Holiday Lets and Property Investment

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Holiday Lets are popular right now, potentially due to the rise of ‘staycations’ and people falling in love with the UK and being able to visit beautiful parts without spending hours travelling. Watch a short video about Holiday Lets, how they’re different to Buy-to-Let and everything you need to know over on my YouTube channel and read below for the full transcript…

Hi and welcome to The Mortgage Mum. Thank you so much for tuning in today. I’m going to be talking to you briefly about holiday lets and why you might consider buying a holiday let as your next investment property over a buy-to-let. So the first thing that people are considering at the moment, these are very popular because of the rise in staycations and the rise in people falling back in love with the UK. There are so many tourist hotspots in the UK that you can enjoy, but also proven to be a very good investment for a holiday home. So, first of all, what is a holiday let, well in terms of buy-to-let versus a holiday let it’s a short-term let versus long-term. Buy-to-let you typically get a tenant or a family in a property for six months or 12 month periods. Whereas the short term you’re looking at holiday makers, that can be as little as a day or one night or up to a few weeks.

And you’ll earn more rent generally from a week in a property that’s holiday let as you will, and the same in a week as you will in a month on a buy-to-let property. So the return on investment can prove to be really great, but there are some things you need to take into account. So let’s start with the return on investment. And according to some research, I have carried out before doing this video and the subsequent podcast episode, that’s going to be released soon. There is actually up to 30% more yield on a holiday let property than a buy-to-let. In terms of return, that’s quoted as 8% return as a typical holiday let and 6% for its buy to let counterpart. In terms of profit a good indicator is if you’ve got a mortgage and a management agent which I’ll on to in a moment you are looking at a 30% profit with holiday let.

So they say up to 50%, if you don’t have a mortgage or a management company. So there’s a lot of money in the property itself. On top of the fact, if you buy a property that needs doing up in an area that is up and coming or becomes a hotspot for the UK, then you’ll make money as well on the property price increase, alone. So for example, there’s a place being built in Wales, which apparently is going to be like the next Center Parks. It’s going to have all sorts of outdoor activities and it could end up being a major tourist attraction. At the moment it is a little bit under the radar, so that could be a really good place to buy a property, for example, to let out to holiday makers, as soon as that’s built, when they come flocking in, and if you buy a doer upper, you’ll also make money off the back of the fact that the location price is going to go up, but you’re also going to renovate your property.

Now, the cons of a short-term holiday let, is you will have to do an initial outlay because you’re going to have to get it prepared to be lived in essentially for three days a week or a night that involves crockery furnishings, making it a pleasant space to live, TV subscriptions. And now when it comes to your council tax, interestingly, you can claim small business relief on those rates. So that can prove to be really beneficial because in tourist hotspots, typically the council tax is higher. And so that can save you money, but you do have to kit it out. That’s going to cost you money and you’re not going to rent it out straight away unless you’ve got people queuing up ready. So you are going to have that initial period. Now they typically say that your and lenders will look at 22 weeks of the year for a holiday let property to be rented out.

So when you’re looking at your return, you’re looking at 22 weeks worth of that short-term rent and obviously different seasonal periods, you’ll be able to charge different prices. And you’ll, you should think fingers crossed get more money in different seasonal periods, such as the summer or potentially Christmas. So when a lender is looking at your affordability, it works much the same as a buy-to-let, they’re looking at how much rent you’re going to receive that property across a year. And they will rely on a forecast from a reputable company that knows the sorts of properties that are letting out in that area for holiday lets and how much realistically you’re going to get for it. And then they’ll use that to look at your affordability and much like a buy to let it’s based on a stress test. So every single lender has a different stress test

and at the moment there are 29 lenders on the market doing holiday lets so there are plenty of available, but they all have different criteria, which is why you need a broker to navigate through that based on your circumstances, they ideally do like to know that you’ve had landlord experience or that you’ve got experience in letting out property or some sorts of relevant experience. And they definitely like you to have a job or employment of your own and income. So that’s the common trends, but every single lender is different and it’s going to be based on property as well as your application itself. But it’s good if you have got that minimum income and that employment in the background, you need at least 20% deposit. So buy-to-let, we’re looking at 25%, the more deposit you have the better. And the, if you’re struggling to get a property on a buy-to-let, it is sometimes a lot more affordable on a holiday let in terms of those calculations.

So that’s worth considering as well. Now we do have one of our brokers who has recently bought property in Corfe Castle and completely renovated it and is now released as a holiday let, it’s absolutely stunning. I’m going to put the details in the notes at the bottom of the video to have a little look because it’s beautiful. So I’ve heard firsthand from her, the pros and cons of doing this. And it’s no doubt that the return on investment is great. That initial outlay is a lot. And the other negatives we spoke about is the fact that there is going to be more wear and tear on the property because it is going to be frequently used. And she did say that you can hire towels and sheets, which I think is amazing. I’m sure you probably know this. I didn’t, I thought that was a really great idea because otherwise you’ve got to have three of each thing and for the whole house, but when you look at her property, you’ll see it is so high-end, it’s beautiful.

And actually the company that she decided to do the managing was a company called Classic Cottages and they do all the photos and, and help sort of set out the property and ready to publicise it, which I thought was really interesting. Now typically an agent’s going to take between 20 to 30% of your profits. So when you’re looking at the overall picture, just important to take those deductions off for wear and tear for your subscriptions and obviously for the management fees as well, but if you base it on 22 weeks of the year, that should really help. I feel like that’s going to give you a bit of an overview. The podcast episode that is coming out soon is going to go into a bit more detail. And I think if you’re interested in a short term let now, or in the future, that would be a great thing for you to just take note of and do your research using the podcast episode as your foundation. If you have any questions or you want to look into your own personal holiday let then get in touch with us today via our website.

Thanks so much for listening.


In this video we share some details about one of our Mortgage Mum team – Colleen Sykes – who owns her own STUNNING cottage in Corfe Castle as a holiday let investment.

PLEASE check out Colleen’s stunning house here – Acorns –


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