UK staycation boom - Can your second property be a money spinner too?
“Where are you going on holiday this year?” The answer is very likely to be a UK based destination. Staycations are the theme of 2021 (and beyond) whilst us Brits continue to face stringent travel rules. However, let’s not ignore that fact that we’ve got a green light on the 12th of April to pack our suitcases and appreciate what we have on our very own doorstep!
The introduction of vaccine passports, limited access to certain countries, and extended hotel quarantine periods means that the flurry of activity for holiday bookings are being made on home turf. The Brexit exchange rate has made international travel even more pricey than before, and with the International Air Transport Association predicting that global air travel won’t resume to its pre-Covid level until 2024[i] there’s potentially a lot of money to be made from owning a UK holiday home.
As thousands of people look to explore Britain this summer, it could be a good time for those with a second home to turn their property into a holiday let – or for those with a substantial sum of money to invest in a holiday home.
So, how easy is it to turn your second home into a holiday let? Here are our top tips on the holiday let market and how to maximise your returns…
- Location, location, location
First things first, the profitability of your second home as a holiday let will largely live or die by the old adage ‘Location. Location. Location.’ What does the location of your property offer a potential holidaymaker?
Is your property next to the seaside? Does it offer an air of reclusiveness in a rural location? Or perhaps it is located in the heart of a city or busy market town with tourist attractions nearby?
Hotel platform, Hoo, recently analysed 60 of the most popular UK destinations comparing the cost of renting, the cost of buying and what return is available for those considering a holiday let investment. Cities typically offer annual rental yields of 4.6%[ii], compared to 3.5% in the country and 3.3% at the coast.
There’s no ignoring the fact that the demand for UK-based holidays is here. Bookings for self-catering cottages shot up by 187 per cent following Boris Johnson’s road map address, with April bookings seeing the biggest increase, rising by 284 per cent[iii]. And Covid aside, let’s also consider the planet, ‘sustainable travel’ also continues to be an important trend across Europe, with many UK travellers paying more attention to the impact regular flights abroad has on the environment[iv].
- What are the costs?
Before you choose to invest, start by assessing your financial situation. This will help you determine how much money you have to kick-start your new project.
If you already have a property, is it going to need some work done to it before you can let it out? Think in realistic terms about how much this will cost you, on top of what you’ve paid for it.
Is your second property mortgaged? If so, it may be worth having a chat with your bank. Traditional residential mortgages do not allow you to let out your home, and a buy-to-let mortgage may not be suitable[v]. The amount a lender will loan you will be based on an income projection figure as well as your other income streams. The bank will just need reassurance that your payments can be made even if your holiday let sits empty.
- Do your research and get advice!
As with all business ventures it is key to do your homework. The ideal starting point would be to look at other holiday lets in your local area and draw comparisons to the property which you are considering letting.
Ring your local holiday let management company. They will know your area, know the current market demand, and be able to guide you on expected costs and rental yields.
Don’t forget to speak to the HMRC. Furnished holiday lets are bound by different tax laws compared to buy-to-let properties. Your holiday home is classified as a ‘business’ not an ‘investment’. Heads up! These tax changes can work in your favour so don’t be deterred by the fear of the taxman!
- Protect your second home
As with all business ventures it is worth remembering to plan for unforeseen circumstances. There may be unplanned maintenance charges, cancelled bookings or global pandemics which affect your bottom line (though many of these can of course be covered with insurance measures in place).
Protecting your holiday let should not be overlooked. The most important insurance cover to have in place is both buildings and contents insurance. In addition to these two essentials covers, you could also consider extra policies which include provision for loss of income, accidental damage, public liability insurance (in case someone hurts themselves on your property) and employers liability insurance (if you employ a regular cleaner or gardener for example.)
It’s worth speaking to someone that understands the ins and outs of holiday lets and all that it entails. Here at Stride we will ask you about your specific needs before tailoring a policy to suit your portfolio. The insurance provided will then be unique to you and your requirements – just like your holiday home.
So if you’re thinking about letting out your second home for holiday purposes, get in touch with Stride today to see how we can help you!