your own holiday home bolthole. Getting the practicalities of a holiday letting business right may seem daunting. But with sound advice, proper research, and an understanding of the market, you’ll be on your way to letting success.
Use the quick links below to navigate to a specific topic or continue reading for our detailed guide on buying a holiday home to let.
Buying a holiday home to let – is now the right time?
Buying a holiday home to let has always been considered a sound investment that can generate a great profit, but more so now than ever before.
In the wake of the COVID-19 pandemic, the way in which people in the UK are looking to holiday has changed. With the ongoing uncertainty of travel abroad and the ease of holidaying in the UK, demand is high.
There are also new key drivers influencing the nations choice to holiday locally. Access to the outdoors, convenience and a growing awareness for the need to limit the impact of travel on the environment are among the top reasons the market for UK holidays remains strong.
According to our latest survey, almost four in five of us planned to have a holiday in the UK. This increase in local tourism is set to boost the UK economy by a staggering £30 billion.
With the South West identified as one of the top three most popular regions for bookings, it’s hardly surprising our holiday homes in Cornwall, Devon and Somerset have benefitted from unprecedented levels of demand. And are achieving fantastic booking levels.
Having a holiday home to let can be fun and highly rewarding, so long as you do your research before you begin the buying process. Covering everything from benefits to what costs to expect, here are some key points to consider if you’re buying a holiday home to let.
Key benefits of buying a holiday let
Buying and setting up a holiday home to let represents a significant financial commitment. So understanding the advantages from the offset can help guide your journey.
Your own holiday destination
Undoubtedly one of the key motivators in buying a property, is the luxury and convenience of having your own holiday destination. A home away from home, where happy memories can be made. Buying a holiday home to let allows you the opportunity to have a lucrative letting business which offsets the cost of having your own holidays.
Higher income potential
Another reason people are getting onto the second-property ladder is that holiday homes can prove highly lucrative. Especially at peak times of the year. During the busy summer months, the earnings from holiday property rentals are significantly higher than the returns on a normal long term let. The average income of a holiday let owner is £21 000 per year*.
Buying a holiday let as a potential retirement property
For many, a key benefit is the potential of a future nest egg. A place to retire or part of a pension investment. Often, you’ll find that popular retirement locations are likely to be sought after areas with holiday makers too. So, where better to acquire a future lifestyle financed by others in the place where you enjoy your holidays best?
Cover the costs of improvements at your holiday cottage
Any income received from letting your holiday cottage will naturally cover the running expenses, but also allow you the means to add extra facilities and cover the cost of improvements. A successful holiday let should generate a steady income. Allowing you the chance to improve your property with your future needs in mind.
Enjoy favourable tax breaks as a holiday let owner
Investing in a holiday home to let is a great way of making the most of tax saving opportunities. If your property meets the criteria, a furnished holiday let is considered a trading venture rather than an investment. And therefore, subject to more favourable tax laws than standard rental properties.
Holiday home owners are entitled to capital allowances for certain items that are used in the running of the property, such as furniture and large fittings. All legitimate expenses incurred in running and maintaining the holiday let can also be deducted from the gross income of the property.
If and when you come to sell your holiday home, you could enjoy certain tax benefits. Such as entrepreneurs’ relief, which would reduce the tax on the sale of the property to 10%.
Lucrative future sale of your property
Not forgetting that as with most properties across the UK, inflation means that your holiday home will always be worth more in the future. Provided you choose the right property, and keep it up to standard, you can expect it to go up in value over time. A proven successful holiday let business, will attract buyers and benefit from a good asking price. This translates in additional profit when you sell.
Where to buy a holiday home?
If you are looking at investing in a holiday let, where should you look to buy? Apart from your personal preference, when buying a holiday home to let it is important to choose a location that appeals to holiday makers. A prime tourist location will ensure a high volume of bookings and a good return on investment.
According to our research the top three types of UK break according to Brits are cottages style homes, lakeside/mountain properties and beach front accommodation. Preferably with a sea view, and within walking distance to a beach or coast path. Do not forget areas of natural beauty, Devon has plenty of peaceful countryside and picturesque villages across Dartmoor, Exmoor and beyond!
Close proximity to good amenities is one of the most influential factors in a guests’ choice of holiday home. Situated within easy reach, or better still, walking distance to a pub, restaurant, shops, and visitor attractions will boost a holiday homes desirability and booking performance.
Consider who will be staying at your holiday cottage
Before buying a property, the key to success is understanding your preferred target market. Will you be catering for guests looking for a spacious getaway that’s suited to families? Or is it a romantic seaside bolthole or a secluded woodland cottage for couples? The size, type and location of a holiday property will naturally dictate who you attract.
Couples retreat
A holiday home is often the perfect place for special occasions. Whether it’s a birthday celebration, anniversary or just a romantic couples retreat. Guests seek out a property that will make loved ones feel special. They’re willing to pay a premium and expect the price to reflect the quality.
If you are buying a one– or two-bedroom holiday home, your property will be a perfect staycation for holiday makers. 41% of holiday bookings last year were couples.
Group getaways
With friends and family making up for lost time during the pandemic, group getaways for summer were up by 35%. So, investing in a four– or five-bedroom property, that will attract groups and multi-generational families will also be a lucrative option.
Ensure you offer plenty of space for all guests to eat, sleep and relax comfortably. Also consider a good ratio of living space to bedrooms.
Dog-friendly holidays
A very important part of the family to be considered is the four-legged member. Perhaps your holiday home and the area are well suited to dog owners? Having a property that is pet-friendly means you are able to attract a wider audience. Our dog-friendly properties have seen a rise in bookings by 40% and an 11% increase in income.
What do guests want from their holiday home?
Ultimately, it all comes back to giving holiday makers what they want in a holiday home.
Outdoor Space
Topping the list of things influencing a guests’ choice of staycation are holiday lets with outdoor space. Whether that is a garden, patio, terrace, or balcony, it is a top priority for holiday makers! During warmer months, an outside area doubles as somewhere to enjoy alfresco drinks and dining.
WiFi
Whilst going away on holiday is often about getting away from it all, for many guests, a relaxing break involves watching their favourite box set or catching up on social media. So, it’s no wonder good WiFi is a must for one third of Brits.
According to our parent company Sykes Cottages, there has been a 44% increase in property bookings with WiFi this summer. While most of the South West is reasonably well connected it is advisable to check if WiFi is available at your property.
Log burner or open fire
There’s nothing more welcoming that an open fire or log burner in a property. If you are aiming to achieve good year-round occupancy, a log burner is an excellent asset to attract winter bookings and will achieve 14% more income.
Holiday lets with hot tubs
Having a holiday cottage with a hot tub definitely makes a property more appealing to guests and adds a great holiday experience. A haven of relaxation, a hot tub is a sure-fire way to add a bit of luxury and set yourself out from the competition.
According to the Sykes Staycation Index 62% of guests seek properties with hot tubs. And holiday lets with hot tubs earn 54% more than those without.
How to make the most out of your investment
Whether it’s to generate income, supplement savings in retirement or simply cover the costs of owning a second property, here we look at how holiday let owners can maximise rental income.
Offer short stays
Short breaks are becoming increasingly popular in the UK. Offering short stays allow customers to easily find the holiday they are looking for. By accepting short breaks at your property, it will help secure more bookings and higher income. They also allow you the opportunity to increase the amount your property earns per night and expose your property to a wider range of customers.
Holiday let owners can earn 30% more by accepting short breaks over the winter period, with three-day bookings for this winter up by 111% compared to previous years.
Sustainable holidays
We have seen a growing awareness of the human impact of travel with 20% of guests wanting to book more sustainable holidays. Adapting your holiday cottage to be more eco-friendly and contribute to a sustainable future could help save money and increase the appeal of your holiday let to guests.
So, if you are buying a renovation project, consider giving it some eco credentials. For more tips on how to make your property more environmentally friendly, read our eco-friendly blog.
Luxury homes
If you are buying a property to renovate or make improvements, consider budgeting to finish it to a high specification. Stand out properties enhance a holiday experience.
Recent property trends suggest that as demand increases, more people are seeking the five-star holiday experience. Evidence to the fact is that our luxury homes have seen a 39% growth in demand. Proof that a good investment in interior design and fixtures and fittings will go a long way.
Key considerations when buying a holiday home to let
There are a number of things that are specific to owning and running a holiday let. Some may not be obvious, so we’ve collated key considerations to help with your holiday letting journey.
Furnished holiday let occupancy rules
There are several strict occupancy conditions that relate to any property in order for it to qualify as a furnished holiday let. The property will need to be in the UK and must be furnished so that guests are able to use it.
In addition to these basic qualifying conditions, there are a three occupancy conditions that apply:
- Your holiday cottage must be available for paying guests at least 210 days or 30 weeks a year.
- Of those, it must be let for at least 105 days of that period.
- If your furnished holiday let is rented out for more than 31 days to the same guest, these periods are excluded from the 105 days of letting referred to above.
Read our article on holiday home tax and all things in between which provides an overview of some of the key tax points to consider over the life cycle of your holiday home.
Holiday let mortgages
If you require financing to buy your holiday home, you will face increasingly stringent affordability criteria from mortgage lenders. Unsurprisingly, they require evidence that you will be able to keep up with the repayments on your second home – especially if you have a mortgage for your current property.
They often require a letter from a reputable holiday letting agent. This is to confirm the anticipated gross weekly rental for the low, mid, and high seasons. The good news is, Helpful Holidays are a recognised source for lenders and can provide a letter including an annual projected income to support your mortgage application.
For detailed advice on the subject read our outline on guidance to holiday home mortgages.
Health and safety regulations for holiday lets
Buying a holiday home to let will mean that you have a care of duty to your guests. It means you are legally obliged to provide safe accommodation and do everything you can to minimise the risk from potential hazards. To understand the main points to consider and comply with, read our blog on health and safety regulations for holiday lets.
Holiday let management
When buying a holiday home to let, choosing how it is going to be managed is an important decision. Choosing to manage your holiday let yourself may be a cost-effective option but it is time consuming. You need to make sure that you have enough time on your hands to do so.
Using a holiday let management company is a great way to save time and effort. Finding the right holiday letting agency for expert advice and support can make all the difference to help you achieve holiday let success. Partnering with a team of industry experts like Helpful Holidays, who specialise in the self-catering holiday market is key to your property’s earning potential and overall success.
Costs when buying a holiday home to let
Holiday let insurance
Standard home insurance will not provide adequate cover for a holiday let. Therefore, you’ll need to take out specialist holiday home insurance.
If you plan on renting out your holiday home to paying guests, you’ll need to consider including public liability cover as part of your holiday home insurance policy. If the property is going to be left unoccupied for long periods of time, you’ll need to ensure that you’re covered for the raised risk of water leaks, burst pipes and theft.
Read our guide on how to prevent water leaks in your holiday let.
Council tax and business rates
A holiday home that you let will mean you are responsible for paying tax to the relevant authorities. But different types of holiday accommodation are treated differently for tax purposes. So, it’s important to understand what the distinction is.
For clarity on which would apply to your situation, read our blog on holiday home council tax.
Stamp duty land tax
Another consideration if you’re planning to buy a holiday home to let is stamp duty. If you’re purchasing an additional home, you’ll have to pay an extra 3% in stamp duty land tax, on top of the current rates. And while regular stamp duty is determined on a tiered basis, the 3% surcharge applies to the entire purchase of the property.
Furnishing a holiday let
If you want to be classed as a furnished holiday let, having a certain level of furnishings is part of the requirements. But the great news is that the cost of your furnishings can be deducted from your pre-tax profit.
Holiday let yield
The size and flexibility of holiday properties can affect the potential return on investment. A larger property allows for higher rental prices, as well as appealing to a wider market. It can accommodate various groups of guests and as a result, the property is more likely to generate bookings throughout the year.
If you would like to know how much your investment will return, we can help. We have been successfully managing and marketing holiday homes for over 40 years. We have the knowledge and experience to help advise you on buying a holiday home as well as how to maximise the return on your investment.
Expert advice on buying a holiday let
As with all investments, buying a holiday home to let comes with some risk. Our property team is ready to help you avoid the pitfalls and assist you through every aspect of buying and letting.
No matter where you are in your letting journey, we have the help and advice to take the hassle out of holiday letting.
For more helpful tips and suggestions head over to our Owner Advice Blog.
At Helpful Holidays, our team of holiday letting experts are on hand to offer advice. We’re happy to help answer any questions you may have on a particular subject. Find out more about letting with us, request your FREE guide or call our team on 01647 433593 today.
*Statistics published in Sykes 2021 Staycation Report.
