Holiday buy to let

[FiveMoreMinutesPlease]

Please, no haters!

Been left some money and thinking of investing it in a going concern holiday buy to let in a tourist area (we're not kicking locals out of affordable homes).

We're doing the sums. Please could anyone who has a small 2 bed, 1 bathroom holiday flat give me an idea of their running costs.

We've googled it but I'd like some thoughts from you wise mumsnetters too.

When we first came up with the idea interest rates weren't as high so the idea was much more affordable for us.

I'd appreciate any tips too.

How long is a piece of string.

They are all different. It will depend on occupancy, location, availability of cleaning staff and a million other factors.

You won’t make as much money as you might expect and it can be stressful. Even more so with a flat unless it’s all holiday lets. People on holiday tend to be noisy and inconsiderate and the neighbours hate them.

Find one you like and ask for their accounts. That will give you an idea of how profitable that one is. Check also that they have permission to run a FHL as many flat owners don’t. They get away with it. Until they don’t.

Do a lot of research! It's not just bills that constitute running costs, holiday lets need to meet lots of standards on fire risk, gas safety etc etc so there are costs you wouldn't get in a 'normal' home. Plus of course marketing, cleaning, maintenance, commission fees if you aren't taking direct bookings.

There are some great hospitality groups on facebook that are well worth joining just to listen to what other owners are doing. Also look into PASC - professional association of self-caterers - as they will help explain all your responsibilities.

This has been a very difficult year for holiday lets with an over saturated market and less bookings, more cancellations and lowered prices. Depends on where you are of course but its not the good times of 2021!

You've kinda answered your question there already.

Seriously though, a FHL makes no sense in a market where there is little discretionary income for luxuries and those who are holidaying are largely going abroad plus you'd be buying into a falling market.

It would make far more sense to invest the money in low risk long term gilts for a guaranteed income not much less than you'd get for all the hassle of running a FHL.

It's profitable if you can afford to buy, no question. If you need to borrow though to buy then you need to work the numbers very carefully and factor in considerable capital depreciation. The chances of property holding its value are looking mighty slim in the short term.

those who are holidaying are largely going abroad

Are they? I use holiday cottages in the uk numerous times a year, as do many of my friends, and when I'm searching for them the nice ones are booked up pretty solidly for much of the year.

They're not cheap either, I would think if they were struggling to get bookings they'd drop the prices.

When you say buy to let in this context, would you need a mortgage? I don't know a lot about it, but if you were doing an airbnb type thing, I'm not sure you could get a standard buy to let mortgage- but I'm also not sure you can get a residential mortgage if you're not really planning to live in the property?

Depending on where you are in the UK, you could also have quite long empty periods- my understanding is that this can make your building insurance a lot more expensive. You'd also have increased council tax in some areas and I think stamp duty too?

There is also definitely a push towards more regulation of air bnb type properties, locally to me there is a lot of concern about fire safety/gas safety, and I think it won't be that long until you have to have some kind of gas safety certificate for the property.

Would you use a local management firm or would you pay for cleaning/maintenance etc yourselves? It's worth bearing in mind that holiday makers are likely to be more careless than most people who are living in a house for a long time, and won't necessarily report damage/breakages but will just leave it all to become a massive issue. They'll also be very happy to rack up large utility bills which wouldn't be an issue with a "normal" tenant, and probably a lot more than you'd expend as a householder.

Final thing is depending on where you are, your neighbours may not like having an air bnb/holiday let flat next to them, it's disruptive and damaging to the local community. In some areas, it isn't unusual for known air bnbs which are left empty in the winter to be specifically targeted for vandalism, or very occasionally rough sleeping.

Living in a holiday type area, my perception is this year there are less UK based tourists than previous years BUT this is the first summer we've really seen European tourists come back since Covid so probably overall tourist numbers are similar.

I was watching a moving home with Charlie update the other day (don't even ask what that is unless you want a shit storm) and a lady said she works in a busy Cornish tourist village, and there were 40% vacancies this August in the village, which is unheard of.

A friend runs a very fairly priced air b and b (£75 a night) in a place popular with walkers and gourmet lovers. In April she had two bookings. A few other places opened nearby, a bit more luxurious. Curious to know if it was her or the area, I had a look at the area around coronation weekend when I would expect folks to get away for a long weekend, and a disturbing number of really underpriced ones were still available.

Proceed at your own risk. It is very far from a sure bet as an income stream.

Honestly. I wouldn’t be buying any kind of buy to let property if you are new to being a landlord and a holiday us even more time / money consuming.
think of your holidays, you want a great property for your budget. Holiday makers expect a lot - washing machines (they break), sky tv / Virgin or at least free view, wifi etc on top of your regular bills and weekly cleaning services.

You also need to think about the tax:

• stamp duty to buy it
• tax on rental income
• capital gains tax when you sell it

i would take your inheritance and top up your pensions with it. You can also create ones for your children if you have any. You won’t pay tax on it going into your pension and you’ll have a better long term, less stressful investment.

I live in Cornwall, and don't really recognise this. The weather has been terrible, so I wonder if people have been pulling out of bookings last minute? I'm not sure how that works with air bnb? I'm not really sure how she could know vacancies for the whole village when so many people advertise privately now and are undercutting the bigger holiday let chains? Maybe her firm is just overpriced. (Equally in some villages, 40% could be 4 out of 10 houses empty, which really doesn't sound so extreme).

I would say that the actual "season" is a lot shorter than a lot of people realise. Generally there's not much until the Easter holidays, a mad few weeks at easter, then a bit around may half term etc and a steady trickle up until July- it's only really in the school holidays that things are manic. Maybe then a bit around October half term, and a few couples coming away September time if it's nice weather?

I would also add there is so much competition in some places, that if you want to be fully booked you do really need to stand out from the crowd either in terms of price or offering something in a really good location, or be somehow unique?

Take a look at home many holiday lets are for sale in any location you are interested in.
Should give an indication of profitability.
I would guess that a lot more people will go abroad next year having suffered the terrible weather this year.

Thanks for all the advice.