Top 5 Issues That Will Stop You from Owning a Holiday Let
Top 5 Issues That will stop you from Owning a Holiday Let and how to get around them
Are you looking to invest in a holiday let, but unsure about the potential set backs you could face?
In this blog post, we will discuss the top 5 issues that may prevent you from owning your holiday let. From zoning restrictions to insurance requirements, we will cover everything you need to know before making your investment.
Hopefully, by being aware of these obstacles early on, you can take the necessary steps to overcome them!
There are several types of mortgages available depending on the type of property you want to purchase. When it comes to holiday lets, there are some specific mortgages available which can be useful for those looking to purchase a property for this purpose. But it is not always straightforward to go through the process of borrowing money to fund a holiday home.
Lenders tend to view the situation more critically, emphasizing the fact that
you will only be able to rent out a holiday home for a limited number of nights each year to cover your mortgage. Lenders may request that you provide proof of funds if you are unable to rent out the property for any reason – and they may expect you to have savings or money set aside.
As well as that the lender will often want to ensure that you have insurance in place to cover any cancellations, which is another cost.
You should be prepared to provide projected possible income from an experienced agent, of weekly letting rates for the property so a lender can be sure there is sufficient rental demand.
You must also be a current homeowner with an annual personal income of at least £25,000.
Because the rent is higher than a normal rental property, you will need to pay a larger deposit than usual. Lenders typically ask for at least 30% of the security deposit for a holiday let property.
Investors who are new to investing may be surprised to discover that the interest rates are much higher than those for a typical house.
These elements, when combined, will decide whether your holiday rental desires become a reality. Holiday Let Management agents are used to providing potential income estimates so do not hesitate to contact your local agent to discuss this with them. There may be a small fee but this will depend on the agent.
2. Holiday Let property cannot be your second home
Many individuals overlook the fact that a vacation property cannot be treated as a second home. This implies you are limited in terms of how often you can use the home for yourself.
If you want to let your property out as a holiday rental, you must be able to offer it for at least 210 days each year. If not, you risk breaching your mortgage and other agreements with any holiday letting company.
When you let out your home as a holiday property, you will make more money throughout the year, allowing you to pay off your mortgage sooner. You may increase your revenue by treating your holiday let property as a small business.
3. Legal requirements
There are many legalities that you need to consider before renting your holiday let property out. You will need to know about the tax implications, health and safety regulations, insurance, and contract laws, please refer to our Holiday Let Safety Requirements blog.
Renting out your holiday let property can be a lucrative business, but it is important to remember that you will need to pay tax on any income that you earn. When it comes to taxes, holiday lets are more like a business than a residential property. Note that the tax implications are much more lenient for Holiday Let properties than for Buy to Let properties.
Health and Safety
There is nothing more essential than the safety of your guests.
We all like to think we are cautious and unlikely to get caught out by mishaps or injuries while renting our holiday let properties. How can you avoid them? By following all the health and safety regulations.
Accidents do happen, although they are rare. When they do, you must make sure that you have followed any relevant legislation and that you are protected from future legal action. Types of insurance you might want to get:
Building insurance for holiday let property is insurance that covers the structure of the building in case of damage. For example, if a tree falls on the building, the insurance will cover the repairs. This type of insurance is different from liability insurance, which covers any damages or injuries that occur to people on the property.
It is always important to read the small print of any policy before taking it out, to make sure that you are aware of exactly what is and is not covered. And if you have any specific questions about cover, do not hesitate to give the insurer a call. They will be happy to help clarify anything for you.
Liability insurance for holiday let property covers you if someone is injured on your property while they are a guest. It can also provide protection if you are sued by a guest for any damages that they suffer while on your property. This type of insurance is important to have if you are letting out your property to guests, as it can help protect you from any potential legal action.
Content insurance for holiday let property is insurance that covers the contents of your property while it is being rented out. This can include furniture, appliances, and other personal belongings.
Content insurance is an important policy to have if you are letting out your property, as it will provide you with coverage in the event of any damage or theft that may occur. Be sure to read over the policy carefully to make sure you are aware of what is and is not covered and ask your insurer any questions you have about the policy.
4. Property Location
Did you know that the location of the property is critical in deciding whether you will be able to rent your ideal holiday home?
For example, some communities, such as Edinburgh, Cornwall and Northern Wales are now putting into place stricter rules and even sanctions on holiday home letting.
In some areas local communities have felt they have been priced out of their hometowns as some places have become a hotspot for travel tourism.
Places like Cornwall and North Wales have started to limit the number of homes that are being sold as holiday homes. This is to ensure that the local community can live and work in their hometowns.
If you are thinking of purchasing a holiday home in a popular location, double-check that the local council has not imposed any limitations on holiday let properties.
5. Self-Management of your Holiday Let
Managing your property from a distance can be tricky but it can be possible when utilising a local management company. Without a management company to help you maintain your property, and keep it clean and tidy, you are going to struggle to maintain high standards for your guests and it might have a knock-on effect on your guests’ satisfaction and bookings.
Planning is key when it comes to owning a holiday let. By being aware of the potential problems you could face, you can take steps to avoid them and make your investment as smooth as possible.
If you would like to talk to our team about your future investment and discuss how we can work together to help you manage your holiday let property do not hesitate to contact us. We are here to help! You can reach us on 01242 964417.