Yields – Long term let vs holiday let?

by Property 118

8:59 AM, 11th December 2019
About 10 months ago

Yields – Long term let vs holiday let?

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Yields – Long term let vs holiday let?

I have inherited some money and am looking at advice about the best investment vehicle for it. I was initially interested in buying a place in North Wales / Anglesey (we live just over an hour from the area) with a view to renting it out as a holiday let with us having the option of using it during quiet times.

Some places yield high prices during peak seasons. Downsides are that we’d have to pay management fees / agency fees and there is a high amount of wear and tear I guess.

The other option would be to buy a place close to where we live and let that out on a long term lease. Advantages are that if there are any problems, we’d be round the corner and could sort them out.

Any ideas of which would be the better investment vehicle.

I am a basic rate tax payer and have one other property on a long term lease.

Thanks in advance

Mark


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Comments

Neil Patterson

9:48 AM, 11th December 2019
About 10 months ago

One difference between holiday lets and residential AST lets owned in an individual name is section 24 mortgage interest relief restrictions don't apply.

However, as this will be a new purchase then you can mitigate this by purchasing in the name of a Ltd co.

david porter

12:51 PM, 11th December 2019
About 10 months ago

Consider if you are in a business,
or do you want a paying hobby?
Do you want two hours drive because a holidaymaker has lost keys?
cant get washing machine to work?

Michael Bond

16:21 PM, 11th December 2019
About 10 months ago

Do not do anything until you know the Election result! The new government's policy on the Private Rental Sector must be a consideration.
I have both holiday cottages (Furnished Holiday Lets - FHLs) and permanent tenants in my portfolio. I am beginning seriously to consider getting rid of all my tenants as and when I can and going over to FHLs.
You should use an agent. Fees about 20% of takings, but worth it if they are good. They will get you bookings and sort out cleaners etc for you and take the calls at 11.30pm on Friday to say that the boiler has stopped working. Have a look at your market. Will people in your area want 5-star cottages and pay 5-star prices? Not necessarily the same thing. But nowadays people expect clean well equipped "shiny" cottages with TV and wi-fi, dishwashers, microwaves ,unchipped crockery that matches, etc. Repairs are likely to be much the same whichever you choose: but you will need to make sure your towels, sheets etc are in good order (in our house we mainly use towels passed down from the cottages). Remember that you need to qualify as a quasi-business which essentially means your cottage must be available to let for 210 days a year and actually let for 105 days. Then you can get tax relief on interest on any mortgage you may need. ( "Cottage" seems to be a sort of generic word for any FHL from 1-bed apartment to an 8-bed mansion)
The alternative is to let "permanently", which increasingly means exactly what it says as Shelter spokespersons get the ears of politicians.

William Williams

11:58 AM, 14th December 2019
About 10 months ago

I have similar properties of the same value in Manchester and N Wales. The rental return in Manchester is far higher than in N Wales and also tenants in Manchester tend to look after the property much better and have more respect for their homes.

Mark Goodman

17:24 PM, 20th April 2020
About 6 months ago

Thank you for all your replies.
Funnily enough Bill, I'm originally from Manchester and already have a house that is on an AST in Stockport.
Anyway, for the next investment (with the inheritance money) I am not looking at getting a mortgage, so any tax relief doesn't apply to me.
I would also be using an agent local to the area, as a poster has said, i don't want the 11pm phone calls saying the boiler has packed up.
I am still undecided. The GF wants us to have the use of a holiday home when it isn't rented out but I'm kinda thinking that we could make enough money each month by buying a house and letting it out on an AST which then gives us the money to go to a variety of AirBnB's instead of 'our own' one each time we go away.


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