Articles:
Pros and Cons of Holiday Letting
SB May 2007
A
holiday let mortgage is harder to obtain
than an ordinary mortgage. Before you take the
plunge you need to be absolutely certain a
holiday let is right for you. You need to be
clear about the specific benefits a holiday let
can bring, and whether there are any downsides.
One huge benefit is that having a
holiday home to let enables you to buy
your retirement home at today’s prices, and
it will be paid for by the time you retire.
One of the biggest benefits of a furnished
holiday let, of course, is that potentially
it can be very lucrative! For example,
there are holiday properties in Devon,
Cornwall and Dorset which let easily for up
to £1,200 per week at the height of the
holiday season.
Another major plus is the tax situation. A
holiday let is treated as a business for
tax purposes. This means that you can treat
nearly all your costs as tax-deductible.
A further benefit of the tax position is
that any loss you make (and, let’s face it,
you probably WILL make a loss in the initial
period) can be offset against your income
from other sources, if you wish.
So are there any downsides?
The main downside that comes to most
people’s minds, of course, is that as a rule
the property can only be let at a profit for
a very small part of the year. But this
negative is offset to a large extent by the
much higher weekly rents you can attract in
the high season.
Most costs for a holiday let are higher than
for a buy-to-let – for example advertising
costs and maintenance costs. In particular,
if you decide to use an agent, they can take
up to 30 per cent of your rental income.
And customers nowadays expect high standards
of furnishings and fittings: dishwashers, CD
players and satellite TV are standard, not
optional extras.
A great deal of work is involved, especially
if you decide NOT to use an agent. The
place has to be cleaned to a sparkling
standard between each letting, and clean
bed linen and towels provided. And with such
a high turnover, there is a greater
possibility of problems arising, which you
have to sort out.
These are some of the things that you need to
bear in mind before making your decision. But
the minuses are far outweighed by the pluses.
When looking for your
holiday let mortgages, talk to your adviser
and you will find there is plenty of help out
there.
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