'Goldmines with roses round the door' - the holiday let boom: Property in a tourist hotspot can make 1k A WEEK

By Neil Simpson, Financial Mail On Sunday

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Romance: Landlord Mark Howseman offers a flat for couples in beautiful Edinburgh

Romance: Landlord Mark Howseman offers a flat for couples in beautiful Edinburgh

Summer's nearly over – and it’s clear that holiday rental homes are some of the brightest property stars of the year. Halifax says price rises in country and coastal locations have outstripped most urban and suburban alternatives, while estate agents say weekly or fortnightly rentals are more lucrative than buy-to-let.

In tourist hotspots such as Bath, buy-to-let investors offering two-bedroom apartments in beautiful Georgian terraces are likely to earn about 450 a week on six-month tenancies.

But holiday let investors can ask for anything from 525 to more than 1,000 a week for comparable top-quality properties in the height of summer. Don’t forget though that you may not be able to let the property all year round.

Fans say the best holiday lets are ‘goldmines with roses round the door’ – and claim the autumn is a great time to consider an investment. Many existing owners sell when the summer rush is over – and buying now could give you enough time to get a property ready for the lucrative Christmas and New Year market.

Now could be a good time to get a mortgage as well – Leeds is the latest building society to offer special deals to potential investors.

Here are five key steps to join the holiday home goldrush.

GET A MORTGAGE

In most cases you’ll need to already own (or have a mortgage on) your main home to get a holiday let mortgage. You’ll also need to have a decent income – Leeds Building Society for instance sets the bar at 40,000 a year. 

 

And you must get at least two letting agents to prove the potential rent from your holiday property will total at least a third more than the annual mortgage payment.

FIND THE BEST RATES

Lenders come and go fast. Holiday let stalwart the Market Harborough Building Society has temporarily withdrawn its deals after being swamped with demand – though it is expected to have a new range on offer soon.

In the meantime the best variable rate deals come from Cumberland Building Society.

Housekeeper wins rave reviews so I clean up

Offering something different to holidaymakers – and enjoying meeting new people – will help you get more from a holiday let investment, says Edinburgh-based owner Mark Howseman.

He has two properties in imposing Georgian terraces. The one-bedroom apartment is aimed at couples wanting romantic getaways while the two-bedroom flat appeals to families or small groups of friends.

‘There is plenty of competition so you need to stand out from the crowd,’ says Mark, 46, who offers the apartments on homeaway.co.uk and juggles the lettings with his job as a GP.

‘It’s good to meet people from all over the world and help them enjoy their time in the city – but you need to be organised and spend a lot of money on support.’

He says his housekeeper is ‘worth her weight in gold’ and wins rave reviews for keeping the apartments sparkling.

And while many prospective investors assume their mortgage will be their primary expense, Mark warns that other bills add up fast.

He says: ‘Some months, the wages for a housekeeper, insurance, utility bills and maintenance can top what you spend on a loan – and if you don’t keep your property up to scratch, bad reviews can hit future returns.

‘Furnished holiday lets can be a profitable investment – but they’re not easy money.’

If you’ve got at least a 40 per cent deposit you’ll pay 1.54 per cent below its commercial variable interest rate of 4.99 per cent  (its residential variable rate is  4.49 per cent).

Buyers with smaller deposits pay 1.14 per cent below the commercial rate.

Bath Building Society is costlier, charging a 0.7 per cent premium on its 5.99 standard variable rate, so you’ll be paying 6.69 per cent. New entrant Leeds Building Society is offering two, three and five-year fixes from 3.4, 3.99 and 4.29 per cent respectively.

Other lenders don’t advertise their holiday let deals but accept applications on an individual basis – brokers suggest approaching your current lender to see if they’ll do a deal before shopping around elsewhere.

MAKE SURE IT'S THE RIGHT DEAL

Many investors take out more readily available buy-to-let mortgages or take out mortgages for second or holiday homes for properties they plan to rent out on a weekly or fortnightly basis.

But small print on the former deals will require properties to be rented using assured shorthold tenancy agreements of at least six months, while the latter deals may outlaw paid rents altogether.

If lenders discover the rule are being broken they can withdraw any special offer interest rate and even force a sale to clear the loan. Remortgaging your main home (or other investment properties) to raise the funds for a holiday let isn’t against the rules, though these properties will be at risk of repossession if your holiday let turns sour and you fall behind on the monthly repayments.

KEEP A LID ON COSTS

Holiday let investors normally have to pay the full utility bills for each property, as well as council tax and television licences.

Insurance should include public liability cover for guests and employer liability for cleaners, turnaround or other staff.

Experts warn against cheaper ‘landlords’ policies. These are for buy-to-lets, not holiday lets – and claims won’t be paid if they are taken out for unsuitable properties. Specialist insurers such as Schofields in Bolton, Greater Manchester, and Boshers of Bideford, Devon, are better bets for lettings insurance.

GRAB TAX BREAKS

Most holiday let mortgages are interest-only – and your interest can be offset against profits before your tax bill is calculated.

Lettings also enjoy a few extra reliefs compared with traditional buy-to-lets – including on the cost of furniture and furnishings.

But other reliefs are on the way out – most notably on inheritance tax. Go to ‘Holiday Lets’ at gov.uk for a wealth of information.

The comments below have not been moderated.

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Click to rate     Rating   8

Yet another article trying to ramp up the property market and make out the UK has suddenly turned the corner and is on the verge of an economic recovery. Who , in this climate , can afford to pay 1,000 pw for accomodation in the UK and more importantly after the fees and maintenance expenses have been deducted how much is left for you as an investor sucked into this hype ?

Click to rate     Rating   11

would be nice to be able to buy one property to live in,i know this is an old fashioned idea nowdays that houses are for people and familys to live in.

Click to rate     Rating   9

You will lucky to let your property for much more than the school holiday weeks depending where it is. It is expensive to run 2 homes however if you are planning to use it yourself and factor that in its not so bad. Thanks to cheap Sun holidays at caravan parks your rental will be kept down. My family bought a cottage in Cornwall over 20 yrs ago, no locals wanted it, it had been on the market for ages, needed a new roof etc. We love it but do have to spend some of our holiday time painting and maintaining which we are happy to do. Just remember the letting agents take a good chunk of the let, followed by cleaning and laundry etc don't expect to make money however renting it does help towards the running costs.

Click to rate     Rating   11

This is a ridiculous and misleading article, full of "rosy" assumptions." We just bought a bungalow in a holiday area, where the business is entertaining holidaymakers. So no local people would have been deprived of a home. However, when the holiday letting expert came round and gave us a long list of things to do, plus all the latest gizmos required, from satellite TV to broadband internet, we could see that the sums didn't add up. If you bring a tired property up to a top spec standard and fit the place with a houseful of new furniture, you will only let it for the holiday season, about 16 weeks a year. However, rates and all bills for satellite TV etc have to be paid all year. In winter the heat has to be left on. There are security problems at empty properties. We worked out there was zero return in it. So please do some decent research before you invest - and ignore articles like this. We are now spending about 45,000 to get the property up to sale level. No letting return!

Click to rate     Rating   12

Ah! another greed driven idea. Communities suffer significantly through buy to let particularly in expensive rural and tourist areas.

Click to rate     Rating   51

I live in one of these 'hot-spots' and the holiday lets have wrecked our local communities. 80% of the properties around me are now holiday lets and other nearby villages have between 50% and 60%. Properties for letting should require planning permission for change of use and should not be able to get mortgages from taxpayer subsidised schemes or tax relief. Soon there will be no local population!

Click to rate     Rating   42

Sorry to burst your bubble, but holiday lets are not quite as rosey as you make out. To start off with you need to look at occupancy levels, its easy to sell in the height of a good british summer, but how long does summer last? It can be a long winter, and if you buy in remote areas you have to think about how people will get there, thats if they want to. You mentioned the costs,mortgage, rates utilities etc, but failed to mention marketing, cleaning costs and maintenance. If you dont live in a close proximity to the property how do you manage it, yes there are some management compnaies who will sell and even clean it at a cost, maybe 15-25% of a stay. After a couple of years you will need to redecorate throughout, and whilst redecoration only occurs maybe bi annually you still have all the ongoing maintainance costs. Be prepared to subsidise your property from your other income, if you cant subsidise it be prepared for an animal which needs alot of tlc , you have been warned!

Click to rate     Rating   39
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