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’m sure some of the people saying you’re paying too much for changeover have no idea what is unsolved and would be the first to complain if it hadn’t been done properly. Of course you need to iron bedding! Can you imagine turning up to a holiday where the bedding was screwed up!

I had a holiday let - I started letting it out after Covid. I had no mortgage and it was a big property in a good location. It would get £4K ish per week in peak season. However I still sold it as it wasn’t worth it. It would break my heart to see the state some people left it in. It was impossible to manage from a distance - the final straw was a big storm in February a couple of years ago where my roof was damaged. I was in the process of moving house a couple of years ago and people had turned up and the internet wasn’t working and I had to try to sort that out whilst dealing with my own removal men (may have been the same storm I can’t remember) and there’s constantly things to do.

I was lucky that I sold it at the market peak and before it needed any major work doing ( the sea had battered the bifold doors and would have needed replacing soon). These are also all the sorts of things that neee factoring in to any profit.

I don’t think it’s realistic to think you’re going to really have an income from it, as any profit will get eaten up with repairs (if there is any after the costs), but long term the house should increase in value more than money in the bank. However, with an interest only mortgage, that’s not really helpful either! I’d sell it.

I can tell you two places. Epsom, where my house was 'worth' £525k when I tried to sell it 6 years ago ( sale fell through when chain collapsed) and is still 'worth' £525k now.

My area of Cornwall. Houses are being put on the market for more than they sold for 5 years ago but aren't selling. My cottage I bought for £275k 7 years ago and spent £50k on renovations would probably be valued at £325 k now if I compare it to others nearby.

Also people who bought during Covid paid inflated prices near me. There are people trying to sell who have had to reduce the price to below what they paid 3 years ago. One example, they paid £775 k in September 21. Now on the market for £650k and not shifting.

Ah missed that. I'd definitely sell up then.

And there have been property crashes in the past. In 1991 I bought a flat in a major UK city. Six years later I finally sold it for £500 less than I paid for it. New development nearby ... an old building in prime location developed into very nice city flats. I looked at one in 1991. Half of them were never sold, the development company went into liquidation. Six years later the people who did buy them were stuck in negative equity (the phrase was popular late 80s / early 90s) living in a half empty building and regretting the day they every bought into it.

It can happen!

Sorry OP but you clearly didn't do your research before you bought the house. Probably best for you to sell it or rent it out long term.

I think the real issue is that at the planning stage, the OP thought she'd be doing a lot of the stuff herself, i.e. changeover, marketing, booking admin, etc., but now she's got a full time job herself so is having to pay others to do all that as the entire ethos has switched from being "owner managed" to being "hands off".

The OP needs to look at the opportunity cost/benefit of her now having a full time job which presumably brings in more money (plus longer term benefits like pension, paid holidays, paid sick leave etc), than the holiday let profits she'd have made otherwise.

Quite a lot as above. It's not just running round with a duster and a vac. Beds need to be changed and whole place checked over for failed bulbs, guests having messed with heating or TV settings etc.

If there are hard floors they need to be mopped.

Then bedding and towels need to be washed, dried and in case of bedding ironed.

And that's before the guest from hell who's left the kitchen in a mess, sink full of pans and a massive turd in the loo.

We’ve got two rentals in Cornwall. One we have long term tenants who are lovely and no trouble. Have kept their rent stable and below market rate for the area. The way we view it the rent is covering our mortgage on the property plus it is going up in value with a long term view. Our second is holiday let, our fees aren’t as high as yours seem the be (it is managed by a holiday company who provide a complete package including the clean which I find more effective). Again, we’re not doing it to make a fortune as the rules have and will change more to prevent that happening (which I agree with). It’s more that the income helps offset the mortgage and running costs and over time the property will rise in value and the mortgage will decrease. Long term we will move to one of them. I don’t feel guilty as they are both used all year round and support the local economy. They don’t lie empty and we use the holiday let when it’s not booked. If you are spending in excess of the income being generated then it probably is a good time to sell.

HMRC are cracking down on holiday rentals, and are changing the tax rules so that they are much less beneficial. Ask your accountant about it.

A lot of holiday cottage owners locally are either selling up or changing to long term rentals instead, ahead of the change coming in.

£174 a changeover seems madness esp twice a week so £348 a week

What do you rent it out at ?

As even £100 a night so £70" a week you are losing half in cleaning

Find a cheaper cleaner

One who strips beds - washes them - changes and cleans 3/4hrs tops each time

From a customer's perspective, I can always tell when a cottage isn't owned by a local person. If you're paying someone to do a changeover, they don't provide the same level of service/detail an owner would. I stayed in a fab house on the coast but the owner lived in London. You could tell. The garden needed tlc, the windows upstairs needed a clean, and the utensils in the kitchen were in need of replacement. The lady doing changeovers is never going to have the same level as investment in the property as you. I think if you're not there to check on the property I'd sell. All your 'profit' is going on outside help.

Council tax 190. airbnb you don't have to pay council tax - get your accountant to look at this

I have an Airbnb house. It's a small one-bedroom with an ensuite loo/basin and separate shower room. My cleaner charges £55 for cleaning (around 2hrs) and doing the ironing. (I do the washing). I get this cost back because the guests pay an extra charge for cleaning/laundry.

Assuming your cleaner's charge includes doing the laundry/ironing, £174 is still an insane price for a 2-bed cottage changeover.

Also, furnished short lets can be classed as business premises, therefore you can move to business rates rather than council tax, and if the rateable value is below a certain figure, you may be exempt from business rates. I am 100% exempt. https://www.gov.uk/introduction-to-business-rates/self-catering-and-holiday-let-accommodation

If you’re on Airbnb, you might find a co-host to manage and maybe for less than the agent is charging you. https://www.airbnb.co.uk/help/article/1534

For an absent owner, it's whoever does the changeover who also has to act as caretaker/housekeeper, which goes far beyond cleaning, such as checking inventory, replacing lost/broken items, resetting central heating controls, checking fridge/freezer settings, checking and replacing light bulbs, checking/replacing batteries in remote controls, window cleaning, buying welcome pack, buying/replenishing loo rolls, soaps, washing up liquid, dishwasher tablets, etc. (Fair enough, the actual costs of purchasing the consumables won't be included in the housekeeping costs, but the time spent needs to be accounted for).

It goes FAR beyond just a quick wipe/vacuum around and changing the beds/towels if there's no one local to do all the other stuff. "Someone" has to check there are 6 wine glasses, 6 tumblers, 12 forks, 12 knives etc., and has to either get replacements from the storeroom or go out to buy replacements!

It’s actually not much for business use ( so long as you aren’t a courier driver) added £130 a year to my policy when I worked as a holiday let cleaner.

Ive always found business use adds nothing to my insurance, Ive needed it for nearly 20 years.

Just seems a lot @taxguru

Or op goes to 4 night minimum

She isn't making a profit at the moment

Esp if is on interest only

Tell me, where in the U.K. have property values had a 0% increase over 5yrs?

A fair few flats in various parts of london, allow for inflation and there will be a loss.

I'd sell it or rent it out on a long lease. The cost of living crisis, oversupply of property for short term rental and the terrible weather has really hit bookings for holiday cottages. Managing a cottage isn't easy and while I think what you were quoted for a clean was high, cleaning staff are in really short supply. Your figures also seem to rely on being fully occupied in high season which is by no means guaranteed (although you wouldn't pay cleaning costs on empty weeks you would still have to pay your mortgage) A reasonable occupancy is about 60 per cent over the year.