Should you get involved in the holiday lettings business?

Should you get involved in the holiday lettings business?

Buy To Let, General, New

As a sub-sector of the buy to let business, holiday lettings are often overlooked. However there is one very good reason why you should consider investing in a holiday property as a buy to let investment …. it can be a very effective way to achieve high yields.

For example, a property which lets at £800 pcm on a standard AST could, if well marketed, easily let at circa £1,000 per week during a 10 week period season (summer and bank holidays) and circa £500 per week at other times – offering far superior prospects for yields.

Holiday property can also offer good prospects for capital appreciation too. Should you wish to sell the property in future there is a good chance another investor may be interested in buying it as a holiday lettings business, for more than just the value of the property.

There are a few issues to consider with holiday lettings however:

A holiday property takes much more management time than a standard buy to let.

Finance may be more difficult to secure.

Running costs will be higher. There will also be more wear and tear.

You might also be concerned about the impact on the local community – although some areas are heavily reliant on tourism anyway and properties offered for holiday lets generally benefit the area better than properties which are merely second homes.

There will be tax considerations. Take professional advice to make your investment as tax efficient as possible. But there could also be some potential tax benefits – tax allowances are generally more advantageous for holiday lets than standard lets.

You might even be able to tear up your Council Tax bill by opting to pay business rates instead – which could be much less or even nothing.

Here are Insider’s tips on choosing the right property for holiday lettings:

Choose your area carefully. The coast and countryside, especially national parks, are favourites for holiday accommodation. However, many of these area already have a lot of holiday properties and you will also pay a premium for suitable properties.

Properties away from tourist honeypots will be cheaper but will be less lettable. Try and strike a balance.

Bear in mind that some city and urban locations are now popular for holidays and breaks.

Look for opportunities to maximise your occupancy. Most holiday properties will let readily in July and August. But try and look for locations/properties that offer the best scope for lettings at other times too, ie. areas where there are year round attractions or events.

Another option is to look at locations where there is scope for offering a short six month residential let during the low season.

Check supply and demand. How many other holiday properties are there in the area, and what sort of occupancy do they enjoy? Try to choose areas where demand is strong but supply is limited.

Estimate rents and yields and accurately. Find out what rent you can realistically charge bearing in mind this varies considerably around the year – summer holiday, school and bank holiday weekly rents can be treble those in off peak periods.

Estimate what your annual rent might be using a ‘worst case’ scenario to be on the safe side.

Choose the most suitable properties. Properties with two double bedrooms or more, that will appeal to families or sharers, are most lettable. Also, properties that have room for a sofa bed in the living room will increase your letting options (ie. you could accommoate two more people) and increase the rent you can ask.

Look for the features that appeal to holiday tenants. Private parking, some outside space for the summer and an open fire for the winter top most holidaymakers’ wish lists. Walking distance of a pub and shop are also sought after.

Tip. Try and find a USP for your property, to set it out from similar properties. For example, in country areas properties that offer safe bike/sports equipment storage and/or that can accommodate dogs are sought after but in short supply.

Fit out and equip your property to a suitable standard. Depending on the type of customer you anticipate pitching the property at, and the rent you intend to charge.

In general terms properties that are fitted out to a higher standard not only attract a higher rent but are more lettable too. Poorly presented properties can be difficult to let even at a low rent. Holiday property tenants generally expect a holiday property to be as good as, or better than, their own home.

Unless you are operating at the budget end expect to provide features like good wifi, cable/satellite with a large screen TV, a dishwasher, power showers and beds that are of good quality hotel standard.

Decide how you will manage and service the property, on changeover days and so on. Are you able/willing to do this yourself, or will you need to find a local agency or manager to do this?

Decide how you will market your holiday accommodation. You may decide to use a holiday accommodation agency – they will find customers and manage your bookings but will charge a commission.

Websites likes AirBNB and Booking.com are other possibilities to consider. Here’s a useful article on using AirBNB.

Alternatively you could set up your own website, promote your property using holiday accommodation websites or use offline advertising – but be aware of the time and expense this will involve.

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