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Holiday Home Investment: Worth The Money?

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Holiday home rentals, also known as holiday lets, are an increasingly popular option with families thanks to the flexibility they offer. With more space to spread out and get comfy, and greater choice about what you eat and when, holiday lets provide a home away from home feeling. Larger properties have a distinct advantage over hotels as several families can come together, and eat, drink and sleep in the same place.

Done right, a holiday home investment can also be a very shrewd move. A study by the London School of Economics indicates that the gross income of all UK holiday lets reaches approximately £950 million a year, with approximately £450 million spent on associated employment and purchases, thus benefiting the wider economy too.

Choosing the Right Location

Often the temptation when considering investing in a holiday rental property is to think of sun, sand and family summer holidays. However, you need to bear in mind that many seaside resorts only have a relatively short rental season and numerous facilities may close during the winter months. If you are looking to maximise the number of letting weeks, it may be better to look at locations with all year round visitors, such as the National Parks or even historic cities.

Getting A Return On Your Holiday Home Investment

From a financial perspective, a holiday home investment can offer lower levels of risk than other types of investment as it is not subject to the volatility of the stock markets. Unlike a traditional buy-to-let which is typically occupied by a tenant all year around, you can actually enjoy a holiday home yourself. However, you may be wise to avoid such indulgence during the high demand summer months and Christmas, as weekly rents can soar and offer the best opportunity to get a good return on your holiday home investment.

The average UK holiday home is occupied 30 weeks a year and costs approximately £6,000 to run. Subsequently, the average holiday let owner earns £12,750 gross annual income. Obviously, this figure varies according to the type of property and its location, as well as the amount of effort put into marketing it. However, holiday homes aren’t just sound investments in the short term. Many owners will eventually sell their primary residence and retire to their holiday home in a more idyllic location. Alternatively, they are a brilliant asset to pass onto children.

Recent changes to buy-to-let regulation, including the introduction of a 3% stamp duty surcharge on second homes and greater restrictions on mortgage relief, have put people off investing in additional properties. Holiday lets however, do remain popular. Whilst they are still subject to the 3% stamp duty surcharge, holiday lets are considered to be trade for HMRC, as opposed to an investment. This means that the mortgage interest, council tax, maintenance costs and utility bills can currently be offset against any income.

Defining A Holiday Let

However, these tax incentives only apply to holiday lets, not simple holiday or second homes. Before you confirm your holiday home investment, you need to seriously think about whether you’ll be renting it out and whether you will meet the criteria. A let must be available for a minimum of 210 days every year, of which it must be occupied 105 days. There can be no long-term rentals of over 31 days that amount collectively total over 155 days.

Managing Your Holiday Home Investment

If you live relatively locally you may choose to manage your property yourself to keep your overheads down.  However, if not you may want to consider renting through a specialist holiday rental company who can also manage cleaning, maintenance and gardening on your behalf.  Our property finders have excellent links with national and local holiday rental companies and can advise you on the best options for you.

County Homesearch can help you find your perfect holiday home investment, for personal use or let. Contact us on 0333 939 8300 to discuss how we can help you.