Holiday cottage figures just don’t seem to add up for us at all.

[flowergirl24]

We bought a small 2 bed holiday cottage three years ago.

It needed doing up but is in a beautiful area. I originally planned to manage it and clean it myself. Fast forward three years, the renovation is finally complete and I’m working full time with young children. I’m struggling to manage my workload as it is, but I’m in a decent position work wise, so it’s worth me working right now rather than stepping down to clean the cottage.

Today I had a meeting with a (lovely) housekeeper who told me her going rate which is £174 per changeover. It’s similar to the other competitors in the area. It’s a short term late place to visit, so I’d be looking at paying this twice a week in the main-high season. It is a year round area, although it is quieter in winter.

So:
Mortgage 750
Changeovers, linen etc 1392
Council tax 190
Gas and Electricity 50
Internet 37
TV licence 33

Total costs come to 2452pcm

I just don’t think it’s going to be financially viable for us, which is a real shame.
Add to that an agent who will do all the work but take 24% on bookings and I don’t think we’ll even break even. We’ve been told that we could expect anything between 25-35K gross from the agent.

We’d need to factor in 10% for wear and tear costs for a high occupancy house.

The mortgage is up for renewal in 18 months and it won’t be as cheap as it is now.

We are too far away to be able to manage it ourselves and too busy working full time to manage bookings ourselves.

Should I just sell? Even if I switch to doing a AST (normal tenancy), it is going to cost me quite a lot as I would have to change the mortgage (specialist holiday cottage mortgage on it right now at a decent rate). Not only would I lose that rate, but I would also have to pay for the cost of a new/ switching mortgage.

Does anyone have any advice please?

How about a long let?

Just sell. Even if you pay an agent to manage it, a load of problems will still fall on to you. It’s going to be a time and energy suck and as you say, probably not make any money. My parents did this, for 20 years, and my mother calls it one of the biggest mistakes of her life.

Ignore that. Should have read more carefully

Yes, sell it to someone who is going to live there all the time.

What is involved in changeover and how many hours. Seems a lot for cleaning and changing beds, towels.

This. Holiday lets ruin communities.

Do you need to cover all costs? Surely you should contribute towards costs or pay some of the mortgage as you will own the cottage eventually. If all the costs are all covered by renters they will have bought you a house that will no doubt be worth hundreds of thousands. It's ok to pay towards the cottage yourself as well.

Surely if you need to rent it out the first thing you’d do is the sums?
Long let I guess. How often do you go there?

We rented out our old house while we were abroad and despite using a full management service it was a massive hassle. Constant emails. That was with long term tenants as well. Would never even consider doing it again. I can imagine holiday lets or short term tenancies would be far worse.
In your situation I'd sell, unless you absolutely love it and are planning on using it yourselves.

Set your minimum nights to allow you to cover your costs otherwise sell because everyone is getting paid apart from you. And you’re bearing the liability for everything to do with the property. It doesn’t seem great. You can get 5% return on cash in the bank (with an ISA) without any risk, stress or worries

We are not planning on using it ourselves.

Forgot to add important information - it’s also on an interest-only mortgage so we are not even paying it off each year, just paying the interest! Yikes.

What do you mean?

I did all of this right at the start, but our circumstances have now changed.

We do not use it ourselves.

It seems to me that the whole second home / holiday cottage business is very risky at the moment and my inclination would be to get out while the goings good and before the rules change even more than they have already done.

How much do you let it for per night? 174 is an insane cost for a changeover in a small 2 bed place.
since you’re so far away to be honest I’d sell it.
(still can’t get over 174 though. I used to look after mine, 2 hours of my time would absolutely see it sparkling again and then a few laundry loads and a bit of pressing, but no more than another couple of hours for that.)

I do changeovers for £50...includes taking bedding home to wash... You need a new cleaner op.

This. Holiday lets are pretty immoral in a lot of places and the commodification of housing is one of the most significant blights on society globally.

Sell it to someone who will live there.

£174. She's taking the piss surely.

Find a good local cleaner who's prepared to do a load of washing for you.

I'd let it out as a long let to a local couple or small family.

If you want to keep it as a holiday let (and they seem to have crazy new rules and requirements these days) I think it would be worth going to the cottage and staying in it for a couple of weeks. Get to know some locals and hire someone privately to do the change over/linen/keys etc for a fixed sum each week. I know a couple of friends who have rental holiday homes and they barely break even on them - that's without a mortgage - they inherited the properties.

1392 / 174 = 8

8 changeovers a month?

Hard to get a holiday cottage for less than £600 a week. £800 more likely, so that would give you £3200 a month income.

I think the main issue is too many others involved. Running holiday lets is a lot of work. People are always doing things like locking themselves out and then ringing the owner at 9:45 in the evening, they then have to make a 25 min round trip to unlock the door for you (I've done this myself).

As I see it, the problem with your buissness model is that you're paying other people to do all the pain in the neck stuff. Looking after letting, changing sheets, doing the laundry.

The people who are going to do all this stuff for you have to live and have to be paid. That eats away at your profit so you will derive very little personal income from the enterprise.

I actually think that situation's fine, people should be paid for work that they do.

You will get the profit when you eventually sell the place. That is unearned income.

The income from renting the place out is earned income, somebody has to work to earn that income. you want a holiday let to provide you with a personal income, then you have to be prepared do that work yourself and earn the income. The only alternative is to allow someone else to earn that income.

174 for change over is your issue.

My cleaner is £15 ph…
That’s 11.5hours of “cleaning” per change over for a small 2 bed.

that’s nuts.
My cleaner washes and does all our bedding and leaves our 5 bed spotless in 6 hrs per week.

can you find a regular cleaner who will do it?

How long does the changeover take? I'm guessing well over an hour, maybe longer if outgoing tenants were slobs.

Does £174 include washing bed linen and towels?

If that's the 'going rate' then unless somebody undercuts it or you do the job yourself your stuck with it.

What do you think you'll make in a week/month?

If you're doing short breaks ie less than a week then I guess voids are an issue.

I'm paying £650 for a similar size place next week but it's on the Hebrides so well off the main tourist beat.

If you never use it and it’s too far to do the change over yourself then the cost of changeover is as vital to making a profit as local taxes insurance or bills.
Either pay it and assume you’ll get the benefit if and when you use it or sell it.

@Sceptic1234 yes it is 8 changeovers a month. That’s the norm around here. It’s not a holiday cottage using the Devon/ Cornwall model of Saturday changeovers. It’s a two changeovers a week kind of place.

As I understand it your property will also be subject to business rates. I'd sell it. Not worth the hassle.

Housekeeper is taking the piss - bet she’s got an army of minimum wage staff doing the boots on the ground work, whilst she coordinates and sorts out (at most) laundering of bed linen.

That said, holiday lets are a difficult business to make work. They are definitely a business, not an investment.