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Why Now Is the Perfect Time to Invest on a Holiday Let

As the imminent lifting of the coronavirus restrictions is just around the corner, people are getting more excited about taking their long-delayed vacations. But with continued questions surrounding foreign travel, it looks like many people are planning their summer holidays in the UK rather than going to other countries.

As the demand for domestic holiday accommodations starts to rise again, you might be thinking about buying a holiday let of your own. Having that little place where you can spend a few days off on holiday could be worth investing in. But before you go out looking for an estate agent or a conveyancing solicitor, you must first ask yourself, is now an excellent time to buy a holiday let?

Holiday Let Mortgages Bounce Back

With the 2020 pandemic affecting almost every industry in the world, the holiday let industry also suffered huge losses due to the lockdown restrictions. The housing market took a huge blow and prevented a lot of people from going on a holiday. As a result, many lenders withdrew their holiday let mortgage products from the market.

Recently, however, research has been showing that the holiday let mortgage market has already bounced back and is now on the verge of experiencing an influx in borrowers and lenders. The number of mortgage products on the market has been steadily increasing since March and April 2021.

Looking at the state of the holiday let market, it seems like a more significant number of lenders are also offering holiday let mortgages. As expected, however, rates may be slightly more expensive than last year, but lenders are giving generous return rates, which only appear to improve in time. For example, some lenders suggest that the holiday let market is forecast to grow 4% yearly.

When looking at the mortgage products in the market today, it seems like a broader range of these products is now available especially on the standard residential mortgage market. This provides a greater choice for people who choose to remortgage their main residence to pay for their second home.

Growing Demand for Holiday Lets

Despite the growing choice of holiday mortgage products, the rise in demand is set to overtake the supply. Anticipation for a staycation boom combined with other factors, such as the Stamp Duty holiday, which allows second-time buyers and investors to take advantage of reduced Stamp Duty rates, means that buyers are snapping up properties faster than they go on the market.

Why Holiday Lets Can Be a Good Investment

As the COVID-19 restrictions continue to ease, the holiday let market will also continue to expand. There’s likely to be even more demand for holiday lets in the future since some areas are already experiencing a shortage of holiday property. Here are a couple of reasons why holiday lets are a good investment right now.

Make More Money from a Holiday Let

If you compare holiday lets with longer-term lets, the former is much more profitable than the latter. A very rough rule of thumb might be that you can charge the same for a week’s holiday let when in-season as you can for a month’s long-term let. There’s even a report from Which? saying that lets earn over 10% yield on average and is expected to reach or surpass 14% in the coming years.

If you’re still not convinced, here’s an example: Suppose you buy a holiday cottage for £175,000. A property on a long-term let might earn you more or less £700 a month for about £8,400 a year. Calculating your earnings will give you an annual yield of 4.8%. That looks like a decent yield at first. But let’s imagine the property as a holiday let that earned you £700 a week for about ten weeks of the year. After that, you earn another £600 a week for another ten weeks and £500 for another ten. If you combine all that, you basically get about £18,000 a year, which totals to a 10.28% yield.

Benefit from Tax Advantages of Holiday Lets

What most people don’t know is the major tax benefits of holiday let properties that ordinary buy-to-let landlords just can’t obtain. These can make a huge difference to the profitability of your property.

As a general rule of thumb, the HMRC considers holiday lets to be a business rather than a buy-to-let as such. What does that mean, you ask? It means you have the option to claim full mortgage interest tax relief rather than the minimal allowance that is now given to most landlords. Generally speaking, you’ll be able to claim all your running expenses on your holiday property business. That includes bills and maintenance costs, and the replacement of domestic items. That’s simply an advantage you can’t get from any other investment.

Holiday Property Has Restricted Tenancy Rights

One of the most significant differences in holiday lets is that tenants don’t have the same occupancy rights as tenants on assured shorthold tenancies or ASTs. That just means there’s little risk of being stuck with problem tenants who are difficult to evict. The best thing about this is that holiday tenants also tend to pay their rent in advance.

You Can Use Your Holiday Let Yourself

If you currently don’t have any tenants to occupy the holiday let, you can always use the property yourself whenever you feel like taking a vacation. This sounds like a great advantage to have as an investor, but there’s actually more to it than that. From a financial perspective, this means you could benefit to the tune of several thousand pounds a year.

Also, owning a holiday home has its perks as it lets you spend time visiting these stunning locations, treating yourself to a world-class holiday for a fraction of the cost. The UK has some of the most breathtaking destinations that are perfect for a domestic holiday.

Get Expert Advice About Buying or Selling a Holiday Let

Like any other property buying or selling transaction, you need expert advice to help you with all the legalities. While you shop around for a holiday let, you should also make some effort to find conveyancing solicitors that could help you buy a property. The best and easiest way to do this is to get a conveyancing quote online to see how much your transaction is likely to cost.

Conclusion

The effects of the coronavirus on international travel have led many Britons to opt for domestic vacations rather than going on a trip abroad. As the lockdown restrictions begin to ease, the holiday let market is also seeing some growth in popularity and demand.

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