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?

I know 😂

Towels and bedding do not need to be ironed.

Bedding needs to be ironed for a holiday let.

Ironing tea towels died a long time ago

Change to a Saturday-Saturday model.

Or rent to someone for a 6 month/ 12 month term.

That's £1,820 a month. That's more than minimum wage so of course it can be a sole source of income. Most people won’t want it to be but it certainly could be

We have a holiday let (not in the UK, but not a long way away).
We make a nice profit off it- and we let for about 18-20 weeks a year, we are not in a tourist hotspot.

But: we have no mortgage, we live next door and do all the change overs, gardening, laundry and maintenance ourselves.
It takes me 5-6 hours to turn round our 3 bed house, and 4-5 hours for DH to do the (large) garden, pool, bins most guests think the recycling sorts itself and any maintenance.
It would not pay if we had to outsource all that.

I think you are paying over the odds for your change over. And as for 24% to an agent 😳! I advertise with Air, verbo, Booking, plus several others which specialize in my area. I also have a good website and active Facebook page. I sell an increasing number of weeks via direct booking from Facebook holiday groups.
Air charges 3-4%, most of the others 10% plus vat. Booking is the most expensive at 15% plus vat plus a "transfer charge" for actually paying over my money😡.
It does need work- trawling accommodation requests, replying, ect ect. But this is my job!

It helps if your property has its "USP" - what makes it stand out? Dog friendly? Hot tub? Walking distance to gastro pub/ beach/ local attraction?
Find that and go for it!

It’s only £1820/month at 100% occupancy, and once you’ve taken longer term costs out of that, there’s not a huge amount left for the effort.

Also- I only do Saturday to Saturday bookings in peak season, 3 night's minimum otherwise.

And yes, bed linens and tea towels have to be ironed (if you want 5* reviews that is!)

Sounds like too many turnovers - can you try contractors rather than tourists ? Turnovers are really expensive but £70 sounds about normal for a 2 bedder not £174. Try managing it yourself on Airbnb & booking.com ?

My best friend lets out a holiday cottage, but it’s her full time job. There’s no way she’d manage another FT job on top of it. Even at that, it’s very demanding.

I had no idea the cleaning fees would be so expensive. I would either sell, or give up your other job and manage/clean it yourself.

It isn't. You are assuming full occupancy 365 days a year. Most holiday cottages are nowhere near fully occupied apart from the summer months when you can guarantee 20+ days occupied a month. Most of the winter you will only get the occasional worker staying.

In the very best year when there are no major expenses it made about 10k profit, partly boosted by a nearby wind farm project using it for their workers regularly.

In the worst years (broken boiler, replacement oil tank, young adults who stayed and trashed the place) it's down to 3k or so. Not to be sniffed at, and a welcome pension top up but certainly not a living wage for a normal family. Even most of the 10k would be gone if you had a mortgage.

Why do you need an agent?

Also, if the going rate for a clean is £174 near you then presumably it's a premium area. If you expect a local resident to do changeovers then they have to be able to afford to live on the income from changeovers. If there's not much accommodation available because of holiday lets then their cost of living will be higher which is why they need to charge more.

Definitely sell, I'm surprised that you bought it with a mortgage as high as £750/month originally and it definitely won't be worth your time on a higher rate.

OP...you missed out how much income you generate each month from your figures in your original post. You told us how much you shell out...but not what you are making from it. So you recoup LESS than what you pay out? If so then you clearly need to sell. If you recoup more than it costs, then you might still find a way to cut your costs and hold on to it a while longer.

The mortgage is £750 but interest only, is that right?

I think these places work if you are round the corner, to do the grunt work yourself, like a job

I also think your cleaner is taking the piss

I also think OP didnt ask about whether its moral or immoral to have an holiday let, she is asking on 'money matters' about her investment

I've recently sold my holiday let (due to the new fire regulations - mine was a Grade 2 listed property and I couldn't get permission for the changes required. I assume you've checked that your cottage is compliant...). My let was profitable - £17K profit last year BUT I did all changeovers myself, and had no mortgage on the property.

I think it would be impossible to make a profit if you are paying a mortgage, paying for changeovers, and using an agent. Some holiday let owners are happy to break even/make a loss if they get to use the property themselves, or if it means they can downsize to it for retirement, but that doesn't sound like your situation?

There are several costs you haven't included in your figures, including commercial rubbish collection (which you legally have to use from day 1, even if you have not qualified for business rates yet so are paying council tax), which will probably be about £40-50 per month. You also haven't included holiday let insurance, which is more expensive than usual insurance due to the public liability cover/hapless things guests do. I was paying £600 per year for a 2 bed cottage. Also water bills, plus there are annual costs of gas checks and chimney sweeps (legal requirements and a condition of insurance).

In the last budget, announcements were made that will remove some of the tax advantages of holiday lets (e.g. you will no longer be able to claim the mortgage interest as an expense, you will pay full capital gains tax when you sell). The government is also planning to bring in a registration scheme for holiday lets (well overdue IMO) to ensure fire safety and compliance, and this is thought to be around £200 per year.

Now is not a good time to be going into holiday letting, the market is over-saturated (so take any figures an agent gives you with a big pinch of salt) and if I were you, I would sell the property, or, if you have the stomach for it and the figures work out, switch to an AST.

agree with everything @mahonga said

my holiday cottage is now up for sale despite all the 5 star reviews, great location etc. it just doesn't make enough money to cover the effort/risk/costs

Quite.

Why oh why can't I get a cheap cleaner? Possibly because you've priced them all out of the area.

They do for a holiday cottage. I suppose it depends on your market but I was charging £1400 a week in the season, which was high end for my area. People definitely expect billowy white linen at that price point. I think if you were using non-iron poly cotton type stuff you’d probably be looking at a different market.

So is being able to spell business.

I know.....I'm sure I can spell it in real life but my fingers can't seem to manage it on a 'phone!

Sounds like a good time to sell.

Especially if you have just done it up and it's all perfect and beautiful with no gouges out of the oak worktops type thing.

You should make some money on it hopefully.

And if you wanted to do something like this again you'd have some profit in the bank from this one to do so in the future if circumstances allow.

Absolutely this.

I'm struggling to have much sympathy for this situation tbh. Just sell it.

You don't need to own more than one property at a time.