When summer arrives, and our thoughts turn to getaway plans, many of us may consider buying a home at our favourite holiday destination.
According to research, the number of people buying second homes in the UK has increased by 30% since 2018. This would indicate that a holiday let could be a wise investment.
Let us help you make the most of your holiday home investment!
What Should You Consider While Purchasing a Holiday Home?
There are many factors to consider when purchasing a holiday home. However, there are a few crucial considerations to keep in mind if you want to make a successful investment:
- Price: When determining whether or not your home will provide a fair return on your investment, this is the most crucial concern to take into account. The property’s price will be determined by it’s size and location. However, for the same selling price, some houses will be capable of providing a more considerable return as a holiday let than others.
- Size: The number of bedrooms and baths, the size of the living space, kitchen capacity, and whether or not there is a garden are all factors to consider.
- Location: Consider what amenities are nearby, such as pubs, restaurants, stores, a children’s playground, tourist hotspots, and so on. Another factor to consider is whether the site is situated away from major roads and loud or industrial zones.
- Character: Check whether the house has unique elements like vaulted ceilings, marble fireplaces, and so on.
- Finance: Evaluate how you plan to finance the acquisition of the property. Consider whether you’d be better off borrowing money against your primary residence (remortgage) instead of the holiday home if you’re getting a mortgage.
Varying properties in various settings may appeal to a variety of people, so there is no ultimate definite answer for what makes a wonderful holiday home!
However, to maximise your returns on investments, there are several factors to consider.
Advantages of Buying a Holiday Home
A holiday let can be an excellent investment if it’s well-managed and well-used.
Here are some benefits of buying a holiday home:
The flexibility to go on holiday whenever they want is what most people find appealing about having a holiday home. You and your loved ones can use the house whenever you choose, which means regular holidays in your ideal location with no planning and expenses, which is a significant benefit given the rising prices. Weekends with nothing planned will no longer be the same.
UK’s Thriving Tourism
The full market potential for holiday rental is stronger than ever, with staycation bookings increasing by 300% in 2020, setting a new high for domestic tourism. The surge in demand underscores a national desire to find holiday destinations closer to home. When you couple this with the growing popularity of short breaks, holiday homeowners may now receive bookings all year.
Favourable Tax Laws
Qualifying holiday lets are treated differently by Her Majesty’s Revenue & Customs (HMRC) than typical rental properties, as they are regarded more like a business than an investment.
People are ready to spend premium prices for well-equipped flats, homes, and holiday cottages in places like Scotland’s Highlands, the Lake District, and coastal resorts. Thus holiday lets can be highly profitable. Holiday rental profits can be nearly four times higher than typical rental yields during peak seasons.
Disadvantages of Buying a Holiday Home
Purchasing a holiday home may be a disaster if not appropriately managed, draining your finances and causing them far more trouble than it’s worth.
Here are some of its disadvantages:
Purchasing a property in a desirable location in the UK frequently means paying a great deal of money for a holiday home, as you might expect. Even if you’re just trying to generate a little more money from your second property, the more you pay, the longer it takes for you to break even. You may even be compelled to rent it out at times of the year when you would prefer to enjoy it privately instead.
Most people will require a mortgage to fund some or all of the purchase price. Depending on how you intend to use the holiday home this could be:
Disturbance and Damages
If you intend to rent out your second property to paying guests, you should be aware of the possibility of damages and disturbance. While you can take steps to ensure that no one enters your property who will be reckless or disrespectful, accidents can occur, and the more people who use the property, the greater the danger of damage, whether by accident or not.
Pre-vetting of guests can help with this and you must also make sure that your home insurance matches how you are using the property.
How About Holiday Home Mortgages?
The financial aspects of owning a holiday home might be tricky, and it all relies on what you want to do with it. There will be fewer financial requirements if you use it for personal enjoyment, but plenty of options are available if you’re going to run it as a holiday letting business.
A second home mortgage may be the best option for you if you don’t intend on letting the house out regularly (or only on occasion).
You’ll need to have a holiday cottage mortgage if your property is to run as a commercial holiday let..
At Drake Mortgages, second home mortgages are our speciality. We will handle all of the paperwork and trouble for you, so you can spend more time enjoying your new holiday home.
Feel free to contact us if you have questions on how to buy a holiday home.