Who's right and wwyd?

[Harryhenderson10]

My DH and I are having an argument at the moment and I could do with MN to give some solid advice on wwyd.

So you have £110,000 in savings.

You live in a property that has a building that could become a holiday let. It would take all of the budget and maybe a little more but it is in a pretty popular tourist location.

Or would you do something else with the money?

The savings need to at least stay the same in value over the long term and preferably give a monthly amount of income.

One of us thinks a holiday let will give an income per week and add value to the property longterm.
The other thinks it would be easier and less hassle to invest in shares, but honestly I don't see how this will generate nearly as much income as a holiday let?

What would you do?

It depends if you want to run a holiday let really! You would need to do the maths and work out likely income, costs, and factor in the time it would take you to run. And then work out if that is a good wage for your time, as well as the financial investment.

Also depends how knowledgable you are about shares and different industries, or whether you would just want to passively invest it in an index fund or similar. In which case, returns might be lower but you would still have the time free that you would have spent running the holiday let.

There isn't a right or wrong answer, you need to cost it up and assess what you want to spend your time doing.

I don't think either of you are right or wrong.
Personally, I'd invest the cash as I wouldn't want people invading my space 4 months of the year. And the hassle of bookings, changeover days etc. But if you have the time to invest, and space to feel you have privacy from holiday makers, it might make sense.

What would you do out of holiday season, any Universities, hospitals or large organisations nearby that need o/n accomodation?

What is the competition like in your area, road full of Airbnb or quiet?

well, investing that into a holiday let is not only looking at the return for your money in income, but it is also investing in property, so the holiday let, after doing it up, would presumably be worth more than 110,000 if you sold it? The property will then be your investment.

if not, don't do it.

Holiday lets can be great, but it is a job you are taking on, one of you will need to take this on. Some can make money, but many don't. Many only really let for a few weeks in the year.

I know someone who runs a holiday let on the grounds of his house and he makes a fortune! However, you need to factor in things like cleaning, greeting the next visitors and giving them the key etc. Most of his Saturdays are spent cleaning, so it depends if you want to do that or you are prepared to pay a cleaner.

Shares or premium bonds. Having a holiday let is a complete pain. My DBIL has one in Cornwall and this year it has been trashed more than once. After the season he is going to rent it out long term through an agent.

I’d do shares unless you want the hassle and expense of running a holiday let with no guarantee it will be booked or end up making much of an income.

I wouldn't get a holiday let. If you need to sink 110k into it is sounds like madness

Shares or premium bonds. There a reason loads of holiday flats/cottages are suddenly up for sale. People have had no income from them for months but still having to pay mortgages, bills etc. Also it’s rare a holiday place will be busy all year round so would only be getting seasonal income along with all the hassle that comes with it, people trashing the place, cancelling last minute etc.

depending how far it is from the main property, i'd give it the once over, basic decorating etc if needed and sell it. is it necessary to spend all your savings if you don't need to ?

I work for a few air B&B hosts. The profit can be quite minor I am told. Unless you want to clean and make beds you would have to figure' staff' into your plan.
Me and dh stayed at an amazing house with a great host in Wales once. She ceased hosting after being attacked... In her own home. Not all guests are nice op.. She had a ds who witnessed it also.
A let attached to your family home wouldn't be for me.

or rent it out to a tenant as a pp suggested.

If you need the (mostly reliable) monthly income then holiday let. I'm not sure why you did the whole 'one thinks and the other thinks' when you then went on to make it clear you disagree with one side

Personally shares!

Holiday lets would be a pretty big thing to take on - are you prepared for it.

First off homework needs to be done - how much could you make per week and how often would you be filled.

Then exactly how would it work - who would do the end of let cleaning etc and get it all sorted. Would you offer a welcome basket etc

Adding the holiday let might not add the same value to your property (in fact, it’s unlikely to).

And (assuming the let couldn’t be sold separately from your house), it completely ties the money up for the long haul: you couldn’t access it until you sold your home.

AND, it means almost all your capital is invested in the same asset in same location. What if property stops increasing in value? What if something goes wrong in your area? What if planning permission is given for landfill site, quarry, intensive pig farm, solar panel array with huge overhead power lines, etc etc.

Do you actually want to have people on holiday on your doorstep?

Do you want to run a self-catering let? Doing it for just one is seldom that profitable for the hassle involved, which is fine if you want to do it. If you’re a SAHP, and hoping to earn some extra £ I can see the appeal, but it’s a big capital investment to earn very little from an annoying job.

Personally I’d be making an appointment with a good financial advisor.

110k to make a building into a holiday let?

Plus then the daily grind of keeping it running?

Yeah sounds shit tbh. I can’t be arsed with my own laundry and cleaning, let alone a whole other building’s worth.

Unless you pay someone to do that, in which case goodbye all but maybe very minimal profit.

Personally I'd go for the holiday let but there's no right or wrong answer here, it's done to what you both want to do. Holiday lets may take away some of your privacy, involve some work, could bring problems sometimes plus a separate house needs up keep etc so costs money as well as brings money in......I would still do that but these are the cons

I think it depends on how much you actually want to run a holiday let? For me I'd find it restrictive and not something in interested in... But if it's a business you want to run then it might be for you. I have heard the profit isn't much and that people seem to want a lot for little money.

Have you had any financial advice?

personally I would be looking for a wealth management company something like Saint James’ Place but not them because their fees are extortionate

Holiday lets are not without risk or work look at what’s happened this year I bet there’s plenty of second homeowners who are reliant on their income that will be in dire straits after the pandemic effectively shutdown their business overnight. Once that money is put into your property it’s gone at least investing it means it’s still available and it’s continuing to grow

@MummytoCSJH

If you need the (mostly reliable) monthly income then holiday let. I'm not sure why you did the whole 'one thinks and the other thinks' when you then went on to make it clear you disagree with one side

Yes, what with the “one of us thinks” followed by “I don’t see...” So, you want to do the holiday let.

You sound like the pair of you are just tossing ideas around and haven’t costed anything properly.

Do you know what average annual returns from even basic tracker portfolios has been for the last 50 years? If not, you can’t even have this conversation.

£110K+ just to make a property rentable sounds like a lot of money.

There is so much more to consider than just rate of return.

One thing is liquidity.

If you have plenty of savings anyway, then sure - tie it up. If this is all your safety net, what happens if you get sick / lose your job? Do you have to sell the holiday let that’s on your property to get a larger injection of cash? How would that feel?

Tbh, I wouldn’t give you an opinion on who’s right, until I saw figures AND understood your full financial picture.

As to the WWYD?

Understand annual investment growth / income.
Investigate all options (e.g. if one or both of your pay HRT then £110K drip fed according to your income into a pension would give you a massive immediate return of 40%!)
Get actual quotations for the let preparation work.
Draw up a business plan of what rental rate you can expect, what your void periods would be, running costs, tax, likely capital gains - and CGT.

From your post, it all sounds a bit pie in the sky at the moment. For that reason alone I’m with your husband on the stock market.

Do you have space to put in a shepherd’s hut or similar, to test both the market and your comfort level with being rental owners?

If £110K (plus) turns a value-less outbuilding into a habitable regular home work £200K, then I’d certainly do that. You could play at holiday lets for a year and if it didn’t suit you - or wasn’t profitable - you could sell on at a profit.

But I see that as property investment vs shares, not holiday let vs shares.

One works without any effort. The other is taking on another job.

I know which I'd be doing!

I would also make sure your pensions are maxed out, though you need a decent financial advisor to ensure you get the best from both that, or any investments.

I'm also a little surprised that it would cost you that much money to convert an existing building into a holiday let, unless it's in such bad repair that you'd have to rebuild from scratch. If the cost is because it's an enormous building, then either you're talking about a number of holiday lets (and much increased work), otherwise very large buildings aren't as popular as 2-3 bedroom ones.

Holiday lets might not be definite income, but neither are stocks and shares. For any investment, property or shares, I'd get some proper financial advice first.

Running a holiday let will either be a lot of work, or it will require you to pay a decent portion of the profits to somebody to take on the hassle for you.

It's not right or wrong, it's just an option. Personally I would go for the holiday let idea but then I'd be prepared to deal with the hassle for the extra money. I think it's also perfectly valid to invest it in shares because then you don't have to do any extra work. Just depends on how much work you are prepared to put into it.