Welcome to your October Owner Q&A! Confused about how to price your property? Rachel, Sales and Operations Manager...
If you’re looking to generate a second income, buying a holiday home could be the perfect investment option for you. Not only will you own a holiday cottage for yourself and your family to escape to, you could make a healthy profit by renting it out to others.
If you’ve never managed a property before, you’re probably unsure on the practicalities of it all and how much money you could earn. Here we answer some common holiday home investment questions and offer advice on how you can maximise your income.
The UK is becoming an increasingly popular place to holiday. Recent Visit Britain statistics show that spend on UK staycations was over £23 billion in 2017, which was 3% more than the previous year. Here at Sykes, we saw bookings increase by 24% in 2017 and this trend looks set to continue.
With changing tax rules on buy-to-let properties putting investors off the long-term let market, short-term holiday lets are becoming an increasingly attractive option.
If the thought of running a holiday let business feels like too much like hard work, you don’t have to do it all yourself. Many reputable holiday letting companies have teams of experts on hand and will provide assistance with everything from the advertising and marketing of your property to managing guest changeovers and any general maintenance that may be required.
Read our guide on how to start a holiday let business.
Many people choose to use a mortgage to help with the purchase of a holiday let. Holiday let mortgages differ from standard residential mortgages or that of a long-term rental property.
Some holiday let owners raise the necessary funds by releasing capital from either their current mortgage or their pension. Currently, you can release up to 25% of your pension tax-free once you’re over 55.
If you’re unsure on the best option for you or would just like some advice, contact one of our property specialists who will help or point you in the right direction.
When you buy a holiday let, you’ll need a specific mortgage aimed at those offering short-term lets to holidaymakers. There are fewer providers offering this type of mortgage than those that offer standard mortgages and there can often be restrictions on, such as the maximum loan-to-value (LTV) a provider will offer.
There are also some tax benefits with holiday let mortgages. For example, you can currently offset the interest on your mortgage against the rental income you make. So, if your property made £12,000 in one year and the interest on your mortgage for that year was £9,000, you would only be liable to pay tax on the £3,000, according to your own tax rate.
If you’re wondering how good of an investment holiday lets can be, we’ve crunched the numbers based on our actual booking data to help you find the answer.
On average, our owners earn around £18,000 annually through bookings, but what you could earn will depend on a variety of factors, such as your property’s location, what type of guests you accommodate, property features, number of rooms and your pricing strategy.
If you’re open to choosing a property based on its earning potential rather than having your heart set on a specific location, here are some top tips to help.
In our in-depth review of the UK holiday let market, the Sykes Staycation Index 2018, we found that coastal properties and those in National Parks earn 10% more than other properties in the same region, and that some regions earned more than others.
Our data from 2017 revealed that Dorset was the top-earning location in the UK, with four-bedroom properties making an average of £43,000 in gross income a year, while the Lake District came second, with four-bedroom properties earning an average of £28,000 annually.
If you’re always on the lookout for the latest trends, there are some destinations in the UK that are becoming increasingly popular. Our data suggests that some of the fastest growing regions at the moment are on the South Coast, in the Midlands and in southern Scotland.
When you’re choosing the location of your holiday let, think carefully about who you are trying to attract – for example, do you want to attract families in Cornwall or outdoor lovers in the Lakes? However, if you’re planning on visiting your holiday home with family and friends too, don’t forget to factor in your journey time to the property as well. Likewise, if you plan on managing changeovers and maintenance to reduce costs, you’ll need to be able to travel to and from the property easily.
Read our guide on the best places to buy a holiday home in the UK for more information.
Figures from Visit Britain in its Great Britain Tourism Survey show that 2017 was a great year for the staycation market. The number of overnight trips taken in the UK in 2017 was 120.7 million and overall spend was up by 3%.
In its Travel Trends Report 2018, ABTA also revealed that 72% of British holidaymakers took a break in the UK in 2017 with the UK predicted to be the most popular holiday destination with Brits in 2018.
Read the full Sykes Staycation Index 2018 here.
When you’ve bought your holiday home, there are ways to boost the income you get from it. For example, we noticed some clear trends in 2017 that could help you generate more revenue.
Our customers are clearly looking for a little luxury as properties with hot tubs, on average, earn 51% more than those that don’t. And holidaymakers want to stay connected while they are away – last year we saw properties with Wi-Fi earning up to 20% more than those without it.
Home comforts are also attractive to travellers in the UK. For example, Brits love their pets and offering pet-friendly facilities could boost your earnings by up to 10% a year, while installing a welcoming log burner could increase your income by a similar amount.
Read our guide on the five ways to maximise your holiday let income.
* At the time of publishing (15th June 2018), Sykes Cottages has taken all reasonable care to ensure that the information contained in this article is accurate. However, no warranty or representation is given that the information is complete or free from errors or inaccuracies. Generic information is contained within this article and each individual’s mortgage and saving affairs are different, further advice should be sought from a qualified supplier
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