A Guide To Buying A Holiday Home For Investment

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Why buy a holiday for investment?

In the UK, buying a holiday home for investment is a very attractive proposition. Why? Because when managed correctly, they deliver excellent returns. Currently, there are approximately 165,000 holiday lets in the UK, and in early 2018 their annual yields were consistently higher  than that of standard residential buy-to-let properties. In 2016, the average UK holiday home owner was able to generate an additional £22,281 in income from their letting activities. The average for residential tenancies was half of that at £11,052.

Research by Second Estates indicates that during the UK’s peak holiday periods, the average holiday home owner can earn £1,200 for a single week. Those living in the most in-demand areas can achieve nearly 6 times the average weekly rent of a standard buy-to-let in the same period. It is this peak season that sustains holiday home owners through the less profitable periods of the year, ensuring that the property returns on the initial investment.

Even if your holiday home doesn’t deliver quite that level of return through letting, it can still be a worthwhile. As with all forms of property, if you choose the right location and keep up the maintenance, you can expect to make a profit when you come to sell the property on.

In order to succeed as a holiday let, you need to treat your holiday home like any other business. That means investing in marketing, meeting the needs of customers and responding to their feedback, and ensuring an excellent level of cleanliness within the property. Here’s everything you need to know about buying a holiday home for investment.

 

A Guide To Buying A Holiday Home For Investment

Consider The Sort Of Property

When viewing potential holiday homes, either by yourself or with the help of a property finder, bear in mind who your ideal client is. For example, if you’re looking to target families you will need a property with a minimum of 2 bedrooms, preferably more. If sports are a big tourist draw to the area, such as skiing in the Scottish Highlands or surfing in Cornwall, you might want a property with sufficient space for guests to store equipment and specialist clothing.

From a marketing perspective, a more unusual or historical building might be an attractive option. There may be a backstory for you to sell to guests. However, the advantages of this should be weighed against the additional expense that may be required to maintain an older building.

Don’t forget to consider the outdoor space! As well as being a draw for families, dog-friendly properties are always in high demand.  However a very large garden with a great expanse of grass and flower borders can sometimes be more trouble than it’s worth in maintenance. A patio or decking may be a more practical option.   

Choose The Property Location Wisely

If you were buying a holiday home simply for your own use, you could pick anywhere you like in the UK. It can be as remote or populous an area as you like Buying a holiday home for investment changes things slightly. If you want to guarantee a return on your investment, we recommend choosing a town or village with a proven level of interest. Ideally, there would be plenty of local attractions to keep guests entertained, as well as pubs and restaurants. Holiday homes might be self-catered but people still like the option to eat out on holiday.  You also need to take into account seasonal variations. Some coastal towns for example can achieve excellent returns during the summer holiday period but become ghost towns in winter. Whereas other locations like National Parks attract visitors all year round.

Wherever you choose to buy in the UK, you have an advantage over those who purchase a holiday home abroad in that you can visit the property more easily yourself – whether for your own holiday or for regular maintenance.

Securing A Holiday Home Mortgage

When it comes to securing a holiday home mortgage, you need to be clear on whether or not you plan on letting it out on a regular basis as this will require a slightly different mortgage. A specialist building society will be able to take you through the details.

Establish The Level Of Tax You Need To Pay

In the UK all holiday homes over £40,000 are subject to a 3% stamp duty surcharge. There are some tax relief options available for furnished holiday lets, but you must meet certain criteria in order to qualify. The holiday home must be available for guests to let a minimum of 210 days each year, with bookings for at least 15 of those days. To ensure that your guests are genuinely holiday makers, you aren’t allowed to take bookings of more than 31 days.

Beware Of Hidden Costs

When it comes to managing and buying a holiday home for investment, you need to consider all the potential financial costs before making a final decision. These include the following:

  • Hiring an agency to manage the holiday let on your behalf
  • Paying for a cleaning service between each guest booking
  • Retaining emergency funds for maintenance and repair work
  • Expense of travel for you to visit the property

 

County Homesearch are experts in helping people buy a holiday home for investment, whatever your requirements. Contact us on 0333 939 8300 to discuss how we can help you.