We are open Mon-Thurs 8am-8pm | Fri 8am-5pm

Mortgage enquiries:
01603 856936
[email protected]

Investing in a holiday property in 2022 – Should landlords be considering this growing market?

According to specialist lender Hodge bank, holiday let mortgage enquiries grew over 170% between 2020 and 2021.

Another report from Sykes cottages, who have over 30 years of experience in the business, report that landlords of short term rentals properties enjoyed close to £28,00 in annual income in 2021, a 33% rise compared to 2019. Our very own East Anglia was in the top 3 fastest growing regions in 2021 for staycation properties.

Why have property investors flocked to this area of the buy to let market?

COVID-19 meant that the majority of us were forced to stay at home for the best part of 12 months between 2020 and early 2021. When the world finally transitioned back to some form of normality, travelling abroad for a holiday didn’t seem as necessary for many people as it did before, it certainly wasn’t as easy, with many countries operating stringent policies to counter rising infections.

Whilst there were already many professional landlords with holiday properties in their portfolio, and a significant number expressing interest, this change in consumer behaviour has accelerated activity for many.

Lenders have recognised this growth and as such, more and more are offering holiday let products than ever before. This increase in products is a good thing for potential investors as the lenders are fighting for the business.

What to consider before you invest in a holiday property

Remember this isn’t primarily a second home. It is a property purchased with the intention of renting it out to holidaymakers on a short-term basis.

To qualify for business rates relief, the following criteria must be met:

  • The property must be furnished and available as a holiday let for a minimum of 140 days a year.
  • The property must be physically let for at least 70 days a year.
  • The maximum length of a single holiday stay can be no more than 31 days.

What are the benefits?

For furnished holiday lets, landlords should still be able to deduct mortgage interest payments from their rental income before paying tax. Energy and gardening amongst others costs can also be offset against the profit, bringing down a landlords tax bill. In comparison, a traditional buy to let no longer enjoys any mortgage interest relief.

In addition to the financial positives, many lenders also allow you to occupy the property yourself for a limited time per year.

Are there any potential pitfalls with a short term rental property?

 

With a typical buy to let property, tenants will be on at least a 6 month tenancy agreement. Holiday properties can be more complicated to manage with regular guests to consider, cleaning, and overall management of the property.
Some tourist hotspots can suffer from overinflated property prices which can mean investors are waiting longer to see a profit. Lender criteria is also typically more stringent for holiday lets than standard BTLs.
With many companies competing to advertise a holiday property – from the likes of Air BnB to Sykes Cottages – it would be easy to assume that securing guests was a foregone conclusion. Remember guests can never be guaranteed, and it would be prudent for anyone considering this type of BTL to factor in rental voids.

 

Final verdict on holiday buy to lets

 

With any property investment we would always recommend doing your homework. This is just a whistle-stop tour on a few points you should think about when considering this area of the market. Further research and professional advice will need to be considered before you proceed with any plans.

 

This is not guaranteed income, there can be periods of fluctuations in rent as well as rental voids.

 

Contact us today
Contact us today for personal mortgage advice and a quote, call 01603 856936 or email [email protected]

Get a Mortgage Quote

Advice that’s tailored to your own bespoke situation.

Enter your contact details and we’ll contact you back within 1 hour (during normal business hours).

Consent(Required)