There’s an alternative to buy-to-let. Investing in a holiday letting could earn you just as much (if not more) money and give you a holiday home for you and your family to use throughout the year too. Let’s explore the pros and cons.
The pros
Yield: Invest in a buy to let family property in Blackpool (for example) and you’ll be able to charge an average of around £700 per month. Invest in a holiday let instead and you’ll make at least that (and possibly double that) each week during peak season. No, you won’t make that sort of money throughout the year, but as long as you can make peak season count, you won’t need to.
Since 2020, holiday let owners earned a 30% higher yield than their buy-to-let counterparts. There is a caveat to that (which we’ll examine below) but there’s no escaping the fact that holiday lets have proved especially lucrative over the past few years.
Additionally, choose the right property in the right location and your yield will be underpinned by the growing capital value.
Occupancy: You’ll only make a profit if you achieve the levels of occupancy you need, but it’s never been easier to connect with a holiday-home-hunting audience. Yes, you’ll have to pay Airbnb and other booking agents a significant chunk of every let, but choose the right property in the right location and the agents can help make filling it a relatively simple process.
Tax breaks: As long as your holiday let is available for 210 days during the year and is actually let for at least 105 of those days you’ll be able to claim Small Business Rate Relief which will exempt you from council tax or business rates. Add in the tax offsets for cleaning and maintenance, energy and other costs and it could increase the viability of your project.
Your holiday home: We used Blackpool as an example above but draw a 30-mile radius around KMA’s Bamber Bridge HQ and you’ll have South Ribble, Southport, the Fylde Coast and the Forest of Bowland all within easy reach. While some areas of the country are likely to see legislation to limit the number of holiday lets (see below), locally things are likely to remain far less restrictive. Which means you get a viable and potentially lucrative holiday let and a wide variety of weekend retreats for you and the family when the property’s not occupied.
The cons
The staycation boom busts? Realistically, it was never going to last. Once the travelling public had ‘learned to live with COVID’ and rediscovered their overseas travel bug, the heat was always going to come out of the staycation boom. Yet that doesn’t mean UK holidaymakers are about to desert the UK. The cost-of-living crisis and ongoing airport chaos are combining to ensure there will still be plenty of staycationers for a good few years yet.
Legislation/regulation: There are some parts of the UK where new holiday lets aren’t welcomed by locals. Soon, they’re likely not to be welcomed by the government either as the likelihood of new regulations to limit holiday lettings increases.
That makes a holiday let in Cornwall, the Lake District, North Wales, the Norfolk Broads or on Skye a costly and potentially risky strategy although the potential rewards remain high. The key, therefore, is finding the places which don’t attract negative holiday let publicity, and which are likely to remain popular as the staycation habit goes off the boil.
Locally, we do seem unusually well positioned to benefit from that.
Running costs: if you’re used to the traditional round of cleaning and repairs when a tenant exits every few months or years, the pace of work required for a holiday let may come as something of a shock. Cleaning will need to take place after every visit. If you’re paying a management company to do that you’ll inevitably pay them more than you would for a typical buy-to-let.
Finance: Getting a mortgage for a holiday let property isn’t simple. As ever, the watchword for lenders is affordability. They want to know their money is secure, and they’re more likely to feel confident about that if you’re not relying on your holiday let as your sole source of income.
Targeting your search to the lenders most likely to look favourably on your application is important, and that’s where we come in.
Investing in a holiday let isn’t quite the automatic ticket to high occupancy and high yields it once was—but it still can be with the right strategy, the right planning and the right people on your team.
To find a better holiday let opportunity, talk to us.
