holiday lets and buying overseas property

A holiday let is a property that is located in a holiday destination and marketed entirely towards tourists. In the UK, self-catering holiday bookings jumped from 6.22 million in 2015 to 7.23 million in 2017; resulting in more and more people turning towards the lucrative holiday lettings market.

The Advantages

The obvious advantages of owning a Holiday Let Property is that you can use the property for your own family holidays. In addition to this property being a financial investment, it can also benefit your family and friends; giving you cheaper holidays and providing you with some quality time together.

Owning a holiday let is also commonly used as part of a retirement plan. By owning a property in an area that appeals to you later in life, it allows you to begin your retirement in your Holiday Let Property or quite simply provides you with a pot of money to cash in when the time comes to sell on the property.

In the meantime, a holiday let can make you a tidy profit as charging by the night or week tends to earn a higher income than a standard buy-to-let. During a peak season, a holiday let can make as much in a week as you would in a month through buy-to-let,earning 30% more yield than their buy-to-let counterparts. Moreover, there can be attractive tax advantages for you to capitalise off.

With Holiday Let Properties you must be fully aware of the responsibility you are taking on. With these properties, your profit relies upon having a high guest turnover. All these bookings come at a price. With more traffic through your holiday let, there will consequently be more wear and tear and, therefore, more maintenance costs.

Holiday lets also require more work in their day-to-day runnings — who will oversee the hand over of the keys? Who will do the laundry and the cleaning? It is possible to hire a company to manage these services for you; but, bear in mind, that this will only increase your expenditure.

The best thing to do with investing in Holiday Let Property is to sit down and work out your numbers. Holiday lets can see a dramatic variation in their occupancy rates throughout the year, as specific locations are very dependent on the seasonal flow of people. In order to attract guests all year round, some investors decide to look abroad for their Holiday Let Property, or choose a city-based UK location.

When purchasing a property for the holiday lettings market, you must consider who your target market is. Is your property tenant group for families, couples, or those looking for a weekend bolthole? This decision is crucial as your property’s needs will change depending on who you are trying to attract; different audiences have different needs.

Put yourself in their shoes.

A top tip is to focus on the memorable holiday experience you want to achieve for your guests. If you can understand what your target market wants, you will be able to provide them with everything they will need to have that experience. And, ultimately, it is in these smaller touches that you could guarantee repeat bookings. It is always a good idea to stay in competitors’ Holiday Let Properties to see what you could do differently or improve on.

Once you have decided on who you are trying to entice, visit your potential property locations through their eyes. For example, young couples want a completely different holiday to that of a family with young children. Make sure your property is accessible, and there are local amenities on hand should they require a trip to a supermarket or pharmacy. Additionally, ask yourself what the local attractions are and who would typically visit them.

Purchasing your Holiday Let Property abroad is a huge consideration.

Although the process in question is similar, some key details will differ. It is essential to research your chosen country’s property regulations and taxes before you start browsing through potential properties. The next step is to get to know the local market; talking to local managing agents is a great way to gain insight.

The most important thing to do if you’re tempted to cash in on the guarantee of warm weather for your guests, for example, is to do your homework.

Whether you are buying in the UK or abroad, the basics are the same. Find the right property for your target market, and then market that property emphasising how your property has everything they need to have the holiday they want.

With a holiday let investment, it is easier to assess your finances from an annual perspective. Renting your property out on a short-term basis will create more profit; however, you must manage your cash flow as this income will fluctuate throughout the year.

Void periods occur across the large majority of Holiday Let Properties due to the seasonality of their locations. In most cases, these periods tend to coincide with when children are back in schools. But, you can use your peak seasons of income to ride out any void periods.

By working out the average amount of weeks your property can be rented out each year, taking into consideration seasonality and annual visitor numbers, you can calculate your gross income. The average occupancy level for holiday lets is between 20 and 24 weeks per year, with high performing properties in popular locations achieving over 40 weeks booked.

If you then approximate your outgoings of mortgage payments, interest, bills, insurance, cleaning and maintenance, you can simply find out how many weeks occupancy is needed to cover these costs. Then, of course, aim higher to secure a profit margin.

When it comes to advertising and marketing your holiday let, many choose to go through a trusted platform which is independently managed. These sites take control of a large proportion of your bookings, as well as creating personal profiles and listings. A popular choice of advertising portal is Airbnb.

Airbnb

Airbnb currently charges 3% for most of their ‘hosts; however, this fee can be increased for some international hosts or those with a Super Strict cancellation policy. This fee is calculated from the booking subtotal (the nightly rate plus additional costs, excluding Airbnb fees and taxes) and is automatically deducted from the host payout.

There are positives and negatives to using holiday let management agents. By self-managing your property, you stay completely in control of who can or cannot rent your property. Screening your guests can also help your reviews, as you know who your Holiday Let Property is targeting. Similarly, there are no agency restrictions. You would have more flexibility when you want to use your holiday home.

However, by using these management sites can help you to guarantee more bookings without dedicating any more time and effort to your advertising. The biggest downside to using an agent is the fees and commission; if you have the time to self-manage, you can keep 100% of the rental income after deducting tax.

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