The Ups and Downs of Investing in Holiday Rental Properties
With international travel having taken an unprecedented nosedive, 2021 has become the year of the ‘staycation’. In turn, demand for desirable holiday rental properties has skyrocketed in dozens of popular regions across the UK.
Even before the coronavirus pandemic hit, interest in buy-to-let investments for holiday lettings was steadily increasing. Today, many investors believe they are staring down the barrel of a golden opportunity to tap into the UK’s thriving domestic tourism sector.
One which could potentially maintain its momentum indefinitely after international travel returns to pre-pandemic norms.
But as is the case with all property investment opportunities, BTL investments in the holiday rentals sector bring their own pros and cons into the equation.
Potential for High Rental Yields
One of the positives of investing in holiday rental properties is the potential to generate more attractive yields. BTL holiday home investments benefit from significant tax advantages, due to the way in which they are classified as businesses rather than conventional investments.
Combined with attractive per-night returns and the potential for bigger profit margins, the appeal of investing in holiday homes for short-term lets is understandable. The more desirable the area, the greater the potential for higher rental yields.
Simplified Lettings Management
Platforms like Airbnb have simplified lettings management responsibilities for millions of new and established landlords. Setting up a profile and marketing a holiday home online has never been easier or more affordable.
Along with simplifying the process of marketing and letting out properties, platforms like these also enable landlords to maximise their profits. The costs of more traditional lettings agents can be eliminated entirely, swapped for a fully self-managed approach.
On the downside, qualifying for a buy-to-let mortgage can be challenging for some applicants. Loans for holiday lettings investments are typically available with a maximum LTV of 65%. The subsequent 35% down payment may be difficult or impossible for many prospective investors to save within an appropriate period of time.
In addition, eligibility checks are generally more stringent for BTL investors. This could translate to difficulties qualifying for a mortgage without a flawless credit history and proof of high annual household income.
There are also additional costs that must be factored in by anyone looking to purchase a holiday home for lettings purposes. Examples of which include taxation on income, property upkeep and maintenance, covering the costs of urgent repairs and so on.
In addition, if the holiday home is located outside the immediate reach of the owner, it may be necessary to hire a weekly cleaner and/or a local agent to take care of the property on their behalf.
Independent Advice and Support…
We provide a dynamic range of services for new and established investors. Our independent advice and representation could prove invaluable in evaluating the investment opportunities available and making the right decision.
Whether you are considering a holiday rental property investment or any other kind of buy-to-let property purchase, we would be delighted to provide you with an obligation-free consultation. Call anytime, or send us an email and we will get back to you as soon as possible.