Post-Covid, buying a holiday let or holiday home has become an attractive proposition for many real estate investors. These investments deliver higher incomes and also serve as a second home for when you want to treat yourself to a break from reality!
Buying the perfect holiday home requires significant analysis and market knowledge to ensure that you are maximising your profit on your hard-earned money. To get the most out of your investment when buying a holiday home in the UK check out the tips below.
When buying a holiday let, make sure the location and property are profitable
Like all real estate purchases, it’s very important to lock in on the right location and the right property type while buying a holiday let to ensure the best returns. But you need to be aware that your perfect holiday location and property may be very different to what others want. Therefore, to really maximise the rent on your property, you must make sure you have checked the stats and ensure it’s well suited to holiday-makers frequenting that area. Properties showcased by Omah are all evaluated and underwritten on 20+ parameters linked to income. Some of these criteria include;
• Proximity to tourist attractions such as a beach or a historical place.
• Proximity to high-quality restaurants and cafes.
• Availability of transport options nearby.
• Low crime rate location.
• A presence of successful Airbnbs nearby.
• The respective property type is suited to holiday-makers coming to that specific area. For example, a flat or apartment is more suitable for couples, whereas houses will be suited to larger groups and families.
•The respective property’s size is competitive compared to other successful properties in the area.
• The property has features that are offered by other successful rental properties in the area. For instance, most successful properties in Dartmouth mostly include a parking space as most travellers coming to Dartmouth bring their car.
Understand income potential of your holiday let in all seasons
It’s a good idea to calculate the property’s average income across the whole year to understand and develop the best rental strategy for you. For instance, owning a holiday home property near a coastal area may be very successful during peak summers, however, it may have less attraction and lower revenue in winters. In such a scenario, it is sometimes beneficial to let it out for longer durations to either groups or people looking for temporary accommodation or you, your family or friends could also make use of your property in down periods.
Do a deep dive on the entire cost structure of owning the holiday let
You may be a serial property investor or may be considering a holiday rental property as your first real estate investment. Nonetheless, it is important to take a close look at all cost elements involved in running a holiday rental property. At the very least, you’ll have to cover marketing costs, insurance premiums, cleaning fees, management fees, repair costs and your mortgage. It may be a good idea to run your numbers past a local professional who runs similar properties. To give our investors that extra peace of mind, we offer income guarantees on our underwritten properties.
Buy only if the holiday home is priced reasonably
It’s been a seller’s market for a while, especially in premium tourist locations. The prices of prime properties in the UK have been rising and most local agents promise sellers that they will get a price of their choice. But it is important that you remain patient and only buy a property with the highest chance of capital uplift. We use multiple valuation methodologies such as sales comparable analysis and discounted cash flow analysis to estimate the predicted value of the property and compare it to the asking price.
Buy a holiday let in cities with a strong short-term rental industry and no restrictions
We propose buying a holiday home in towns, cities and neighbourhoods with deep rental markets, where the local ecosystem thrives on holiday-makers using the available local properties. You should read the potential properties’ local authority websites for their views on holiday lets to understand if there is a risk of any policy changes or articles which may prevent investors from short-letting the property.
Estimate the refurnishing costs required
Unlike buy-to-let properties which are let out without any furnishing, buy-to-let holiday home properties need to be furnished properly before they can be marketed. This will require a good interior design eye or interior designer, coordination with contractors and separate upfront investment. Sometimes properties are sold in a beautiful condition ready to let out, but if not, it is important to create the right look and feel yourself, to appeal to holiday-makers and get raving reviews online.
Consider your financing options
Real estate financing when it comes to buying holiday home rental properties, can be complicated. There are multiple financing options available for a depending on the property’s use and whether you choose to mortgage the property itself or mortgage your primary residence. In the case of mortgaging the property, you’ll probably require a buy-to-let holiday home mortgage – which is a specialist area of finance and not understood that well in the wider buy-to-let financing market. They work like any of your usual mortgages but aren’t available with all high street banks and are instead offered by building societies. You’ll need a larger deposit of 25% to 35% while interest rates will also be higher. We have collated a list of lenders you can approach if you are looking for a holiday-let mortgage. You can also estimate your payment using our mortgage calculator.
Consider legal implications
There are several legal obligations that one has to abide by while running a holiday rental property. Once you buy a holiday home property, you are responsible for the health and safety of the people staying in your property, and you must regularly review that your property meets current requirements. For instance, you must ensure your holiday home property with public liability insurance, should conduct fire assessments and equip your property with the right fire safety equipment. The other important point to keep in mind is how many days you can stay at your property for it to qualify as a holiday let. As per HMRC, your property must be available for letting as a furnished holiday accommodation letting (FHL) for at least 210 days in a year and you must commercially let the property as an FHL to the public for at least 105 days in a year. You also can’t count your family or personal stays to increase this number. Full detail can be found on the the HMRC website.
- The information contained in the above article is accurate at the time of writing, based on our research in the UK. Rules, criteria and regulations change all the time and so speak to one of our experts to confirm whether the information is up to date. Nothing in this article constitutes financial advice.
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