We reveal top tips for households looking to buy a holiday home to let.
Second home ownership has come under fire but with more and more Britons opting for a staycation, holiday letting has the potential to help local economies and make property owners money, a new report says.
Sykes Holiday Cottages found properties in Blaenau Gwent in South East Wales were some of the most popular while in England Tyne & Wear and Lancashire were prized destinations for holidaymakers.
The Isle of Bute in Scotland was also popular, with Sykes’s Holiday Let Outlook Report also using insights from rental data and analytics company AirDNA.
The holiday let agency, which has over 22,000 homes on its books, said bookings were up 35 per cent compared with 2019 and enquiries from prospective holiday let investors had risen dramatically in 2022.
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The pandemic also appeared to have encouraged many people to let out their home to holidaymakers with 25 per cent of owners choosing to start letting their home out 2020.
The report also found that in 2022, compared with 2021, new owner enquiries from prospective holiday home investors had increased by 78 per cent.
With a rise in holidaying at home, Sykes’ report revealed the average holiday let owner earned £28,000 in revenue from their holiday let last year, up from £21,000 in 2019.
It added having access to luxury amenities such as open fires could boost a rental property’s earnings by 19 per cent, while a rise in pet ownership fuelled by the pandemic meant pet-friendly properties brought in one per cent more income on average.
Graham Donoghue, chief executive of Sykes Holiday Cottages, said: “The shift towards staycations had already begun pre-pandemic, Covid has just accelerated this trend.
“Although international travel is becoming easier, we now have new types of staycationers.
“With the UK travel sector flourishing, this will continue to have a positive impact on the economies throughout the country that rely on tourism, particularly in coastal and countryside regions.
“In fact, nine in 10 holiday let owners we surveyed think that tourism strongly benefits the local areas around their holiday homes.”
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Where to buy
Seaside towns posted the strongest pandemic house price performance according to estate agent comparison site, GetAgent.co.uk
Its research showed that seaside towns had an average price of £340,339 and had seen the largest annual increase in value at 13 per cent, as well as the largest increase during the pandemic, up by 21.2 per cent.
“We ditched the nine to five to become holiday homeowners“
Adrian and Anita Jennings, 56 and 58, are owners of two holiday lets in Southwest Wales.
The couple own two cottages next to each other in the hamlet of Cwmbach, Kingfisher and Red Kite.
They said: “We left our 9-5 office routines back in 2015, and we haven’t looked back.”
The homes consist of a semidetached annex, formerly a village post office, plus an additional converted outbuilding.
They also have five-acres of woodland garden and we are near to Pembrokeshire, Carmarthenshire and Ceredigion.
The couple bought the original site for £340,000 back in 2015, spending around £25,000 converting it into two holiday lets plus a third property for them.”
Holiday lets – how to invest in one
Matt Kelly said anyone considering buying a holiday let should do their research.
“Even before the pandemic, we were seeing dramatic changes across the buy-to-let landscape with holiday lets steadily increasing in appeal – more so than for traditional long-term rental properties – as they allow people to tap into the UK’s many tourism opportunities.
“This is a trend we expect to continue and we expect the holiday let market to remain fairly stable in the years to come. However, there will discounts out there which may be worth considering, particularly if investors are looking to purchase out of season.
“Buyers may be able to get an even better deal by finding a property which is in a poorer condition and needs restorative or structural work.”
What to consider before investing
For anyone considering a holiday let investment this year, there are a few pros and cons to consider first:
- Opportunity for higher rental yields: For landlords, holiday lets had already begun to grow in popularity well before coronavirus, mainly due to the significant tax advantages as they are classed by HMRC as a business (rather than an investment).
Combined with the potential for bigger profit margins and a much higher return per-night, now could be a great time to invest in a furnished holiday cottage and rent it out to paying customers on short-term lets.
With so much demand for staycation destinations this year, landlords and second homeowners (should they wish to let out their property) can relax knowing that this process has become much simpler to manage online.
With the likes of Airbnb and other options helping you get your property listed, you can get yourself set up and ready to welcome your guests with minimal hassle.
Getting a mortgage
For those considering a second home, there may some hurdles to overcome if trying to obtain a mortgage via traditional banks or high street lenders due to the increasingly tough affordability criteria.
For example, lenders will first need to see strong evidence that you will be able to keep up with the mortgage repayments on your second home – especially if you have a mortgage for your current property. Lenders could also refuse an application depending on the location of your holiday home – especially if you’re buying a place in an area that has risk of flooding – like in the Lake District.
Unlike standard buy-to-lets, holiday lets have to be managed for regular visitors and therefore, there may be higher costs, such as paying for a weekly cleaner or managing agents’ fees, so these are things that consumers should consider before making any rushed decisions.
In addition, if you open your home to paying guests you’ll need to be prepared for potential damages and repairs being needed more regularly – especially after weeks of wear and tear following the summer holiday season.
By Samantha Downes