Is Investing in a Holiday Let a Good Idea?
Is Investing in a Holiday Let a Good Idea?
When purchasing a holiday let, evaluating whether the investment is suitable for you is essential. There are several things to consider, such as the state of the market, your potential income, and the dangers involved. If the market is strong and you are confident in your ability to generate rental income, then a holiday let can be a wise investment.
However, if the market is unstable or you are not sure about the income potential, it may be best to wait or look for another opportunity.
Finally, your financial position and investment objectives will determine the answer.
Let’s dive into more detail to discuss if investing in a holiday let is a good idea.
What is a Holiday Let?
When purchasing real estate, knowing the difference between a holiday let and a long-term let is critical.
A holiday let is a short-term rental of a property, usually for a night or a few weeks, to holidaymakers. Typically, a long-term let (or buy-to-let) refers to a property rented for six to twelve months or longer. While there are some similarities between the two, there are also some key differences that investors need to be aware of.
Holiday lets are often furnished and ready to go with all the essential facilities for a relaxing stay, while long-term rentals may not be. Similarly, holiday lets are usually located in popular tourist destinations, whereas long-term lets may not be. As a result, holiday lets can be more expensive to purchase and maintain than long-term lets.
However, they can also be more profitable, as holidaymakers are often willing to pay premium prices for quality accommodation. If you are unsure what investment is best for you, consider your goals and objectives carefully.
If you are thinking of turning your holiday home into a business, there are a few things you need to know.
First, you will need to prove that you are in it for the money: your property must be furnished to qualify as a Furnished Holiday Let, and you will need to make it available for holiday leasing 210 days out of the year. If you let your property out for 105 days or more, you may be able to deduct certain expenses from your taxes. If you are prepared to put in the effort, a holiday let could be a lucrative business opportunity.
Are Holiday Lets a Good Investment?
Running a holiday let is a business, so you need to approach it as such. This means doing your research, being aware of current market conditions, and understanding the financial ins and outs of the business.
Additionally, it is important to remember that while there can be significant economic benefits to owning a vacation rental, it is not all about the money. You also need to enjoy the property and ensure it meets your personal needs. With the right attitude and approach, owning a holiday let can be a hugely rewarding experience – both financially and personally.
Let us look at a few reasons why holiday let investment makes sense.
Staycations Holidays are becoming extremely popular in the UK (United Kingdom). With people moving away from foreign getaways, the demand for self-catering staycations has grown at an unprecedented rate. Britons love a good staycation. In 2019, they spent over £24.7 billion on domestic holidays, an increase of almost 3% from the previous year. And the trend is only going to continue. The closure of international travel due to COVID has made people more aware of the excellent holiday spots close to home. 46 per cent more people are now considering a staycation, which indicates that the UK holiday let market is set to boom in the coming years. In this light, now may be a fantastic time to invest in a holiday cottage in the United Kingdom!
Holiday Let Tax Benefits
Tax benefits for holiday lets are complex, as the rules governing them differ depending on whether the property is rented out as a holiday let or is used as the primary residence. However, tax allowances for holiday lets are more favourable than long-term rentals. For instance, you may be able to offset certain costs associated with letting your property against your rental income, such as repairs and advertising expenses. You may also be able to deduct wear and tear on the property (although there are restrictions on how you can claim it). And if you are using the property as your main residence at the same time as it is being let out on a short-term basis, you may not have to pay Capital Gains. It is always best to seek professional advice before committing to long-term investment.
Possibility of Higher Income
There is always the possibility of earning more from a holiday let business. You could target a higher-end clientele or offer more amenities and services that appeal to luxury travellers. Additionally, you could also raise your prices during peak travel periods. Of course, keeping a balance between maximising earnings and keeping your property competitively priced is essential so that you do not lose business to other holiday lets in the area. It is up to you to determine how to best price your property and market it to potential guests to achieve the level of income you desire.
Personal Use of a Holiday Let
As mentioned before, you can also have your holiday without paying for it when you have a holiday let property. However, you should be aware that using the property for yourself during peak times can negatively impact your potential income. For example, if you were to use the property during the summer months, you would be missing the opportunity to rent it out to families looking for a summer getaway. Similarly, if you were to use the property during the Christmas holidays, you would be preventing people from being able to enjoy a festive break in a beautiful location. Of course, there will be times when you want to enjoy your holiday home yourself, but it is essential to be mindful of the impact this can have on your income.
The Downsides of Owning a Holiday Let
Owning a holiday let can be a fantastic way to earn extra income, but it is essential to be aware of the potential downsides.
Below are some of the disadvantages associated with having a holiday let.
One of the main drawbacks is that bookings can be very inconsistent, especially during winter. This means you could end up with several weeks or even months when the property is empty. To offset this, it is advisable to set aside some savings to cover your mortgage payments during these periods. Additionally, you will need to factor in the costs of cleaning and maintaining the property between guests. If you are not careful, owning a holiday let can quickly become a money pit. However, if you are prepared for the challenges, it can be a terrific way to generate some hefty income.
Holiday Letting Involves Efforts and Time
Renting out a holiday home requires considerable time and effort. Those with full-time jobs or other commitments will find it challenging to manage a rental property, as it requires constant attention in between each stay. This includes tasks such as changeovers, housekeeping, and maintenance. In addition, it can be challenging to keep track of bookings during peak periods. For these reasons, it is often best to use a holiday let management company like Come and Stay Ltd. These companies will take care of all the details so that you can relax and enjoy your property without worrying about the work involved.
Ongoing Costs for Holiday Let
Remember that you will have recurring expenses for the long-term, so plan accordingly. Maintaining reasonable holiday let costs is still possible if you follow the best practices such as:
- only letting your property to responsible tenants,
- keeping the property in good condition,
- having a solid business plan.
In addition, remember to factor in all your costs when pricing your holiday let. This includes fixed costs like mortgage payments and insurance and variable costs like utilities and cleaning fees. By taking all these factors into account, you can ensure that your holiday let is both affordable and profitable.
How to Succeed with Holiday Let Investment
Here are some of the most crucial things to remember if you want to succeed in a holiday rental enterprise.
Choose the Right Location
Location is critical for a holiday let business in the UK. You will want to choose an area popular with tourists, as this will ensure that your rental property is booked up most of the year. It would be best if you also considered the amenities and attractions available in the area. If your property is located near a beach, for example, you will attract more guests than if it is in the middle of nowhere. It is also essential to think about transport links, as you will want your guests to be able to get to and from your property easily.
Pick the Right Property
The right property is essential for a holiday to let business because it can help to attract tourists and provide them with a comfortable place to stay. The right property should be in a convenient location, have plenty of amenities, and be spacious enough to accommodate guests. It is also essential to ensure that the property is well-maintained and clean so that guests will have a positive experience during their stay.
Ensure your Holiday Let is Well-Furnished
How you furnish and equip your property says a lot about the business you are running. Guests expect to find basic, functional furniture and equipment if you run a budget operation. But if you are aiming for a more luxurious experience, you will need to go the extra mile to ensure that your property is up to snuff. This might mean investing in higher-quality furniture and fixtures or adding thoughtful touches like complimentary toiletries and minibars.
Whatever route you choose, remember that first impressions matter, and guests will make decisions about your property based on what they see when they arrive. Creating a welcoming and comfortable environment can show your guests that you are serious about providing them with a wonderful experience, and they will be more inclined to leave positive feedback online.
Use a Trusted Holiday Let Management Company
When choosing a holiday let management company, reputation and trustworthiness are critical. An experienced and reputable agency can make a difference in maximising your rental experience. Working with professionals such as Come & Stay Ltd, which specialises in the self-catering holiday market, can ensure the success of your property. With years of experience in the industry, Come & Stay Ltd has the knowledge and expertise to help you get the most out of your holiday rental. They will take care of everything for you, from marketing and reservations to housekeeping and maintenance. So, if you are looking for a hassle-free holiday rental experience, be sure to work with a reputable and trustworthy company like Come & Stay Ltd.
What is the Best Time to Invest in a Holiday Home?
While your financial circumstances will determine when you purchase a holiday home, it is recommended that you wait until after the peak season has passed. Supply and demand play a significant role in pricing trends for the property market, so waiting until the off-season can be wise and cost-effective. When demand is lower, home prices tend to follow suit. This means that you may be able to snag a great deal on your dream holiday home by waiting until the offseason to make your purchase. Of course, there are exceptions to every rule, so be sure to consult with a real estate agent or other experts before making any decisions.
What you Can Do to Maximise Your Income
After you have found and purchased your perfect holiday home, it is time to start thinking about how to increase its revenue. Thankfully, you can follow a few easy trends to ensure you are earning the most from your property. For example, installing a hot tub can make you 54% more profit on average than properties without one. Many people now prefer to stay connected while on vacation; hence offering Wi-Fi can also lead to an increase of up to 16%. By keeping up with current trends, you can ensure that your holiday property brings in a substantial income. Amenities are a big draw for travellers, and pet-friendly facilities can be a real game-changer. Pets are part of the family for many people; bringing them along on holiday can make all the difference. Pet-friendly amenities can increase your revenue by 11 per cent every year. Other amenities, like a fireplace, can also be a big selling point. A fireplace can boost earnings by 14 per cent yearly, making it a worthwhile investment for any vacation rental property. Whether you are looking to attract families with young children or pet owners, amenities are a fantastic way to boost bookings and maximise your revenue.
When renting out your holiday home, working with a reputable letting agency can make a world of difference. Come & Stay Ltd has over 10 years of experience in the holiday rental market, and they know how to get your property in front of the right people. They will provide wide exposure for your property, and their expert marketing team will work to ensure that your property is always in high demand. As a result, you can expect a significant revenue increase when you list with Come & Stay Ltd. So, if you are looking to maximise the return on your investment, there is no better choice than Come & Stay Ltd.