Buying a holiday cottage to let out

[Shazafied]

Hi all,

We have around £30k in savings and a lot of equity in our home, low mortgage. We are thinking of buying a holiday cottage to let out (99%) but may use ourselves if there is a vacancy.

We live on the outskirts of a AONB popular with coast to coast walkers/ cyclists and are looking at buying a very small cottage with garden / views . We have renovated property before and are happy to do cosmetic work in this case (but would rather not do full renovations this time). I have seen properties listed for 100-130k that look similar to what we’d liked and so require cosmetic work to be let-able. This is a medium term idea - thinking of buying next year, would like to save a few more thousand if possible first.

I’ve not managed a holiday let before (although have done air bnb in my own home before DC) so just looking for any advice / pitfalls / am I being mad....

I’m contacting our mortgage broker with a list of questions soon to sound out types of mortgage available, and trying to get an idea of fees and other costs (over and above working on/furnishing the property) - it’s a very embryonic idea atm and just trying sound out if it’s actually possible.

We’d be looking for something within 45 min drive from our home so I plan on doing the changeovers and bookings myself (would like to use Airbnb as am familiar with it).

There is probably a bunch of stuff I’ve forgotten to say here... but yes, am I mad ? Do any of you manage the property yourself ? Could I manage the tax stuff myself (we do self assessment for my husbands business but guessing there is loads to consider with letting property and an accountant might be better)?

Really grateful for any pointers, thanks

I understand that we’d need min 20% deposit (only a few lenders offer 20% though) then of course all the fees, survey costs, work costs, furnishing costs.... I think we need £35k ish before we can even begin.

Also, we are looking at fairly secluded detached cottages so should not bother neighbours x

I do have a holiday home but if you do change overs, you will be spending a day doing them. It’s a 90 minute round trip plus work. Most owners who service a property themselves are on hand if something goes wrong too.

We use a holiday company to market and manage lettings but it costs. We are 4 hours away though. We don’t get anywhere near full occupancy although it’s in a decent tourist/holiday area. So do some research about occupancy and pricing in your area. Be realistic about the time you want to spend on change over days.

If you need a mortgage, will you make a profit to easily cover it? Or would you just take out a mortgage on your own home which you can pay regardless of bookings? Sorry if I’ve misread what you intend.

We do our own accounts which are taxed via my self assessment. There are rules and choices to be made which DHs accountant tells us about. It’s easier because the agent manages booking money but we have allowable expenses regarding running the house.

Whatever you buy, make sure it’s what the market wants. So size, bathrooms/bedroom ratio, kitchen, and lounge space are important. Who is going to maintain the garden and do running repairs? Look at other properties for rent and see what the standard is. Areas vary! Tenants expect good standards and cheap and cheerful might suit walkers and cyclists but some people definitely want more so think about wi fi, iPhone music dock, smart tv, decent showers, bedroom storage, patio furniture and a coffee machine. We have a dishwasher and washing machine too.

Hope that helps but others will no doubt have other ideas.

Yes, I have one. About 20 mins drive away and I do the changeovers myself, but have an agency who does all the bookings (for 17.5% plus VAT) - that's my preference, I enjoy doing the cleaning etc (I LOVE my cottage!) but couldn't be arsed with the people wanting discounts, cancelling, damages, correspondence, reviews etc.

Changeovers take about 4 hours plus travel time, but I usually end up spending a full school day up there! (but I luffs it!)

We own it outright, you'd need to do your sums very carefully in terms of occupancy if you have a mortgage on it, I can't see you wouldmake much/any profit (but that might be fine if you just want it to pay for itself). Last year (our first) we got about 40 weeks occupancy, but this year our bookings are actually slightly down (Brexit, I presume).

In my first year I used an accountant for my self-assessment (as we had all the set up and renovation costs, some of which are deductable, some which aren't, and very fine line between the two!) but think I can do it myself moving forward, as all the costs will be deductable.

Hi both,

Thanks so much for your input.

Yes we’d have a mortgage. We’d literally only be able To pay the deposit and renovation costs. We’d then have a mortgage of around £500 pcm, then council tax and bills on top. So even if I manage it and do the changeovers we’d still need to turnover about £10k p/year just to break even. We would be happy to Make a very small profit / break even for a few years, if we get to stay in the cottage ourselves from time to time.

Just looking over air bnb and very similar properties let for about £100 per night just now, less in low season (maybe £70 per night). So I think we’d need it occupied at least 120 nights per year to break even - no idea if these numbers are super tight or fairly comfy in terms of holiday lets!

I’d definitely underestimated the changeover time, I was thinking more like 2 hours- does it make any difference that it may only be 1 bedroom / tiny cottage?

Thanks again x

*In my first year I used an accountant for my self-assessment (as we had all the set up and renovation costs, some of which are deductable, some which aren't, and very fine line between the two!) but think I can do it myself moving forward, as all the costs will be

I thought this might be the case - is not like to get in trouble for claiming the wrong things, or lose out for failing to claim what I can. Maybe starting off with an accountant is a good plan.

Well, I wouldn't , but then I am financially cautious. You will be using up your savings and borrowing against your home. Fair enough if you have got the spare cash knocking about and think a cottage let might make you a better return than money invested elsewhere, but to me there are too many 'if's' in there. If you get plenty of custom, fine. If property prices stay stable, fine. If you both stay in work and in good health, fine also.But there are too many caveats for me.
We had rental property abroad, (not the same, I know) which was managed for us, but it was still a pain in the backside. Every time we used it, which was often, we used to spend our holidays putting right things that needed repairing/replacing. It never felt like ours, and the managers, while keeping up the lets, let things slide. I appreciate it might be different if you manage it yourself, but holidaymakers will never care for the property like you do. Also, if its in a popular place you have the conundrum of using it yourself during peak time (and losing money) or saving your usage for off peak times.
The financial side was dealt with by accountants, so I can't really comment on that. It used to make a profit, but only because it was bought with cash. If it had been mortgaged it would have made no profit at all. I was very pleased to sell it.

I'd worry about things like winter and heating. Say it's not rented out for a week or two. You would still need to heat it to stop pipes freezing etc.
My friend was keeping her mother's house ( mother had died ) going over the winter to put on the market the spring. The boiler stopped working and the pipes froze, and then defrosted and flooded the place.

All good points thank you. Perhaps I need to be brought back down to earth a bit ... I wish we could buy outright !

The other thing we have thought of is moving to a larger more rural house with annex and letting the annex - whole different ball game and haven’t given this much thought to be honest x

IMO you will never even break even. No way! (have had a rental for 14 years and own outright. Do changeovers myself.

Sounds like a great idea on paper, but no. IMO unless you own it, you will make a loss and have a headache (huge one) to boot.

Ours are on the Isle of Wight so we have someone who manages them for us. Ours were either given to us or bought outright.
The disadvantage -or not- is that family and friends use it more than renters. We’ve long let’s on one property; it’s rented at low rent to three young teachers who have low rent in return for being considerate and quiet tenants. The other is a cottage with a terrace overlooking the sea. We make hardly any money because it’s forever booked by family and friends having second holidays or long weekends away. We probably make a loss as the in laws expect their ferry to be paid and to have wine available.

Thanks Billie - can I ask why you think that ? Is it just that the figures are too tight, or the occupancy requirements too high to break even?

Both Shaza. Believe me, you will have leccy bills, water, council tax, WIFI, TV, Tax, insurance. This is before you get all sorts of call outs and complaints about 'no egg slicer'.

You need to factor in laundry, cleaners (proper ones) welcome packs. A hiding to nothing.

I make a profit, but only because I own it, and I am giving up this this year. (Am 48, not an old) it's a fairly miserable existence and full time. Just look at mumsnet threads on what people expect in a rental.

It is hilarious.

I don't own a holiday cottage but have been the changeover cleaner on several lovely (Scottish rural holiday destination) cottages.

For a two bedroom I reckon it would take a minimum of 3 1/2hrs if left quite clean. Bear in mind you may need to stick all cutlery/glasses/crockery through the dishwasher if left grubby. The oven and job will need cleaned, fridge and freezer wiped out, bathroom scrubbed. All floors hoovered/swept and mopped. Ornaments or nicknaks dusted, placemats wiped, sofas "decrumbed" between the cushions.
It will need a proper deepish clean every week if you want to ensure repeat business do good ratings.
If you plan on allowing dogs then I'd allow an extra hr and be prepared with stain removers and spare cushion covers/throws etc.
So you're 5hrs MINIMUM every sat (you hope) between April and Oct? That's quite a commitment and a real tie.
Having said that, here it's a real money maker and I wouldn't mind nearly so much cleaning others folks grot if I owned the bloody cottage!

Oh, advertising. You pay so much for that too. Plus 'Owners Direct' who were great, now are not. Charge you and the client for the booking and keep the money until after they have gone.

They are complete crooks.

Thanks all so far for your insights - much I had not thought of x

And you will need an proper alarm.

We let a 3 bedroom cottage- it can take up to the full 6 hours on change over day to turn it round. Burnt on crap in the oven, sticky floors, recycling not sorted- everything has to be perfect and absolutely clean, or you run the risk of crap reviews.
And laundry- you can use a laundry service but that's more cost. The bedding has to be spotless and ironed. This week one duvet cover and pillowcase have been washed and treated with three different stain removers before finally being clean after 3 washes. The sheet has gone in the ragbag.

You say you have the funds to renovate, but what about set up costs?.

Depending on how many it will sleep you will need to have extra of everything

i.e. bedding - winter and summer duvets per bed,
sheets (lots of), duvet covers, what about protectors for mattress (expensive so wise to cost in at least 3 protectors per bed to save them), pillows and duvet protectors plus spares.

It will have to have plenty of cutlery, crockery, glasses, mugs etc. no one wants to have to wash up after each meal you need a days worth for each person.

Seating will need to be for more than the number sleeping there, no one wants to sit up right squashed on a sofa. Plus extra dining spaces.

Kitchen equipment has to be plentiful.

Then don't forget the constant repair/replace costs, glasses get broken, crockery gets chipped, oven trays/ pans get burnt, bedding gets stained beyond hope.

Also the ware and tare who can go and constantly do the snagging jobs that crop up? it has to be in top condition for every new set of guests.

You will need replacements of stuff close by in a warm dry secure place because there wont be time on the change over days to go shopping for stuff. Remember that you wont have a clue what needs repairing / replacing until you're in there, people don't always let you know.

Guests will happily run up huge bills like having the heating on full when they are out, sometimes leaving lights tv's on etc. (yes it does happen).

People don't always leave or arrive on time cutting down on the change over available time but you can't cut corners.

Don't forget the outside space that's just as important, garden has to be tidy and well presented, garden furniture has to be in good condition. Will there be storage for winter?.

Some people really are hopeless at recycling, they seem to panic when leaving thus putting anything in any bin, that will be a time consuming and a horrible job to sort as it's not fair on the next guests to have no bin space.

I think you need it managed. A friend of mine has a Airbnb and is often called to the property for stupid things like how to switch on the heating. This was 3 weeks ago!

Also think about length of stay. My bil found that changeover costs meant that a stay of less than 3 nights was loss making.

DP's have a holiday house in a village in SW France complete with pool. They employed on a casual basis a friend who lives out there to do check ins etc and other friends who would do maintenance/garden work etc.

However, things have changed in past year or so, the friend now spends 6 months of the year in UK and other friend is quite ill so can't help out so they've got a lettings agency involved. All has gone fairly well so far with a lettings agency.

They did leave strict instructions - typed and laminated on heating, water softener instructions (they have a machine for water softener etc) and to be honest when the friend couldn't be there - there have been no problems.

Agreed re seating - they have a huge corner sofa and extra seats, kitchen table with dining chair and another table you take into garden with seats plus lots of sun loungers etc.

They also give instructions re the pool and safety but not everyone wants to use the pool e.g. in colder months. The neighbours at a push are there to help with queries but they don't involve them much.

BillieEilish - you don't necessarily have to factor in cleaners - DP's had a rule that either guests got in cleaners when they left or they cleaned the place themselves.

A cleaner goes to the house every so often but not regularly as the property isn't let out regularly, it depends.

the one thing they do have to be careful of is mice... setting traps etc

Thanks all this is really interesting reading and food for thought - and going to sit down and speak to hubby about it all tonight. I am thinking we live too far away x