Holiday Let or Buy to Let?

by Readers Question

13:53 PM, 4th February 2018
About 8 months ago

Holiday Let or Buy to Let?

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Holiday Let or Buy to Let?

After many years of letting to ‘regular’ tenants, I’m now thinking about dabbling with holiday letting. I’ve just agreed to buy a modern mid-terrace house in a seaside town in Cornwall, and my own house is also by the sea, in Devon, and quite cute.

My plan was to rent out the house in Cornwall until such time as I wanted to move down there, but now think I’d like to let it to holiday makers, so I can use it myself out of peak season.

Then it occurred to me that perhaps I could rent out my own house (mortgage just about to be paid off) as a holiday let instead, and live in the house in Cornwall. I need to make a decision as I have to get a mortgage for the house in Cornwall, so either buy-to-let, or holiday let mortgage, and I believe that the related issues are very different too e.g. business rates instead of council tax.

Also, is it possible to manage a holiday let, whilst living elsewhere, or is it better to use an agent?

Any advice will be warmly welcomed.

Thank you

Tricia



Comments

Neil Patterson

13:56 PM, 4th February 2018
About 8 months ago

Hi Tricia,

If you are or will become a high rate tax payer then this could be a factor as true short term Holiday lets are not affected by Section 24 mortgage interest relief restrictions.

Watch out for mortgage clauses about not living in the property yourself though.

Susan Bradley

17:56 PM, 4th February 2018
About 8 months ago

Hi Tricia
My experience of having a holiday let in the Lake District for 6 years is that if you don’t live nearby you do need a good agent. If anything goes wrong holidaymakers want it sorting out immediately which is fair enough as they tend to be there for a week or less and their holiday is very important to them. An agent will also have a housekeeper who will check on the standard of the cleaning which again is vital as they should be immaculate.

Andrew Milner

11:03 AM, 5th February 2018
About 8 months ago

We bought a holiday let in Cornwall in 2014, and live In Bristol and do not use an agent, so it is certainly doable. On the funding side I believe there are fewer providers of finance for an FHL, so that may be the first question you need to answer. BTL and FHL are obviously trying to appeal to very different markets, so you need to check out the demand side. FHLs do take a bit more time if you manage it yourself. If you use an agent you probably need to have less input but you will also have less flexibility about when you can use it. We advertise our FHL through Owners Direct and have a local caretaker and cleaner who are both fantastic. Costs are higher than some BTLs because the property is fully furnished, and the fittings need to be of decent quality. We love it because we get free holidays on the dates of our choosing but there is a trade off if you have school age children (like we do) since you can obviously get higher rates in the peak of the summer holiday. The cash flow profile is lumpy but all paid at least a month upfront. Hope this helps

Luk Udav

13:35 PM, 5th February 2018
About 8 months ago

A warning. The agents in the popular parts of Cornwall have a cartel whereby they charge 20% (+VAT, so 24%). They also have charges for cleaning/maintenance that make Foxton's look like penny pinchers.
Andrew Milner is right about good local caretaker/cleaners if you don't use an agent - vital.
If the house has been holiday let before you'll probably not need an agent for marketing after the first year anyway, as you'll get repeat purchasers.
And if it's just one house, apply for business rating and then get small business rate relief.

Susan Bradley

16:59 PM, 5th February 2018
About 8 months ago

I was never able to find a good local caretaker to do the role. I think the point is that you need somebody on the ground to sort out all the issues that can arise. I found my one holiday let to create far more work than my 20+ normal rental properties which I self manage. Having said that I was only paying 12% + vat agency fee.

Andrew Milner

17:23 PM, 5th February 2018
About 8 months ago

Agreed - you cannot self manage an FHL remotely without a reliable cleaner and caretaker. We live 150 miles away from ours.

zoe

23:21 PM, 5th February 2018
About 8 months ago

Unless you live close by you really need to use a good agent - we've had cleaners not show up/call in sick last minute, if it's part of the agreement for the agent to coordinate this they will sort another, if it's yours you need to find one or go do it yourself.
The house needs to be fully furnished to a high standard - recommend having your chosen agent advise on what furniture to provide (double/single/twin beds etc).
It definitely has it's benefits and you end up maintaining the property really well so know its in a good condition for you when you want it back, the rental rates are great (mine was Devon). But it doesn't suit everyone and there is a high start up cost.

Bill Morgan

0:49 AM, 6th February 2018
About 8 months ago

I would avoid buying properties in places like Cornwall with seasonal demand because revenue will drop in winter.

Why not buy something near to a city ot town with a large affluent population.You will get more money all year round.

Luk Udav

10:58 AM, 6th February 2018
About 8 months ago

Reply to the comment left by Bill Morgan at 06/02/2018 - 00:49
Bill, the converse is that rates are very high in the summer and other holiday periods, which is when you as owner don't want to go anyway (too crowded).
The solution to the cleaner problem is to pay well above the going rate. In my experience you then get the sort of person you would willingly pay double for.

Trish

18:08 PM, 8th February 2018
About 8 months ago

Reply to the comment left by Neil Patterson at 04/02/2018 - 13:56
Thanks, yes I'm attracted by section 24 not applying to holiday lets. Thanks for the tip about clauses referring to living in it myself. Didn't know about that.

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