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?

Semi retired is nothing to do with it. Hiring a cleaner is the relatively easy bit.

A good agency is good at sifting out the stags and hens and the teenagers wanting to party, and is able to access different marketing platforms, demand payment for damages, step in quickly if there are problems etc. And will have an idea of pricing, even in a very volatile market.

It’s the business side that matters.

Sit down with someone local and have them take you through likely numbers. Financial Advisors tend to know about financial products. Not about running a small business.

I'd go for the holiday let, as if you come to sell, it would definitely add vale to your property.

We have a holiday let, a few rentals and shares. With the shares it's a LONG term game and you must be prepared to lose the lot if things go wrong. Never invest money you can't afford to lose, in the stock market.

The rentals bring in steady money but come with tenant issues - not often but it happens and it's usually a bigger headache than any issues with a holiday let.

A holiday let can bring in more money than a rental if it's attractive enough year-round and if you can keep costs down. Costs will include a cleaner, gardener, laundry, wi-fi, electricity, gas, water, council tax, logs if you have a log burner, welcome hampers, that kind of thing.

I am a firm believer that brick and mortar is still the best place to put your money - because whether you make a regular income from it, you will still get an increase in equity. In your case it would increase the value of your home because it could be sold as a house with an 'annexe' or with a going concern. HTH.

The easy way to let, is to find a single longterm professional tenant who works locally .

More modest weekly rent but it's for 52 weeks, so can be better than a summer holidsy season and a lot less hassle. Tenant pays the CT and fuel bills, does their own cleaning and laundry. LL doesn't have to be there for changeover days , or have the same conversation every week.

Yes but a tenant can stop paying rent and even if you issue a section 21 it can take months to get them out.

I wouldn't. I'm pretty risk adverse but also holiday lets are a lot more work than most people think. The ongoing work would put me off. Always needing to clean and maintain, lots of regulations to comply with and the chance of having a crappy guest who leaves a mess/breaks/steals stuff. And needing to be on call when we had guests, very much a no from me.

Mum has a tiny holiday house overlooking the Sea in South of France- Magnificent views...She'd make a fortune letting it out, but the neighbours who did this had all the furniture stolen, and were unable to claim any insurance..If you are on the premises, it is different, but it would be a good idea to hire a professional cleaner.
If in a good area, go for the holiday let, as you are on the premises.

Holiday lets can be a stressful source of income as so unreliable. A few of my friends have them and are constantly worrying about bookings.
We stayed in a wonderful holiday rental next to the owner’s house a few years ago in the Cotswolds. The owner was absolutely lovely, incredibly helpful, and we would be going there annually but she now has it rented on a long lease after a succession of people trashed it and she just didn’t want the worry and hassle. So you need to think of all the pitfalls before leaping in. Also think of neighbours, it isn’t always great having holiday lets close to you.

Are you the one retiring though? As if my partner was saying I should spend my retirement cleaning up and preparing a house I didn’t want in the first place, it would be a firm no! If it’s you willing to do all the hard work and slog instead of enjoying retirement then that’s a bit different but expecting your partner to do it is a bit much.

Well not only will the expenditure on the property hopefully increase the value of the property by making the building habitable hence sellable in its own right or a better offerings for future buys, it may create a linked business that will be valued on somewhat of a commercial basis (multiple of earnings/profits). You could always put the after-tax earnings into index funds.

I'm not sure what looks least worst in the medium term (in the UK), the stock market or the property market.

Good luck.

A holiday let/separate dwelling might not add value though or if it does, it’s not necessarily a desirable feature.

My parents had a converted outbuilding they used to air bnb (more hassle than it was worth) in an area very popular with tourists and they recently had a valuation on their house and the agent said there’s very little demand for people wanting annexes/holiday lets and the 2x council tax and upkeep is enough to put people off. They since ripped the space to a shell and are looking at using it as an extension of the main house (cinema/games room) so get some advice on what it would do to your property in terms of value beforehand.

I think the £110k is a red herring.

Questions I would be asking:
Do I want to be in Holiday Let/Air B&B business?
Is it financially viable?

if yes to above then see financial/tax advisor. You might be better off putting half your cash into cottage and get mortgage on other half?

I do think these kinds of holiday rental properties will do very well over the next few years (and have done well in the past anyway) and more people will be holidaying in UK for the forseeable.

Id invest, wouldn't want a bunch of strangers on my property and to wait on them hand and foot

I would not do a holiday let, just look at what’s happened over the past few months, never mind dealing with hangovers, cleaning and maintenance.

I wouldn’t do stocks and shares, the steady shares not likely to fail won’t do a lot at the moment, and share prices go up as well as down

I would consider doing it up for a long term let

@Harryhenderson10

Thank you all very much for the advice.

To clear a few things up,
The property is about 100 yards from the main house. We would do all the cleaning, upkeep, greeting, etc ourselves. If it makes a difference, one of us would be newly retired. Its very difficult to do decent costings as it's all a bit 'we might rent it out for the majority of the time, or we might only get peak season' but from a couple of local-ish lets they tend to book out for most of the year with decent advertising.
Realistically we wouldn't be able to sell the place separately as it would be a shared drive and would probably devalue the main house.
The property needs nearly complete renovation, in fact it would probably be cheaper if there was no building there to begin with.
The building already has planning granted and has had the first phase completed, although it would still cost £110,000+.
A holiday/full time let would add to the value of the main house.
It would make a decent 3 bed but not big enough to split into flats or anything.

We have a mortgage but it is small and will be paid off in a couple of years.

I think a Financial Advisor is the best way forward for us.

If we were to put in into stocks, shares we would do so through a professional stock broker or similar.

I don't think sitting on the money is a very good idea for us as the temptation is to spend a little here and there eventually leaving us with nothing.

Thanks again for the advice so far.

100 yards from either a constant stream of visitors or else a reminder that it’s not being let and costing money! That’s so close to where you will want to be relaxing and enjoying your home.

Do you also want to spend your retirement being a cleaner, doing general property repairs, being on call for any issues (a holiday home will need to have someone being very responsive to demands), organising all the essentials including welcome packs with up to date advice about the area, and paying all the extra costs incurred with any additional property.

I think you would only be able to sell to someone who specifically wants a holiday let or additional property on their land. Otherwise it won’t make much extra money.

I would do some proper research, including talking to an IFA and researching your local holiday market.

On shares, investing for growth and for an income are different things. You'd need to talk that through with your advisor.

As pp have all said, the holiday let is a job. It also gives you perpetual responsibility looming over you, whenever the house is occupied. At any moment, you might get a call saying something's broken, or flooded, or someone's hurt themselves or whatever and you'd have to spring into action and deal with it. All fairly unlikely and you can have good systems e.g. gas and plumbing cover, in place to get things fixed quickly but there is that lurking sense of 'being the one responsible' that comes with being any sort of self-managing landlord. As a holiday-let landlord, your customer service needs to be even more ready and sparkly.

The tying up all your assets in one investment issue is one to consider carefully. Can you imagine a scenario in which you need to sell up quickly to release your capital but it's at a downturn in the market and you're struggling to find a buyer at any decent price? Not a nice position to find yourself in. Much easier to be able to liquidate some shares or a savings account and stay in your home / sell at leisure.

@Harryhenderson10

13:25Cocomarine

We didn't pay out for the first phase

And one of us is retiring so could do the cleaning, greeting, upkeep etc.

That wasn’t the point of my question. I get that one of you is retiring so can manage the property. What I asked, was why the cloak and dagger “one of us”, just like in your OP... why don’t you just say, “I want to let it out, my husband prefers the stock market.” If you are the one retiring, then you are able to accurately answer questions about how you would feel taking the lion’s share of the work. It’s just pointless not just discussing it openly here 🤷🏻‍♀️

Bare in mind that if you mainly have week long lets then changeovers are usually on a Saturday, so if busy you can be tied every weekend.

I'm guessing that the one that is retiring soon isn't you. Would your OH really be up for all the extra work that a holiday let would entail?

And one of us is retiring so could do the cleaning, greeting, upkeep etc.

Do you really want to give up every single Saturday for the foreseeable future? Unless you're willing to pay for staff, you'll be spending 4-6 hours every single weekend doing bed changes, cleaning, check outs, check ins, sorting out shopping (cleaning products, tea, coffee etc).

@Harryhenderson10

13:25Cocomarine

We didn't pay out for the first phase

And one of us is retiring so could do the cleaning, greeting, upkeep etc.

I hope the one who is retiring is the one pushing for the rental then!

The proposed holiday let us not investing in a new property though, so hard to see how it could really recoup the cost of refurbishment.

You might need the net profit on 50 years of letting just to cover the costs of the refurb.

And be left with an expensive annexe.