In 2020 as the pandemic prevented the majority of foreign travel, many of us rediscovered the delights of a UK holiday. Two years on and the appetite for staycations across coastal, countryside and city locations shows no sign of slowing, prompting a boom in the holiday let market as investors seek to capitalise on this emerging opportunity.
However, this is still a niche market and it pays to ask a few questions before embarking on a holiday let business venture.
A holiday let is a property available for short-term rental for a certain number of days each year and for personal use at other times. It must meet the following criteria:
Yes, a holiday let mortgage is designed specifically for a short-term rental property with provision for the owner to stay at the property some of the time. A Buy to Let mortgage is designed for longer term lettings.
As a seasonal business, where income may be irregular and limited to peak times of the year, a holiday let poses more of a risk to the lender. As a result, rates and deposits tend to be higher, a deposit of 25%-30% of the total property value being is more usually required compared to 5%-10% for a standard residential mortgage.
Holiday let mortgages are not readily available on the high street. Instead lenders tend to be smaller building societies or holiday let specialists accessed through a mortgage broker. We advise that you speak to an independent mortgage broker such as Vincent Burch Mortgage Services where you will benefit from a professional overview of holiday let mortgages across the whole market.
Criteria varies but typically includes:
Choosing a popular location is one of the most important factors in the success of a holiday let business. Take time to research aspects such as local market conditions, likely income a property could generate, customer demand in the area, competition and different property types available.
What features will you offer holidaymakers? For example, Wi-Fi and pet-friendly will be high on the list and extras such as hot tubs and open fires are also growing in popularity. Also think about sustainability – some properties have eco-friendly elements such as electric vehicle charging points, solar panels and heat pumps installed.
In addition to the upfront and ongoing mortgage payments, it’s important to factor other costs into your calculations such as maintenance, council tax, utilities, insurance, cleaners, gardeners, etc.
The main tax advantage for holiday lets is that you can still deduct mortgage interest payments from rental income, reducing your profits and therefore your tax bill. Landlords are also eligible for allowances for furniture and fittings – and if your business makes a loss, you can offset it against profits in future years. We recommend speaking to a tax adviser or accountant to understand your individual position.
In popular areas, a holiday let will generate higher rent than a standard long term rental property and there is potential to achieve a healthy second income with the right location, property and level of demand. Analysis by Sykes Holiday Cottages showed that in just two years, average income for property owners went up by 33%, with the most popular regions for summer this year being North Wales, Cornwall, Cumbria & the Lake District, Devon and the North Yorkshire Moors & Coast.
However, as with any investment opportunity, it’s important to seek professional advice to ensure it makes financial sense for your own specific circumstances. Time spent getting it right now will pay dividends later.
As a whole-of-market intermediary, our expert team at Vincent Burch Mortgage Services has access to all specialist lenders offering holiday let mortgages. We’ll work together to understand your individual requirements and find the best mortgage for your plans. With extensive experience, we are well placed to guide you through the process and pride ourselves on helping customers to make the most of their investment.
Get your holiday let business moving by calling us today on 01603 851534 or email [email protected]
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