If you are dreaming of owning your very own beachside bolthole or rural retreat, there are certain practicalities you need to consider before you sign on the dotted line. Choosing a suitable location, the right type of property and looking into all of the tax implications that come with a holiday home all need to be considered before you commit to your dream holiday home in the South West.
As a first class estate agency specialising in rural properties in Devon, Cornwall, Somerset and Dorset, we have plenty of advice and experience to offer when it comes to successfully buying and renting out a holiday home for investment.
If you are considering taking the plunge, here is our guide to buying a holiday home for investment in the UK. You can also catch up on our previous blog: ‘The Challenges of Moving to the Country’
When it comes to purchasing a holiday home, location really is the key. Properties in popular destinations are usually fully booked throughout the holiday season, which will help to ensure that you see the biggest return on your investment.
Being close to the beach or other tourists attractions is of course important, but you should also think about the proximity to essential amenities likes shops, pubs and restaurants. Parking is also pretty much essential for most holiday homes in the region, as visitors like to discover the open countryside surrounding us, as well as the pretty towns and villages.
Finally, a rural retreat may be perfect during the warmer months when public transport services run well, but for your holiday home to work well all year round it needs to be accessible whatever the season. This means that you will to ensure that your property is within a reasonable distance of local bus and rail services, and that your visitors are not likely to set in huge traffic jams during the high season.
A cosy cottage in a coastal fishing village will be perfect for couples looking for a romantic break away from it all. A big detached bungalow on the other hand, may be better suited to large families or groups looking for a get together. The type of property your purchase will pretty much dictate the number of guests you can expect to visit, but if you are clever you may be able to maximise your rental potential by using the space as efficiently as possible.
Maximising your occupancy levels is all about understanding your market, so be sure to do plenty of research about the area you are considering buying in before you commit. Some areas are better suited to families, while others will suit professional guests.
Check out Airbnb or other rental sites to get an idea of which kind of properties attract different types of guests.
Buying an investment property is not the same as buying a home that you intend to live in. Your holiday home will need to be in excellent order throughout before you offer it for rental, so a property that needs lots of refurbishment won’t start to earn you money straight away.
You will need to factor in the expense of filling it with good quality, durable furniture that will be able to withstand constant use throughout the year. Your kitchen will need to offer everything that your visitors need to stay there independently, including appliances, and you may even need to add additional WC’s or washing facilities depending on the size of the property you buy.
However many guests you are hoping to attract, there will be certain facilities that most will expect to be available to them during their stay. Wi-fi is essential these days and you will need to ensure that you have a good, secure connection wherever possible. Other wish list priorities include private gardens, bbq areas and even hot tubs all help to add value.
If you are planning on renting our your holiday home all year round, you should consider offering a log burner or an open fireplace to add a cosy ambience for winter travellers looking for a getaway.
If the property you are considering purchasing does not easily offer these facilities, you will need to consider the cost of potential building or renovation work into the purchase price, and the achievable rental value.
Purchasing a holiday home in the UK comes with some complicated financial and tax implications that you need to be aware of. If you need a mortgage to purchase your new holiday home and it is holiday restricted you will usually need a commercial mortgage that may not be available from the usual High Street lenders.
Specialist building societies will want proof that you can achieve a gross rental income of between 125-130% of your mortgage payment before they will agree to lend. For mortgage advice try Holiday Let Mortgages
Holiday lettings are also subject to capital gains tax, as well as your usual council tax and stamp duties obligations. There, are however some tax relief incentives to be had from owning a holiday rental.
A furnished holiday let for example, is a specific rental property classification and offers you certain tax advantages. The interest on your mortgage will be an acceptable tax deduction, and there are usually further allowances for utilities, furnishings and insurance.
You should always speak to your financial advisor in detail before purchasing a holiday home to ensure that you fully understand your obligations and potential additional expenditure.
You also need to be aware that during the first couple of years may not see much profit. There are a variety of expenses involved in setting up and running a holiday let all year round. You will need to make allowances for mortgage repayments, property management fees, cleaning, changeovers and maintenance expenses, taxes, insurance and households bills and of course the furniture.
These days it can be tempting to just stick some pictures of your new holiday home on the internet and hope for the best. In reality though, you will want to enlist the help of management company to handle the day to day details of your holiday home.
From bookings and key collections, through to emergency repairs and replacement furniture, a professional managing agent will look after all aspects of your property while you are away. You will need to consider the cost of this service as an additional expense when you are finalising your figures.
A great company called Bespoke Devon offer tailor made property management solutions for you holiday home, contact Nicki for advice.
Finally, if you are hoping to use your home as a bolthole for the family throughout the summer months, you may well lose out on a portion of your profit but you are making lasting memories for you and your family and friends. Many owners of holiday homes don’t actually get to spend very much time in them, as a successful rental is one that is occupied nearly all year round.
Here in the South West there is a huge variety of beautiful properties to choose from. Every one of them as unique as the next, and all offering the potential to work well as a holiday home for investment.
If you would like further advice about buying a holiday home in the region then get in touch, and our friendly team will be more than happy to share their experience and expertise with you.