Buying a holiday let property is very different from buying your own home.
Here are some things to think about before you start your search for a property:
Do your research
Research the market, with the help of estate and lettings agents, who will be able to advise on demand and any other issues in the area you are thinking of buying in. The location of a holiday let property will impact its rental value. You also need to consider the travelling distance from your home if you're planning to personally run and maintain your holiday let.
Ask an expert
Speak to an experienced holiday letting agency and make sure you have a professional opinion of the level of income and potential occupancy levels you can expect from the property and the area. Ask about what standard of decoration and furnishings you should offer to attract the level of rent and occupancy that you need. If you decide to register with a holiday letting agency, you should consider what services they will provide you with and the cost to you.
Understand your finances
Keep in mind why you are buying the property – whether you're in the market for capital gain when you sell or simply monthly rental income. This will help you decide what to buy and where, and what kind of mortgage you need. You will need to consider your pricing – if you charge too much the property may be empty during the main holiday season, if you charge too little you may be fully booked but without enough profit to cover your mortgage and any other costs.
Buy carefully
Make sure you buy a property which allows for sufficient profit margin. If you go for a ‘bargain’ property which requires a lot of work, make sure that you have the time and finances to undertake and complete the project. Paying more for a property which is in better condition and can be marketed immediately can be a wiser move.
Check for safety
By law you must make sure that the property you're letting complies with various safety regulations, such as furniture and furnishings fire safety, gas safety, electrical equipment safety and that it contains a smoke detector. You'll also need certificates to prove these regulations have been met.
Be aware of new and updated regulations
Failure to comply with the law can result in serious consequences. The best way to make sure you are kept up to date is to use a holiday letting agency which can make you aware of them, while also ensuring you comply.
Tax implications
A Holiday Let investment attracts several different taxes. Aside from Stamp Duty Land Tax, which you have to pay when you purchase any Holiday Let property, you may also have to pay Income Tax on the rent you receive and Capital Gains Tax when you sell the property. Rental income must be declared on a Self Assessment tax return. However, you can deduct costs such as mortgage interest and letting agency fees from the rent you receive first. And like anything else you own, a Holiday Let property will form part of your estate for Inheritance Tax purposes. There may also be tax advantages relating to any capital you spend in kitting out your property. We recommend that you speak to an accountant for more in-depth information.
Marketing your Holiday Let
You can choose to market the property yourself, or use a holiday letting agency. It is important to make sure your property is visible to potential customers searching online and that they can see anything which sets you apart from your competitors.