Tips For Buying A Holiday Let

July 25, 2022

A holiday let is an investment that can reap very good financial rewards. Staycations boomed during the pandemic, and with reports of chaos at airports, many people are now realising that the UK is just as good a place as any to take a holiday. To make the most of the opportunity to own a holiday let, there are a few important things to bear in mind.

Identify your market

Think about the type of guests you want to attract, as this will depend on the size and location of property you buy. For example, will you want larger groups and families, or grown-up couples only? Do you want to attract the party crowd, or walkers keen to explore the local area? Dogs or no dogs?

Write down your marketing pitch before you begin to help you nail down the specifics. Popular locations in the UK include Devon and Cornwall, South West Wales, the Lake District, Yorkshire, and the Scottish Highlands. The most popular holiday lets have some kind of special draw, such as a sea view, or a lakeside location.

Decide how you will fund the purchase

Unless you are a cash buyer, you will need to arrange a mortgage. Lenders have mortgages specifically designed for holiday lets, so it’s important to disclose how you intend to use the property when you apply. This is because the business is classed as seasonal, and there is the possibility that the property will be unoccupied for long stretches.

Like any other mortgage application, the lender will assess your earnings and outgoings to make sure you can afford the repayments, both when the property is let, and when it is empty. You will typically need to demonstrate a viable rental income of 125% or more of the interest payable on the mortgage.

You may need a larger deposit for a holiday let than a rental home, typically 30% of the property’s value. Holiday let mortgages are a limited market, so it may be best to use an independent specialist buy-to-let broker to help you find the best deal.

Consider the other costs of running a holiday let

Be aware that you will have to pay extra stamp duty on a holiday let, of 3% or more. There will also be the council tax, utility bills, and regular maintenance costs to meet. The property will also need to be cleaned after each use, which you will have to hire a third party to do unless you live locally.

You must insure the property, and have public liability insurance to protect you from any claims made by a guest, should they meet with an accident or injury at the property, and sue you for damages. There are also marketing fees and admin duties to take into consideration. You will need to pay for website and brochure listings, for example.

If you are looking for a mortgage brokers, please get in touch today.

Your home may be repossessed if you do not keep up with your mortgage repayments.

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