Beginning Your Shortterm Letting Journey

Issue 79

The staycation market is booming, and UK-based holiday-makers look set to be joined by foreign ones as travel restrictions are lifted following the pandemic.

All this means that owning and renting out a holiday property has never seemed so attractive – but, as Dale Smith, Founder & Director of holiday rental firm Host & Stay, points out, there are a number of things to consider before taking the plunge.

In recent years, concerns have increased over the environmental impact of foreign travel, not to mention the difficulty of it during the pandemic, which has seen the UK holiday letting market increase in popularity.

We launched Host & Stay in 2018 with just nine properties, and we now have more than 500 on our books.

With growth like this being fuelled by both investor and guest demand, it’s easy to see why, for many people, holiday home ownership seems like a win-win situation; your very own place to retreat to, along with an extra source of income when you’re not using it.

And while both of these elements are true, it’s not quite as simple as buying a house, letting it out, and enjoying the proceeds. There’s a lot to consider, from legal and tax implications to the process of making sure you’re getting bookings and the property is well maintained.

So how can potential holiday home owners start their short-term letting journey?

The first thing to do is find a property to let and, when it comes to choosing a location, the key question to ask is: would I like to visit? Because if you wouldn’t, the chances are nobody else would either. To maximise your returns, pick a spot in a fairly popular tourist destination, whether that’s by the coast, in the hills or within travelling distance of an exciting city.

And don’t forget that today’s holidaymaker is a discerning one. Must-haves on their list nowadays include parking, WiFi, perhaps a safe place for children to play, and most certainly interior design that is better than their own home. If the property you’ve found doesn’t have these, is there any way you can add them? If not, it may affect how much you can realistically charge.

Speaking of money, you’ll also need to come up with a funding plan for buying your holiday home – unless you’re a cash buyer. The two most common options are either a mortgage or equity funding, and there are a variety of aspects to consider. Firstly, a holiday let mortgage differs from a buyto-let mortgage, where you borrow money to buy a property that will be let out to long-term AST tenants.

And because holiday lets can be seen as a more risky proposition, without the guarantee of longterm leases, it can be difficult to find a provider. Unlike a standard buy-to-let mortgage, where the lender works out affordability based on the assumption that it will be let on an AST (Assured Shorthold Tenancy) tenancy of six to 12 months, holiday let stats can be a matter of days, and will have seasonal peaks and troughs.

A holiday let income will also fluctuate, meaning it’s harder to guarantee repayments. That’s where the income expectations from a reputable holiday let management agent like Host & Stay will be essential. The other option is equity funding, whereby you remortgage your existing property to release funds to buy the holiday home. Depending on how much cash you release, you could either pay for the property outright or pay a deposit and take a loan for the rest. Once you’ve bought the property, you’ll then have to make sure it meets all the rules and regulations surrounding holiday home ownership. These include things such as fire risk and landlord gas safety assessments, along with regular upkeep of the property to make sure there are no hazards for your guests. And, while furnishing and styling your holiday home may be the most exciting part, furniture and electrical appliances will also need to comply with all relevant legislation governing flammability and maintenance – you can’t just use your old kettle or sofa. Once your home is furnished beautifully (and legally), you’ll need to make sure that your ownership of the property is above board; buying a holiday home comes with a variety of financial implications, not least of which is tax.

That’s because, when it comes to the home itself, rates and taxes on holiday lets differ from residential. If your property is in England, and available to rent for 20 weeks (140 days) or more, you must be registered for business rates property tax, which replaces the council tax you would otherwise be liable for.

Furthermore, in terms of your personal tax payments, you’re going to have extra income coming in, so you’ll likely need to complete a selfassessment tax return every year.

Once all the above is in place, you’re ready to welcome your first guest – but where will you find them?

At first, you’ll probably have no shortage of willing family and friends ready for a minibreak, but, to really maximise your returns, we’d suggest working with a holiday home property management firm like Host & Stay. Managing bookings, cleaning and maintenance, payments and advertising takes a lot of time, skill and effort, whereas a management firm can take care of every part of the process.

Because the last thing a holiday home owner wants from the experience is more stress.

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