Owners of Holiday Homes - what advice would you give?

[tigerbear]

DP and I may be looking into a holiday home in the area where all of my family are based. We live in London, they live in Newcastle, so the plan would be to buy somewhere in Northumberland, somewhere we can stay when we go up there, but also to let out.
It would be to keep as a long term investment, but we’re wondering if we’ll actually make a decent return. From what I can see of looking on the lettings websites, the prices people are charging for a week in a cottage are astonishing!
Our deposit is approx £30k, with the intention of buying somewhere between £170-200k, and based on what I’ve seen the return is around £1k per week in high season.
Is it too good to be true???
If you have a holiday home, what have your experiences been - are you making easy money / how much do the letting companies charge in commission etc?

I don't have a holiday home but have looked into it. There are a lot of costs involved....holiday park charges [thousands], bills for heating, lighting etc, fees to the letting agencies for admin[booking, deposits, cancellations etc] and advertising [hundreds], cleaning bills, replacement for wear and tear, costs of transport going there and back which would be often as you would feel you had to make good use of it to justify the purchase.

You may not get full occupancy, people often cancel and some can trash a place. So the peak 10 weeks may not give you £10k. And you won't be able to use the place yourself during a chunk of the best part of the year!

On top of it all you will have to repay the 140k-170k you need to buy it. There could also be times when you would like to go to the holiday home when it is available but life steps in...illness, some work/family commitment for eg. It doesn't seem a great deal to me.

if I were you I would just rent a holiday place or hotel each time you want to make a visit to the area...far, far cheaper and a shed load less hassle.

if I were you I would just rent a holiday place or hotel each time you want to make a visit to the area...far, far cheaper and a shed load less hassle

+1

It is hard to make a holiday let 'pay' unless you live locally, manage it yourselves and have some scale of operations.

Owning one remotely is a lifestyle choice, not a sound financial investment.

DH and I would also like to do this - we do currently rent a house when we go up for Xmas etc, but we are yet to find one with comfortable beds, have tried four different ones now!

Some googling a while ago suggested that you might expect it to cover its own costs, but it probably wouldn’t bring income and you could end up having to find money to cover costs if you didn’t get the right level of occupancy.

That £1k a week will bring in not much profit when you consider the outlay.
Mortagage, insurance, utility bills, cleaning, replacing and repairing, laundry, admin, advertising, cost to agencies just of the top of my head.

As you wouldn't be running it yourself the price will increase, what if the cleaning/laundry were done badly and you only find out about when you visit or bookings drop.

Could you cover the costs with no bookings, in this climate things are slow?.
What about the set up costs no mismatched cheap rubbish is going to bring in the guests?.

It's not easy money a lot of hard work goes into running it successfully.

There’s only been one year in the last 45 that I haven’t had a holiday home.
I’ve had caravans , a villa in Florida, a lodge in France and a country cottage in N Yorks and now a static caravan in N Yorks

This one and the the other caravans are so little hassle. It’s what I would plump for to be honest

They aren’t an investment ...only in lifestyle
Once you’ve paid your yearly rental that’s pretty much it

The villa while fabulous was a pain in the butt and the lodge was easy maintainance but so difficult to get to and the cottage was the same as running a second home
Luckily we didn’t have a mortgage on it so didn’t have to rent it

Just love that caravan ..would that be an option for you.

I have a holiday home and the profit is minimal. There are SO many costs - someone to clean, do the laundry, changeovers, be on call if the guests don't know how to unlock the door. Then there's all the utility bills (and you'll have guests who stick the heating on full the second they arrive and don't bother switching it off when they leave, running up bills of hundreds of pounds). Someone to do the gardening, people to fix things which go wrong (and which invariably happen on a weekend so call out charges are astronomical).

So, in short, it's not the most profitable of businesses! I suppose if the underlying asset is likely to increase in value then it may be worthwhile, but unless you know the next property hotspot then I'd probably put my money elsewhere!

We manage a holiday let but it is next door. We do use an agency for bookings but over the years have also built up several regulars who book directly with us. Cleaning can be costly, particularly in a very touristy town as everyone wants a cleaner for 3 hours on a Saturday!

The property we let out is pretty desirable - we live in a little fishing town and our holiday let us one of the few that has parking, a garage and views. It’s booked out about 40 weeks of the year. Providing that there are no major repairs that need doing we break even at bookings for about 30 weeks. It doesn’t really provide an income at the moment but it pays for itself. If I wasn’t next door and able to provide fixes for most minor issues immediately it would be an awful lot more expensive.

That’s the secret , doing your own bookings, cleaning , repairs where possible to maximise profits
I did my own bookings for the villa, but my cleaning company, pool guy and gardener really bit into the budget..
I must’ve made good money as I was always refurbishing...unlike some unscrupulous owners who were renting out tired and shabby looking villas for top dollar while they poured their profit off the mortgage

I think that after Brexit when we may need to pay for visas for European holidays, more families will holiday in the U.K. I live in a holiday spot in England and the cottages round here rent for £1k in the summer and they seem to be occupied most of the year.
I have thought about moving out just for the summer to rent my house out!

I am writing as someone who did this for 4 years and we also lived on site so did everything ourselves. A grand a week for just changing some beds and cleaning a bathroom sounds great in principle, but things like advertising will eat your money very quickly. The "big" names such as HomeAway (or whatever they are called these days) charge a hefty commission. As a pp pointed out, paying someone to do the cleaning/changeovers/gardening/dealing with call-outs is also expensive. In today's market you will need high end furnishings and bedding - at least three sets of bedding, spare pillows, different tog duvets. Guests will be allergic to feathers or only want feather duvets. If stuff breaks or isn't working then it needs fixing/replacing immediately. Wi-fi is pretty much standard these days, you can't get away with saying "the engineer will come in 48 hours." Cue all the sad DM faces of teens whose dream holiday was ruined by not being able to blog about it. If the oven or the fridge break down then you will need to source a replacement/repair ASAP. Would you take children and dogs? Kids break stuff. What if subsequent people booking have pet allergies? You need to think about business rates and rubbish collection, public liability insurance, taxes and numerous other things which quickly eat your profits (heating on full blast 24/7 being one!). Sorry to sound so negative, but we tried the big adventure and very quickly realised that it was not a sustainable way to make a living. To add balance, we also met some lovely people and had a lot of fun, but it was bloody hard work for not much return. OTOH, many people make a great success of it............... I would strongly suggest that you get a cup of tea/glass of wine/bottle of gin and have a browse on www.laymyhat.com There is a wealth of advice there from people who have been doing it for a long time. There is a stand alone section called Just Starting Out. They are a friendly bunch and will help with any questions you have. I have hung up my hat so you won't find me there these days I really hope you can make it work for you but research is the key. Good luck with whatever you decide.

Good luck - it's hard work, stressful at times and you need to be careful not to confuse income with profit. if you're servicing a big mortgage too you will struggle to make a profit - you may just cover the costs of ownership which might be enough for you. Any profit will also be taxable depending on your income elsewhere so you could potentially be paying 40% tax on the bit of profit you might make.

If you use an agency to take the bookings they'll cream off around 20% +VAT of the letting price + the cost of set up, laundry, repairs and replacements. Getting cleaning done can be stressful if you are not close by and can't keep an eye on what's happening.

There is oversupply now in many areas - partly fuelled by AirBnB and this means lower rental income and more unoccupied weeks. I've seen summer weeks being discounted by 40% this year by some desperate owners. I've been lucky and had full occupancy at full price but it's been a test of nerve at times and I'm spending more on advertising,

My advice would to be to do your sums very carefully before you commit

My friend and neighbour has been doing this for years, doing everything herself (they have a small holding and the cottage is on site). They have never made any money from it that made it worthwhile, and this summer she used a cottage rental website. It did work, and they have been fully booked all summer, but she found that the website managed this by offering customers huge discounts for early booking so they still haven’t made any money from it, in spite of working hard all summer!

However, the house had originally been intended as a home for her elderly father, and now she does find it extremely useful for when family visit.

You may well find that it is worth it just to have your own base for visiting family, and you may find that you can rent it out occasionally to friends of friends and via word of mouth, but easy money it certainly ain’t!

Wow, thanks for all of the replies and advice, it’s really appreciated.
Will def take a look at that website you mention, Gussiefox.
I think we’ll do lots of research over the next few weeks and see what the best option would be. DP primarily wanted a long term property investment that he can keep until retirement, so we thought it would be a good option to have the holiday let as a base for us primarily to stay at, and secondly as a place to let out.
The mortgage would easily be covered by us both even if it wasn’t let out, so I guess breaking even would be fine.
We just chatted this evening about other uses for his £30-35k, and it’s a toss up between this, keeping it aside to possibly start a business, putting it towards paying off the mortgage we have in London (which is my property), or the opposite, putting it towards a bigger place here in London.
So many options, all very different!

Does anyone have any thoughts on whether it’s best to buy a typical pretty rural cottage as opposed to an apartment but in the centre of a very touristy town (we’re thinking eg Alnwick, Rothbury, etc).